How to Understand Your Homeowners and Auto Insurance Coverage Elk Grove CA

Steps

1. Know your coverages: Insurance coverages are typically broken down into two categories whether you are talking about home, auto or commercial policies: those are liability coverage and property coverage. Liability protects your assets (all that you own) in the event that you are responsible for damage to a person or that person's assets and you are sued. Property coverage protects the items that you own (home, auto, etc) in the event that they are damaged by what is called a "Covered Peril". Peril is an insurance word for "something that could cause damage" such as fire, wind, etc.
2. Do an assessment of your financial state: If you own a home and have a job, you have a lot to lose, and therefore, more to protect. A good rule of thumb is that your liability limits on both your home and your auto should never be lower than the total of your assets, plus several years of your current salary. If you were to have an auto accident, and not have enough liability to pay for a medical or property claim, in most states a judgment can be issued against your wages for several years. This is money that is taken out before you ever receive your paycheck.
3. Do your homework: Most insurance companies are rated on both their history and their future. You can find out how well a company ranks in terms of how well they pay their claims, how strong they are financially, and how proficient their servicing staff performs. (see links below)

Tips

• The price per dollar is much lower for liability than it is for property. For example, $500,000 of liability coverage on a home may be less than $100 a year when you look at the liability portion of your bill. Having just $100,000 of property coverage on your home may cost $500. But having low liability limits when you have a claim could cost you thousands of dollars.
• Auto policies are largely underinsured: look at it this way, you'll easily pay double the amount for your auto (property) coverage than you will for your liability coverage on your car; but if your car is totalled, the most you stand to lose is the value of your car, let's say $20K. If your liability is too low when you are sued, there is no limit to how much you can lose in court because of medical claims and lost wages. If you know the cost of medical coverage today, you know that you can go through $100K very quickly.

Warnings

• A worst-case scenario might be a young driver who runs into a Mercedes, putting the driver of the Mercedes out of work and in the hospital for months. You are liable for lost wages (perhaps an attorney), medical bills (at X thousand a day), and repair to the vehicle (Mercedes start around 50K). Not to mention any city signs or lights that are destroyed in the accident that would require union workers and heavy machinery to be hired to repair city property. Ever seen one of those guys standing at the side of the road holding the stop sign? You'd be paying him about $30/hour to be there until damages are repaired. If your liability limits are lower than this, an increase in your liability coverage could be as easy as a phone call to your agent and as little as $2/month!

Sources and Citations

• Insurance Discussion Forums - An insurance discussion platform comprising of both insurance professionals and consumers.

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