Let’s help you understand your insurance policies this year! Each policy is a contract between yourself and the insurance company to transfer cost from you to the company if a loss happens. Each policy will define what is considered a covered loss and also what duties you have after the loss in order for the claim to be paid. You should be aware that the base policy may also have endorsements, riders or floaters that generally increase the coverage the policy provides. You need to understand what your policy covers and what’s required of you, so plan to talk with your agent. To prepare for that meeting here are the five policy types you should have (if you don’t, get them quoted) and key points in each to review.
Home/renters/flood: The first thing to know about these policies is they generally outline coverage in one of two ways — through specifically detailing items or by excluding items. You want to be certain you are insured for the estimated replacement cost amount. This will slightly vary by company, but is the correct amount for which to be covered. You want to know your loss settlement type — Actual Cash Value (ACV) or Replacement Cost are the words to look for. To oversimplify you will get a depreciated amount for the first and as the replacement amount (using similar building materials) from the second.
Flood insurance in our area is highly recommended. There is a general misconception about being “in” a flood zone. Everyone is in a zone, and pretty much anyone can have flood damage. This is a topic you will want to thoroughly understand because homeowners and flood policies cover different losses. There are also many available endorsements, but the one to check is water/sewer backup.
Auto: A quick rundown of the policy would start with the most important coverage being your liability. This protects your assets from lawsuits involving car accidents. You choose what the company will pay, then you are responsible for the remainder. Medical payments, disability and auto death are common coverage options on policies to protect you in a claim. Comprehensive and collision coverage protect your car in an at-fault accident and typically have a deductible for which you are responsible. Remember the three protection categories — your assets, yourself, your car.
Auto insurance pays actual cash value, so understand if you have a brand-new car that amount may be less than your loan. Be sure to review your loans gap coverage. Last thing is verifying what discounts are offered to determine if you may qualify for anything you don’t already have, such as telematics, low mileage or student drivers.
Umbrella: This is one of the simplest ways to protect yourself from large “what if” scenarios. It can sometimes provide coverage for gaps in other insurance and generally follows you anywhere in the world. To determine the amount of coverage, check with your agent on your specific situation. It is recommended you have more than the total value of all your assets combined.
Life: Life insurance is one of the most important coverage a family can have. It is a tool that can be used in many ways including easing financial hardship, creating generational wealth or even self-funding purchases (Take a look at how Walt Disney funded his park). Generally, those who need this coverage are the ones who do not have it or have enough, and if that’s you, please talk with an agent today. This is one policy you need more of today. And purchasing it while you are younger will save you money in the long run. There are many types and uses for life insurance, so be sure about your reasons for buying it and have a detailed conversation with your agent.
Personal articles policy/floater: This is generally a stand-alone policy that will cover items for more losses than your home owners policy, such as damage, lost/stolen/mysterious disappearance. You can cover items such as jewelry, firearms, tools, collectibles, musical instruments, computers and sports equipment. (Think about that Scotty Cameron putter you left on the golf course!) Filing a claim on these policies instead of your home can also help keep your home claims free.
Understanding insurance is a complex topic. Reaching out to a licensed agent to explain and educate you on specific policies is extremely important. Get your insurance questions answered as you begin this new year — and make it a good one!
