Auto Insurance Basics
You will see three numbers when you are buying liability coverage. They represent (in the $ thousands) your liability limits for per-person bodily injury, bodily injury for all persons injured in any one accident, and property damage liability. Most states require a mandatory minimum amount and insurance companies offer the option to purchase more.
Medical Payments Coverage (MP or Med Pay)
This coverage (usually optional) pays the doctor, hospital bills, and funeral expenses for injuries to you and the passengers in your car, regardless of who causes the accident, up to the policy limits. Med Pay is sold in states with traditional tort insurance laws. In states where Med Pay is optional, drivers may choose to rely on their own and their passengers' own health insurance to cover resulting injuries. Most insurance companies offer a wide range of coverage amounts.
Bodily Injury Liability Insurance (BI)
BI pays for injuries to other people when the insured vehicle's driver is legally at fault.
Automobile lIability Insurance
Protection in case others hold you legally responsible for bodily injury and/or damage to property losses incurred as the result of a motor vehicle accident. In other words, coverage in case you cause an accident where there is either physical or property damage to other people. This is a general term that covers bodily injury (BI) liability and property damage (PD) liability. See explanation of limits, above.
Optional coverage for when your car is stolen or damaged in ways that don't involve a collision. Examples include: hail damage, glass breakage, fire, vandalism, damage from an animal, flood, earthquakes, falling objects and theft. The price of comprehensive insurance is affected by the risk of loss, meaning the likelihood that an insured car will be stolen or damaged, and the car's value at the time of the loss. According to 2004 data from the National Association of Insurance Commissioners, 77 percent of insured drivers carry this coverage.
This is your out-of-pocket expense that you agree to pay for losses up to set amount, such as $250 or $1,000. If you can afford to carry a higher deductible on collision and comprehensive coverage, you can substantially lower your costs.ties and concentrate on growing your business.
Optional coverage for when your car is damaged as a result of colliding with another object—a brick wall, for example, or a rollover. It also can come into play if you hit a pothole that severely damages your car. This insurance applies only to your car. It doesn't cover whatever the car collided with (that's what your property damage liability is for). According to 2004 data from the National Association of Insurance Commissioners, 72 percent of insured drivers carry this coverage.
Declarations Page ("Dec Page")
The first page of the insurance policy that generally includes your name, address, the insured property, its location and description, the policy period (how long the coverage will be in force), the amount of the insurance coverage, the premiums and additional specific information provided by the insured.
Property Damage Liability (PD)
This coverage is for when you damage someone else's property with your vehicle. Usually it's someone's car, but it can apply to other property such as buildings, utility poles, fences and garage doors.
Homeowners Insurance Basics
The Structure Of Your Home
Three ways to insure the structure of your home:
- Replacement Cost
Insurance that pays the policyholder the cost of replacing the damaged property without deduction for depreciation, but limited to a maximum dollar amount.
- Extended Replacement Cost
An extended replacement cost policy, one that covers costs up to a certain percentage over the limit (usually 20%). This gives you protection against such things as a sudden increase in construction costs.
- Actual Cash Value
This covers the cost to replace your home minus depreciation costs for age and use. For example, if the life expectancy of your roof is 20 years and your roof is 15 years old, the cost to replace it in today's marketplace is going to be much higher than its actual cash value.
Tips for Insuring Your Home to Value
You should insure your home for the total amount it would cost to rebuild your home if it were destroyed. That's not the market value, but the cost to rebuild. If you don't have sufficient insurance, your company may only pay a portion of the cost of replacing or repairing damaged items. Here are some tips to help make sure you have enough insurance:
- For a quick estimate on the amount to rebuild your home:
multiply the local building costs per square foot by the total square footage of your house. To find out the building rates in your area, consult your local builders association or a reputable builder. You should also check with your insurance agent or company representative. (Note: This is only an estimate and shouldn't replace annual coverage reviews).
- Factors that will determine the cost to rebuild your home:
a) construction costs b) square footage of the structure c) type of exterior wall construction—frame, masonry or veneer d) the style of the house (ranch, colonial) e) the number of rooms & bathrooms f) the type of roof g) attached garages, fireplaces, exterior trim and other special features like arched windows or unique interior trim.
- Check the value of your insurance policy against rising local building cost EACH YEAR.
Check with your insurance agent or company representative if they offer an "INFLATION GUARD CLAUSE." This automatically adjusts the dwelling limit when you renew your policy to reflect current construction costs in your area. However, you still should keep up with local building costs by checking in periodically with your local builders association.
- Check the latest building codes in your community
Building codes require structures to be constructed to minimum standards. If your home is severely damaged, you might have to rebuild it to comply with the new standards requiring a change in design or building materials. These generally cost more.
- Do not insure your home for the market value
The cost of rebuilding your home may be higher or lower than the price you paid for it or the price you could sell it for today.
- Most lenders require you to buy enough insurance to cover the amount of your mortgage
Make sure it's also enough to cover the cost of rebuilding.
- Advise your insurer and increase the limits of your policy if you make improvements or additions to your house.
Your Personal Belongings
Two ways to insure your personal belongings:
- Replacement Cost Coverage
Insurance that pays the dollar amount needed to replace damaged personal property with items of like kind or quality without deduction for depreciation.
- Actual Cash Value
Insurance under which the policyholder receives an amount equal to the replacement value of damaged property minus depreciation. Unless a homeowners policy specifies that property is covered for its replacement value, the coverage is for actual cash value.
Here are a few things to keep in mind when you're insuring your belongings:
- Check the limits of your policy on personal items,
such as jewelry, silverware, furs and computer equipment. If the limits are too low, consider buying a special personal property endorsement or a "floater." An endorsement is an addition to your policy. A floater is a form of insurance that allows you to insure valuable items separately.
- Make an inventory
of everything you own in your home and in other buildings on the property. Write down major items you own along with all available information, such as (a) serial numbers (b) make and/or model numbers (c) purchase prices (d) present value (e) date of purchase.
- Document your inventory.
Take either still or video pictures and attach receipts to the inventory when available. Store the inventory and visual records AWAY from your home—perhaps in a safe deposit box.
- Update the inventory
when you make major purchases.
The most important thing you can do to safeguard your home and property is to understand that your insurance policy is a contract and you need to know what's in it.
Your insurance agent or company representative will be able to walk you though it and answer any questions
The bottom line:
Don't put your policy up on a shelf somewhere and let it collect dust! Review your policy every year.