Why It’s Important to Be Adequately Insured
Most people rarely think about their various insurance policies and whether or not they’re adequately insured. You may sign up for health insurance when you start a new job, purchase homeowner’s insurance when buying a new house, or look into auto insurance when you’re car shopping. Beyond that, though, you may never give your insurance a second thought until you have to file a claim.
In a recent interview with Rich Lunsford, an Advice Director with USAA, we discussed why it’s important to be adequately insured and how to make sure you have proper insurance coverage in place in all aspects of your life.
What Does Property and Casualty Insurance Include?
Many types of insurance fall under the broader category of property and casualty insurance, such as homeowner’s insurance and auto insurance. But what does it include? The first aspect of property and casualty insurance protects all of your stuff: your car, your home, and the items within your home.
The second part is called “liability insurance.” This protects against damage to another person’s property. For instance, paying for repairs to another person’s car in case of an auto accident. Rich says that liability insurance protects your future ability to succeed in other financial goals, like retirement and debt repayment.
What’s Included in Your Insurance Coverage?
It’s important to read the fine print and determine what your insurance covers and to protect against any gaps. For example, homeowner’s and renter’s insurance cover most of the items within your home, but the value of some items may be lower than your deductible. This means you would still have to pay to replace those items. To remedy this, you can pay more each month to get an insurance policy with a lower deductible. You can also build your personal savings to cover the cost of those items.
On the flip side, some items within your home are too valuable for your regular homeowner’s insurance to cover. Rich advises anyone who owns extremely valuable items, such as family heirlooms, to purchase Valuable Personal Property insurance.
Figuring out which items your insurance covers is just the beginning. You also have to find out what perils your policy protects you from. Common covered perils include theft, fire, and water damage.
So, if someone steals an item from your home, and your insurance covers theft, you can make a claim. Most insurance doesn't include all perils, though. Most homeowner’s insurance policies don't include flood insurance, so you should purchase this separately if you live in an area prone to flooding.
How Much Coverage Should You Purchase?
Different insurance policies vary widely in how much the monthly premiums cost and how much coverage they offer you. It can be hard to balance between saving money on a monthly basis and making sure you’re properly insured. Adequate coverage means that an unexpected incident would not leave you financially destitute. This means you need to at least cover the cost of what it would take to replace an item.
Anything above this is considered extra, but it can offer some added peace of mind. You know you’re paying too much in monthly premiums if the cost of insurance is derailing your other financial goals. Rich says that insurance should protect today while also safeguarding your ability to grow tomorrow.
Review Your Insurance Coverage Annually
Your life is constantly changing, so you need to make sure your insurance coverage keeps up. You should review your insurance coverage at least annually, but also whenever you experience a major life change.
USAA can help you each year as you review your coverage to make sure there are no gaps. They can discuss an umbrella policy. This looks at your lifestyle and property as a whole, not just the basics like auto insurance and homeowner’s insurance.
They also take your financial situation into consideration, as well as your living situation and location. All of this ensures that you’re adequately insured no matter what life throws your way.