Elections matter. And despite the current state of affairs in the political circus, we aren’t talking politics here. We are referring to your insurance, and the choices you make in your personal insurance policy selections matter greatly. They can have an impact that lasts far longer than the next salacious scandal we’re going to hear about in the news.
The deductible you select can significantly affect your premium. The higher the deductible you carry, the less the insurance company pays if you have a loss; therefore, the lower your premium. But keep in mind that this is the amount you must pay before your insurance company pays a penny towards your damages.
Sure, a $10,000 or 2% deductible saves you a lot of money up front, but make sure you’re able to absorb that amount in the event of a loss. For example, if you have a $50,000 roof claim and a $10,000 deductible, your insurance company will only pay $40,000. The remaining $10,000 comes out of your pocket. If you don’t have access to that cash, you may want to elect for a lower deductible.
Type of Coverage
Another big consideration of a property policy is the type of coverage you choose. Many policies offer two options. The first is Actual Cash Value (ACV) – where you are compensated at the time of loss for the ACV of the lost property. This includes any “time and use” depreciation from the original purchase price of the property before any deductible is applied. The other type of coverage is Replacement Cost coverage. Replacement Cost is just that: your policy will pay to replace the lost property with like kind and quality minus any deductible you have on the policy.
As you can imagine, a replacement cost policy is more expensive than one that offers ACV, so if you elect for the cheaper option up front, remember that during a time of loss, you may be unhappy with your pay-out.
Most states require minimum liability limits for auto policies in their states. These limits are the bare minimums required for bodily injury and property damage in the event that you cause an accident and harm another person and/or their property. While these limits satisfy the state requirements, they usually far underinsure the “covered” party.
For example, the state of Florida requires $10,000 Personal Injury Protection and $10,000 Property Damage Liability to be a legal driver for Florida residents. If a driver carrying these limits, which satisfy state requirements, is involved in an accident and total another driver’s car, injures 1-2 people in that car and then damages his/her own car, you can quickly see where these limits are not enough to protect our driver. When given the opportunity, always elect for higher liability limits, because you just never know.
A personal umbrella policy provides liability protection above and beyond your basic liability policies and can be one of the most important elections you choose. Take the above scenario, but let’s say in this case our driver had the maximum liability limits on his policy – $500,000 combined single limit for injury and property damage. In the accident he caused, if the damages were more than $500,000, his insurance policy would pay the limit – $500,000 – and no more. But an umbrella policy on top of that would pick up the remaining liabilities he incurred (up to the umbrella policy limits, of course).
An umbrella policy usually has a very low premium for the coverage it provides and therefore, we vote “yes” when we are asked if they should be purchased!
Smart choices today result in a better tomorrow! Contact one of our trusted insurance agents near you to discuss your options.
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