Finding the right auto insurance coverages

While shopping for auto insurance, you should think carefully about choosing the right coverages. Auto insurance coverage protects not just your vehicle but also your financial assets if you are found responsible for an accident. Choosing the right level of coverage depends on many factors, including your income and total assets, the value of your vehicle, and of course how much money you can afford to spend on insurance.

Choosing Liability Limits

Selecting which liability limits are right for you is very important when comparing auto insurance rates. One thing to remember is that you can never have too much insurance coverage, because it is impossible to predict if and when you may be involved in an accident and how much the total damage may be.

The higher your liability limits are, the more likely your auto insurance policy will be able to pay for the full amount of damage if you’re at fault for an accident. You should ask yourself: how would I be able to pay to repair damage to someone else’s vehicle or pay for someone’s medical bills if I do not have enough liability coverage? Also consider this: if you injure someone in an accident, do you own any property or other assets that someone could come after to help pay for damaged vehicles or expensive medical bills?

If you are currently leasing your vehicle, the leasing company will most likely require that you carry higher than the state minimum liability limits. Most leasing companies require you to purchase at least $100,000 per person and $300,000 per accident for bodily injury liability and $50,000 per accident for property damage liability, which is known as 100/300/50.

Determining if Full Coverage Is Necessary

The term “full coverage” is simply another way to describe physical damage coverage, or collision and comprehensive coverage for your vehicle.

When determining whether or not you should get physical damage coverage, you should consider the vehicle’s age, total mileage, and its current resale value. As a general rule, the newer your vehicle is, the more likely you will want to carry physical damage coverage on it. Newer vehicles typically have a higher resale value than older vehicles, and if they are damaged in an auto accident, you would most likely want to repair the vehicle rather than replace it.

If you own a vehicle that is over 10 years old, you may want to consider purchasing a less expensive liability-only policy. An older vehicle with low resale value may cost much more to repair than the vehicle is actually worth today, especially considering that you would have to first pay a deductible to have it repaired.

If you are currently financing your vehicle, you will most likely be required by the lender or finance company to carry both collision and comprehensive coverage. Because a financed vehicle is still technically owned by the lending company, full coverage protects them until you completely pay off your loan. Once paid off, you can feel free to keep collision and comprehensive coverage or select a liability-only policy.

Like financed vehicles, if you are currently leasing your vehicle, you will most likely be required by the leasing company to purchase both collision and comprehensive coverage, and it is common for leasing companies to require that the deductibles be no higher than $500. Again, the reason leased vehicles require full coverage is so that the vehicle is protected while it is still owned by the leasing company.

Understanding Medical Payments Coverage

Serious injury from an auto accident can easily cost tens or even hundreds of thousands of dollars. That’s why choosing coverages that protect you and your family if you are injured in an auto accident is one of the most important things to consider while comparing insurance rates, but often overlooked. Since the costs of health care seem to be constantly rising, selecting higher limits for medical payments coverage is necessary to avoid having to come up with thousands of dollars out-of-pocket for medical bills.

Insuring Antique or High Value Vehicles

If you are a car collector with a passion for owning antique or high value vehicles, you will want to purchase a different insurance policy for these vehicles than standard auto insurance coverage. These specialty auto insurance policies are much different than standard policies because most owners of antique or high value vehicles don’t drive them every day. Instead they limit their use to weekend and pleasure driving or special events such as car shows and parades.

Auto Insurance for Antique or Classic Cars

Classic car owners typically drive their vehicles only during special occasions or events such as car shows, exhibitions, and parades, which keeps the total number of miles driven by these vehicles much less than a car used for a daily commute. Since the use of these vehicles is limited, the chances that they will be damaged in an accident is also greatly reduced.

Because antique or classic cars are driven much less and also less likely to be involved in an accident, classic car insurance policies typically provide basic liability coverage at affordable rates. However, because replacement parts for antique vehicles are rare and often hard to find, many insurance companies require that they be kept in a locked garage when not in use to reduce the chance that they will be damaged.

Before purchasing insurance for your classic or antique vehicle, it is very important for you to determine how much your vehicle is worth. Because the value of these vehicles actually increases over time, insurance companies use the “agreed value” method to determine how much they are worth at the time you purchase your policy. This amount or value is agreed upon by both you the owner of the vehicle and the insurance company, and makes sure that you will receive the proper amount in the event of an accident.

Auto Insurance for High Value Vehicles

Usually, for a vehicle to be considered “high value”, it needs to be worth more than $100,000 or be extremely rare or unique. Like classic and antique cars, high value and exotic vehicles are typically driven on a limited basis and not used for daily commuting. This limited use allows insurers to offer special insurance policies that include higher coverages tailored to the vehicle’s value, often at a minimal cost to the car owner.

Insurance policies for high value vehicles are different than standard auto insurance policies because they may set a limit on the total number of annual miles driven by these vehicles. Also, because these vehicles are worth much more than average cars and cost much more to repair or replace, high value vehicle insurance policies may include deductibles that are much higher than the standard $500 deductibles for collision and comprehensive.

Ways of paying for your Auto Insurance

Paying Your Bill in Full

If you are financially able to pay your entire premium in full, it is probably the easiest and most convenient way to pay for your auto insurance policy. Most companies will give you a discount for paying in full, plus you’ll avoid the possibility of getting canceled for non-payment and having to pay any monthly installment or service fees.

Monthly Installments

If you would rather pay for your auto insurance policy in monthly installments, you have multiple options to choose from. Remember, most insurance companies require a down payment to start the policy, which can range between 10% to 30% of the entire policy premium. You can then choose to pay off the remaining balance by making payments by mail, online, over the phone, or you can enroll in an automatic payment plan.

Automatic Payment Plans

Setting up an automatic monthly payment plan is one of the most convenient ways to make payments on your policy. Many companies will even give you a discount for enrolling in an EFT (electronic funds transfer) payment plan, plus you avoid the risk of being canceled for forgetting to make a payment or having to pay any service fees. Automatic payment plans are safe, secure, efficient, and better for the planet because they are totally paperless.

Determining If You Need Life Insurance Coverage

If anyone depends on your income and would struggle financially after your death, you most likely need to purchase life insurance.  A life insurance policy would provide your family or dependents with money after you’re gone to make sure they are able to take care of your funeral costs, living expenses, and other financial responsibilities that they relied on you for.

If you provide the majority of your family’s income, ask yourself this question: if something were to happen to me, how would my family afford to pay for such things like daily living expenses, monthly mortgage or rent,  and education?  Basically, would they be able to afford to continue living the way they have, or would they suffer without the income you contribute?

If You’re Single:

If you’re young, single and have no independents, it may not seem like you need life insurance because no one relies on your income or would suffer financially without you.  However, there are a few factors to consider if you are single.  For example, you may be providing financial support to a friend, aging parent, sibling, or  significant other – and you wouldn’t want these people to have to pay for your funeral expenses or be responsible for student loan payments, car payments, and other debts.  Plus, when you are young and healthy, you will receive the best rates possible because the likelihood that you will die is much less when you are younger.  Purchase a policy at a younger age to lock in low rates and eliminate having to qualify for coverage when you’re older and possibly not as healthy.

If You’re Married:

Married couples share many financial responsibilities together, including rent or mortgage, car loans, and credit card payments.  Even if you aren’t planning on having children anytime soon, if you’re married, a life insurance policy is important because it would make sure that your spouse is taken care of after you’re gone.  You wouldn’t want to leave your spouse with the burden of paying off all of your debts plus future expenses, especially if they are used to living off your combined income.

If You’re Married & Have Children:

If you are married with children and you died unexpectedly, would your spouse’s income be enough to cover your funeral and all of your family’s basic living expenses?  What about future costs such as your children’s health care  or college education?  Life insurance protection allows you to take the necessary steps to make sure your family maintains their financial stability now and in the future.

If You’re a Single Parent:

As a single parent, you are the sole provider of income for your children and without you, they would not be able to support themselves financially.  Purchasing a life insurance policy is essential to making sure they maintain their quality of life after you are gone.

If You’re Retired or with Grown Children:

As you become older and your children grow up and start families of their own, you  may not think that having life insurance is as necessary as it was when you and your family were younger.  However, your retirement savings, pension plan, or social security may not be enough to sustain your spouse, especially if they outlive you by many years.  With life insurance, you can take action now to preserve your spouse’s financial future.

If You’re a Small Business Owner:

When most people think of life insurance, they think of a product that protects your family’s financial future, but life insurance can be used to protect your business’s future as well.  If you are the owner of a small business, you must consider what would happen to your business if you or one of your business partners or key employees suddenly died.  How would your business keep moving forward?  Would someone else take over the business for you, or would you leave your share of the business to a co-owner or partner?  Life insurance policies can be structured to safeguard your business’s future too.

How much life insurance do I need?

Determining how much life insurance coverage you need means trying to determine how much money your family will need for the future.  As a general rule, you will want to carry coverage of at least 10 times your current annual salary, but 15 to 20 times is recommended.  However your family may require more or less, depending on your specific situation and financial needs.

After your death, your family will have to deal with immediate expenses such as funeral and burial costs, medical bills, estate-related costs, and many other financial obligations.  Consider these immediate expenses when determining how much coverage you should buy.  Life insurance will help your loved ones take care of these expenses right away, but their long term needs are more difficult to calculate.

When trying to figure out how much life insurance you should buy, you need to determine how much money your family needs to maintain their standard of life for years to come.  To do this, first take inventory of all of your current financial commitments and any possible future obligations your family will have to deal with.  These items may include mortgage, car payments, health care and college tuition.

Then, compile a list of all the financial resources your surviving family members will have access to, such as their own salary, savings, investments, property, and any life insurance that you already own.  Next, subtract these resources from your total current and future financial duties to help determine how much money your family may need.  Also ask yourself: for how long will my family need to receive benefits?  For 10, 15, or 30 years?

Formula: current & future financial obligations minus existing resources (savings, assets, investments, life insurance you already own) equals the amount of life insurance you probably need

Some expenses to consider:

Immediate expenses:

Funeral and burial costs
Medical expenses
Estate-settlement costs
Taxes

Outstanding debts:

Mortgage
Car payments
Unpaid student loans
Credit card balances
Any other outstanding debts

Family-related future expenses:

Surviving spouse’s annual living expenses & years needed
Children’s annual living expenses & years needed
Childcare & years needed
Annual education expenses & years needed

How are life insurance quotes calculated?

Life insurers calculate quotes by determining your mortality rate, or the likelihood that you will die within a specific period of time.  Mortality rates are based on mortality tables that use probability and statistics to create a life expectancy estimate.  There are 4 main factors that help insurers calculate your mortality rate: age, gender, nicotine use, and overall health condition.

•    1.) Age
•    2.) Gender
•    3.) Nicotine use
•    4.) Overall health condition

Age

Age is used to help determine your life insurance premium because the older you are, the chances that you will die become greater.  Remember, your life insurance rate will never be as low as it is today, since you can never predict what will happen to your health in the future.

Gender

Because mortality statistics vary between men and women, gender is one of the primary factors used to determine life insurance rates.

Nicotine Use

Sorry smokers, but if you use nicotine products, you increase your chances of many medical problems such as cancer or heart disease, which increase the likelihood of death.  That’s why rates for nicotine users are higher than for those who do not smoke.  If you do use nicotine products, it is important that you let your life insurer know because they may refuse to pay your death benefits if you fail to disclose that you do smoke.

Overall Health Condition

Finally, the last of the four primary factors that determine your rates is your overall health condition.  This includes your family’s health history, your own personal medical background, and your current health conditions at the time the policy is issued, based on your required medical exam.

What kind of life insurance should I buy?

Not all life insurance policies are the same.  There are four basic types of life insurance available: Term Life Insurance, Whole Life Insurance, Universal Life Insurance, and Variable Life Insurance.  These products generally fall into two different categories: protection policies and investment policies.

Protection Policies

Protection policies offer pure income protection to replace the income you would have made during your working years should you die unexpectedly.  An example of a protection policy is term life insurance.  Term life policies expire at the end of the agreed upon term and are not permanent, however almost all term life policies can be converted to a permanent policy such as whole life, without being required to participate in another medical exam.

Investment Policies

Investment policies build cash value over time by allowing your premium payments to accumulate interest through investment performance.  An example of investment policies are whole life, universal life, and variable life insurance policies.  As you pay your monthly or annual premiums, the insurer invests a portion of these payments which is what allows them to build cash value.

“Here & Now” Needs vs. Long Term Needs

When choosing the right policy to match your specific needs, determine if your goal is to protect the “here and now” or if you are focused more on long term needs.  If you’re looking to protect your current income and cover all of your current debts, a term life (protection) policy is best.  If you are looking further down the road and are concerned with your long term needs, a whole life or universal life (investment) policy would be best.

Below are a few specific examples of common needs for life insurance:

Leaving Inheritance

If you want a life insurance policy to assure you’ll be able to leave your loved ones an inheritance regardless of how long you live, a permanent investment policy would be best.  A permanent policy such as whole life or universal life will build cash value over time.  The amount of money that you accumulate through premium payments can then be paid out to your beneficiaries after your death, along with the death benefits.

Making Sure Your Children Are Cared For

If you are worried about providing guaranteed income for your children in your absence, a term life policy would be your best option.  Term life policies are designed to make up for the income that you would have made during your working years.  After your children grow up, your needs may change.  At that point, you can consider converting your term life policy to a whole life or choose a number of other policy options.

Building a Savings

If you are looking to purchase a life insurance policy in order to build savings, a permanent investment type policy that builds cash value is best.  Whole life and universal life policies can be a part of your investment portfolio, since a portion of your premiums will be invested by the insurer, increasing the policy’s value over time.  Although these types of insurance policies do not perform as well as other investment tools such as an IRA, if you need to purchase life insurance coverage they at least build some value.

Covering Your Debt (Mortgage, Student Loans, Medical Payments, etc.)

If you are looking to purchase a life insurance policy to cover the debts you have now, such as a mortgage, student loans or car payments, a term life policy may be your best option. Debt is often temporary and after a number of years the need to cover those debts may no longer be there.  At that point, a variety of other policy options are available.

Having trouble finding a company to write your Home insurance policy?

Homeowners Insurance: Problematic Homes

For Dog Owners:

For dog owners, having liability coverage that would cover bodily injury from a dog-bite is necessary.  Because dog-related injuries are a serious problem for insurance companies, most companies have restrictions on the types or breeds of dogs that they are willing to insure.

Below is a list of dog breeds that are commonly denied coverage by insurance companies:

Akita
Bull Terrier
Chow Chow
Doberman
German Shepard
Great Dane
Husky
Malamute
Mastiff
Pit Bull
Rottweiler
Wolf-Dog Hybrid

If you own one of these breeds and are wondering if your liability coverage extends to your dog, talk to your agent or get a quote to find out.

Coastal Locations:

The geographical location of your home is one of the most important factors used to determine your home insurance premium.  If you own a home near the coast, chances are you are paying a higher rate due to an increased chance of a natural disaster occurring, such as a hurricane or flood.  Recently, many insurance companies are choosing not to offer homeowners insurance for new customers who live along the shore and some companies aren’t even renewing current customers who live in these areas.

Because homes located on the coast are considered to be “high risk” by insurance companies, the federal government established a program to give coastal homeowners better access to insurance, called the Fair Access to Insurance Requirements plan, or the FAIR plan.  FAIR plan insurance policies generally cost more than a policy from a private insurance company and offer less adequate coverage, but unfortunately for coastal homeowners, it may be their only option for insurance.

If you live near the coast, find out exactly how many miles your home is located from the shoreline, as this would determine your eligibility for either a private insurer or the FAIR plan.

Swimming Pools & Trampolines:

If you have a swimming pool or a trampoline in your yard, you could be taking on a much higher liability risk than you think.  Although these recreational devices can be a lot of fun, they also can attract children throughout the neighborhood to come onto your property to play, which could lead to severe injury or even death.

If you own a swimming pool, check the local laws in your area to see if there are any specific legal requirements regarding swimming pool construction and safety.  For example, you may be required by law to build a fence around your pool and keep it locked when not in use.  Even if not required by law, insurance companies may require that these safety measures be in place, otherwise it may be grounds for them to cancel your policy.

Like swimming pools, trampolines also open you up to much more liability exposure, and many insurers will deny you coverage if you own a trampoline.  Even with a fence in place, if a child in your neighborhood climbs over your fence to use your trampoline and is injured on your property, you could be held negligent or responsible, even though the child was technically trespassing.

If you do own either a pool or a trampoline, you should notify your insurance agent immediately to make sure that you have adequate coverage.  If you are planning on purchasing either a pool or a trampoline and would like to know how it will affect your home insurance rate, call us for a free quote.

Historical Homes:

If you are the owner of an historical home, finding insurance coverage can be frustrating.  Some insurance companies hesitate to insure historical homes because of their antique and sometimes unsafe heating, plumbing, and electrical wiring.  Some carriers will even refuse to insure a home if it was built before a certain year or time period.

Another problem with obtaining coverage for your historic home is that the insurance company may only insure it for the market value of the home and not the replacement cost.  The market value of a home is the amount that the home is worth on the market today, while the replacement cost of the home is the amount of money it would cost to rebuild the home using the same quality construction materials but at today’s cost.

Historic homes, especially ones built during the Victorian area, are significant because they feature hand-carved wood molding, hand-made windows and doors, and hard to find replacement parts such as hinges and doorknobs.  The cost to replace those original building materials today would be a lot greater than the market value of the home.

If you are the owner of an historical home, find out if your policy covers your home on a replacement cost basis or on a market value basis, as these two completely different types of coverage should never be confused.  If your home has outdated electrical wiring such as porcelain knob and tube wiring, you may want to consider updating to a more modern electrical system, or at least have your current system  inspected for damages and potential problems.

Take care of your insurance now, so you don't have to worry later

Optional Homeowners Insurance Coverages You May Want to Ad:

Extended Replacement Cost

Extended Replacement Cost coverage provides coverage in addition to the coverage automatically included in the standard policy and is generally limited to 20 or 25% of the home’s value.

Contents Replacement Cost

This line of coverage is typically added to each homeowners policy so that a person’s contents will be covered on a replacement cost basis instead of an actual cash value basis.

Inflation Guard Endorsement

This endorsement provides coverage to protect the policyholder against inflation.  If the replacement cost of a home is steadily increasing with inflation, the policy amounts must also be increased to maintain coverage of at least 80% or higher.

If you purchase a policy today that would cover at least 80% of your home replacement cost, that amount may not be enough to cover it in the future due to inflation.  To keep up with inflation, this endorsement allows the insurance company to automatically increase the policy’s limit throughout the policy period and upon each policy  renewal by a pre-determined percentage.

Scheduled Personal Property Endorsement

The Scheduled Personal Property Endorsement or personal article floater covers valuable possessions such as fine art, jewelry, antiques, collectables, silverware, musical instruments and other high value items that may exceed the amount covered by the standard policy.

To make sure these high value items will be covered by your policy, they must be itemized and specifically listed under the Scheduled Personal Property Endorsement form.

Secondary Premises & Liability Coverage

Under the Secondary Premises & Liability Coverage endorsement, homeowners coverage may be applied to another property such as a vacation home.  Secondary residences are not typically covered by the same homeowners policy that covers your primary residence.

Watercraft Endorsement

The watercraft endorsement provides personal liability and medical expense coverage to watercraft such as jet skis, yachts, small sailboats, and outboard motor boats.

Identity Theft Protection Endorsement

This endorsement provides coverage for losses due to identity theft.

Earthquake Insurance

Standard homeowners policies do not not cover damage as a result of an earthquake.  For an additional premium, the earthquake coverage endorsement may be added to a homeowners policy and provides coverage for earthquake damage with a special deductible that applies to each separate line of coverage.

Typical Homeowners Insurance Forms:

Limited Form (HO-1)

The HO-1 form is the most basic homeowners insurance policy, and only provides coverage for 10 specifically named perils, such as fire, theft, and vandalism.

Broad Form (HO-2)

This form only covers damage caused by 16 specific perils named in the policy.  The distinct named perils include damage caused by fire and lightning, weather related perils such as wind or hail, theft, vandalism, damage from vehicles or aircraft, explosion, riot or civil commotion, glass breakage, smoke, building collapse, rupture or bursting of pipes, and falling objects.

Special Form (HO-3)

The HO-3 is the most popular and comprehensive of all the homeowner forms.  This form covers damage damage caused by all perils unless specifically excluded in the policy.  The most common exclusions are flood, earthquake, mudslide, landslide, and acts of war.

Fire & Extended Coverage

A fire and extended coverage policy is a very basic policy that covers only  your home and no other structures or personal items on your property for losses due to a few specific named perils.  Other structures on your property, such as a garage or shed or your personal items, may be available for coverage under certain endorsements offered by your insurer.

Dwelling Policy

A dwelling policy is a basic policy that provides more coverage than a fire and extended coverage policy, however your personal property is not covered under a dwelling policy.

Mobile Home Insurance

A mobile home insurance policy is a specific policy written just for mobile homes that includes coverage for the home itself, as well as theft and liability coverage.

Renters Insurance

There is a specific policy written just for renters called the HO-4 or Tenants Form.  It does not cover the actual building itself because the property owner would be responsible for insuring the structure.

Tenants Form (HO-4)

The HO-4 or Tenants Form insures the personal belongings of the renter and also provides coverage for personal liability, loss of use, medical expenses, and additional living expenses.

Condominium Unit Owners Insurance

Condominium associations typically purchase policies to cover the outside walls of a building and any other common walls and walkways.  However, it is the responsibility of the condo owner to purchase an insurance policy to cover the part of the property that they own.

Condominium United Owners Form (HO-6)

The HO-6 or Condominium Unit Owners Form provides coverage for the property owned by the condo owner and is similar to a homeowners policy.