Is Your Insurance Agent Telling You Everything?
Home and auto insurance takes up quite a bit of your monthly budget. You may not feel the sting like other bills thanks to escrow accounts and electronic funds transfer (EFT), but if you took the time to add up your annual expenditure, you might be surprised at how much it is.
Insurance is a competitive industry, and just like every industry, it has good representatives and bad ones. Is there anything your agent isn’t telling you about your policies?
Know the Basics
Before you speak to an insurance agent, it’s a good idea to know the basic terms that will impact your coverage and your pocket.
- Dwelling Amount – This is the maximum dollar amount your home is covered for if it is damaged due to an insured risk (e.g., fire, hail, theft, etc.). Keep in mind that land is not insurable on a regular homeowners policy, so this amount should typically be less than the amount an appraisal would give you.
- Personal Property – This covers anything not permanently attached, like furniture.
- Liability Coverage – Although this coverage varies from company to company, it commonly covers legal damages if someone is injured on your property and sues you. It can also include protection against slander or libel charges.
- Loss of Use – This gives you money to pay for additional housing costs (e.g., rent, food, and utilities) if you must live somewhere else while your home is being repaired from a covered risk.
- Deductible – This is the amount of money you must pay out of pocket before your insurance company will pay anything. Keep in mind that in many coastal areas, this amount may be calculated based upon a percentage of your dwelling amount.
- Actual Cash Value (ACV) – An option on some policies, ACV values your property with depreciation in mind.
- Replacement Cost – Unlike ACV, replacement cost does not take depreciation into account. Policies with replacement cost will pay up to the policy limits if needed, if a covered item must be replaced.
- Rider – Also called an “endorsement,” these agreements extend coverage into areas not covered by your base policy. Standard riders are those for jewelry, home office equipment, antiques, and art.
- Bodily Injury Liability – This covers the person or people that you injure with your vehicle. It often has split limits, like 100/300, which would represent $100,000 in coverage per person and $300,000 in coverage total, per incident.
- Property Damage Liability – This covers damage to other people’s property. While it typically covers vehicles, it also includes damage to property like fencing, structures, and lamp posts.
- Collision – This feature covers damage to your car in the event of an accident. The dollar amount you see with collision coverage represents your deductible.
- Comprehensive – Often called “Other Than Collision,” comprehensive insurance covers things that can damage your car that are not covered above. It reimburses insureds for things like hail damage, fire, theft, and contact with animals (e.g., deer).
- Uninsured or Underinsured Motorist – This covers you if you are hit by a driver who is uninsured or who does not have enough coverage to pay for your total losses.
- Medical Payments or Personal Injury Protection (PIP) – This coverage varies greatly from state to state. In general terms, it pays for medical expenses for your car’s driver and passengers. It can sometimes be expanded to cover lost wages or funeral costs.
If you have assets that you would like to protect, like cars, real estate, or other investments, it may be a good idea to talk to your insurance agent about an umbrella policy. Umbrella policies extend liability coverage above the base coverage provided by your homeowners policy. With some providers, umbrellas can also extend the liability coverage on your auto, boat, or rental property policies for an additional fee.
Umbrella policies are generally sold in million-dollar increments, and they can be very affordable because they only kick in after the liability coverage on the underlying policy has been exhausted. They are a fantastic – and inexpensive way – to protect assets from major claims.
Once you are familiar with the fundamental terms, make sure that you go over your insurance policies with your agent at least once a year. Changes in your life or lifestyle may trigger changes in insurance coverage, so it’s good to review everything annually. If your agent isn’t available, ask to speak to another licensed agent in his or her office. Only licensed agents are legally permitted to counsel you on insurance coverage.
Ensure You’re Covered
You could be underinsured or overinsured if your insurance agent has not done his or her due diligence in getting you the appropriate coverage for your needs. Both scenarios could be detrimental to your wallet, so it’s important to stress your specific situation when you speak to a licensed agent. Your agent should also take state averages into account when making recommendations on things like liability coverage. If you live in a litigious area, you may want to spend a little extra to upgrade your liability coverage on both your home and auto. Sometimes, a few extra dollars can get you hundreds of thousands of dollars more in coverage.
Be a Smart Shopper
The more knowledgeable you are on your coverage, the better peace of mind you will have knowing that you are properly insured. If you’ve never examined your coverage closely, contact a licensed insurance agent and discuss all the terms above. And if you want to shop around for a better rate, just make sure that you are comparing apples to apples. Not all policies are created equal, and sometimes a better rate is not worth the loss in coverage. Insurance is all about safeguarding you and your family from the unthinkable, so make sure you are protected today!
We are not property and casualty insurance agents and this should not be considered insurance advice. The opinions voiced in this material are for informational purposes only and are not intended to provide specific advice to any individual. We suggest that you discuss your specific situation with a licensed and qualified property and casualty insurance professional.
As a Registered Investment Advisor (RIA), Partnership Wealth Management is committed to providing our clients with financial planning and wealth management services to help them make the most of their investments. At Partnership Wealth Management, we have a long history of working with the LGBT community. Among the many services we offer are financial planning and estate planning strategies for gay and lesbian couples. Financial planning is an important part of preparing for the future; contact us today to get started: www.partnershipwm.com.