Frequently Asked Questions About Personal Insurance

Insurance is like a life jacket. It’s a bit of a nuisance when you don’t need it, but when you do need it, you’re more than thankful to have it. Without it, you could be one car wreck, illness or house fire away from drowning—not in the ocean, but in debt.

But for something so essential to our financial well-being, insurance is a complicated—even uncomfortable—topic. So we’ve boiled your options down to the eight types of insurance policies you can’t go without.

While each one is a must-have, you should consult an independent insurance agent to help you find the right types of insurance customized to fit your needs.

Here are the eight types of insurance Dave Ramsey recommends:

1. Auto Insurance
2. Homeowners/Renters Insurance
3. Umbrella Policy
4. Health Insurance
5. Long-Term Disability Insurance
6. Term Life Insurance
7. Long-Term Care Insurance
8. Identity Theft Protection

The only way to find the best insurance for you and your family is to work with an independent insurance agent that can explain coverage and find the best rate. Here are some additional tips:

1. Don't assume an insurance carrier you see on TV is the best.
2. Do not ignore local or regional insurance companies.
3. Tell your insurance agent the truth about your insurance history and risk.
4. Ask about discounts.
5. Always pay your bills on time.
6. Try to combine coverage (i.e. car and home) with the same insurance company when possible.
7. Raise deductibles if your capable.

An independent agent is an insurance agent that sells insurance policies offered by different insurance companies, rather than working for a single insurance company. An independent agent receives commissions for the policies that he or she sells, and is not considered an employee of a specific insurance company. Rather an independent insurance agent works for their clients, finding and explain the right insurance coverage at the best price in the market.

Homeowners insurance, also referred to as home insurance or property insurance, provides coverage for your private home and compensates you in the event of a loss. If your home is burglarized or is partially or totally destroyed by a cause that is covered by your policy, homeowners insurance will help you replace your belongings, repair your home, or even rebuild.

Homeowners insurance also provides liability coverage which protects you, the homeowner, in the event that someone is injured on your property or you are deemed responsible for personal injury or property damage through negligence.

The amount of compensation you receive in a claim, or that the claimant receives from your insurance company when filing a liability claim against you, depends on the limits set for your policy. 

An independent agent in our network can help you to determine the amount of coverage that makes the most sense for your home and your risk tolerance.

Additionally, there are sub-classes within each industry that have their own even more specific insurance coverages. An example of this would be landscaping businesses which have a sub-class of landscapers that also do tree removal. Landscapers with tree removal need different and additional coverages from standard landscaper operations.

No. Unlike car insurance, states don't mandate you insure your home. But, if you're financing a house, your mortgage lender will likely require you to get some. They don't want to lose money on their investment. And, honestly, neither will you.

• Property damage. Similar to a homeowner's insurance policy, this covers damage to your building (owned or leased), equipment, furnishings, fixtures, displays and inventory.
• Business interruption. If a covered loss strikes your store or warehouse, forcing you to stop operating for a period of time, your revenue stream is protected from lost business income. You can also choose optional protection that covers you in case a major supplier is affected.
• Liability insurance for your business. Covers damages paid in judgments or settlements, and legal defense costs, if you are sued or held liable for accidental bodily injury or property damage arising from a covered cause of loss.

Homeowners insurance provides coverage for a range of risks that you may face as a homeowner that otherwise can be financially challenging to cover out of pocket. These include:

• Property damage: This includes damage and destruction to your residence and/or detached structures. You will receive compensation, up to the limits of your policy, if your house or storage shed is damaged due to a covered hazard. Standard covered circumstances include things like hurricanes and vandalism, but other hazards such as earthquakes and floods are excluded. Be sure to check your homeowners policy for exclusions.
• Personal property loss: Includes damage or theft of personal property, up to your set policy limits for covered circumstances, which typically excludes flooding, earthquakes, and personal negligence. If your personal property is very valuable (such as collectibles or antiques) you’ll likely need additional “riders” or special endorsements on your policy. Be sure to talk with a knowledgeable agent about your personal belongings and valuables, as standard limits may not be adequate to cover a major loss.
• Personal liability: If you, your family member, or even your pet causes an accident, injury or property damage, your homeowners insurance can protect you. Whether the issue requires medical care or repair of property, you will typically have coverage up to your liability limits. There are exclusions, such as aggressive acts against a neighbor, so it is important to fully understand your liability coverage. Be sure to talk with an agent about how to choose adequate policy limits that protect your finances in the event of a lawsuit.
• Added living costs: If your house is uninhabitable, your homeowners insurance can pay for alternative living arrangements while your home is repaired or rebuilt. Depending upon your homeowners insurance company and the specifics of your policy, this may be included or may be an optional coverage. You will typically have daily and total overall limits for this coverage.

You should purchase homeowners insurance before you contact a mortgage company for a loan. Most mortgage companies will require you to have homeowners insurance in place prior to giving you a home loan; but don’t wait until the last minute to start thinking about insurance.

It’s important to shop around for the right policy for your needs. There are many factors that determine the right insurance coverage. A Trusted Choice member agent in your area can help you compare policies and quotes to find the best coverage for your needs.

Homeowners insurance is not included in your mortgage payment, unless it is escrowed. Today, creating an escrow account that covers your mortgage payments, your home insurance and even your property taxes is common practice.

Additionally, your mortgage insurance is typically included in your mortgage payment. This is paid if your loan exceeds 80 percent of your home’s value. Mortgage insurance does not insure your home. It insures the bank if you default on your loan.

To drive legally, you must carry your state’s minimum required insurance coverage on your car. Nearly every state requires liability property and casualty insurance, and many require more. In no-fault states like Michigan you must have more coverage, usually PIP insurance, which covers damages and injuries regardless of who is at fault. Most states require liability insurance at minimum, but liability coverage only protects you against the other driver if the accident is your fault. You need to buy additional insurance to cover damages to your own car in case you have an accident that is your fault. You also need more insurance if you owe more money on your car loan than what your car is worth. Otherwise, you’ll still carry a remaining balance if your car is declared a total loss and you’re paid out by your insurer.

The answer to this question depends largely on which coverages you buy. If you only have the state minimum, you’re only protecting the other driver if you’re at fault. In that case, the expense of repairing the other driver’s car and taking care of medical costs will be your insurer’s responsibility. If you buy collision coverage, your car will be repaired at no cost to you. If you buy comprehensive coverage and your car is stolen, you will be paid the value of the car. If you do not have collision and comprehensive, you’d be on your own to pay for your own losses.

Many people wrongly assume that having comprehensive insurance means you are covered for “everything” after you have an accident. Comprehensive insurance covers you if your vehicle is stolen or vandalized or if it is damaged as a result of anything other than a collision. Other perils that are covered by comprehensive insurance include storms and other natural disasters, broken windows and windshield and damage caused by animals and falling objects.

How much car insurance you have depends on a few factors. First, if you’re leasing or financing a car you may be required to have full insurance. Each state has different insurance requirements so it’s important to check with your local DMV. However, nearly all states require liability insurance at the very lease, if your car is paid off. Also, you don’t want to over insure a car that is worth very little.

Car Insurance is not a one-size-fits-all type of product. There are many factors that determine what is best for you and your car. It also helps to speak with a knowledgeable agent, who may be able to tell you how much coverage you need if you feel confused.

There are a number of things you can do to lower the cost of your homeowners insurance. The easiest thing to do is get a comprehensive review of your policy and needs from your local agent.

It is not surprising to find quotes on homeowners insurance that vary by hundreds of dollars for the same coverage on the same home. When you shop, be careful to make sure each insurer is offering the same coverage.

Another way to lower the cost of your homeowners insurance is to look for any discounts that you may qualify for. For example, many insurers will offer a discount when you place both your automobile and homeowners insurance with them. Other times, insurers offer discounts if there are deadbolt exterior locks on all your doors, or if your home has a security system. Be sure to ask us about any discounts for which you may qualify

Another easy way to lower the cost of your homeowners insurance is to raise your deductible. Increasing your deductible from $250 to $500 will lower your premium, sometimes by as much as five or ten percent.

It's worth considering if you have valuable assets to protect. Umbrella insurance provides extra liability protection above the limits of your car and home insurance policies. It covers damage claims that you, your dependents or your pets cause to others, and it kicks in once claims exceed your home insurance and auto insurance liability limits.

Typically an insurance company will require you to buy a certain level of liability protection through home and car insurance before you buy an umbrella policy. Because auto and home insurance at those levels covers most claims, the additional umbrella coverage is inexpensive -- about $150 to $300 a year for a $1 million umbrella policy, according to the Insurance Information Institute (III). The next million would cost about $75, and every million after that would run about $50 a year.

A personal liability umbrella policy pays your defense costs if you're sued, but it doesn't cover intentional acts that cause damage or pay for punitive damages in judgments against you.