What to Look For in a Personal Insurance Policy
Understanding your personal insurance program can be a daunting process. It’s common for people
to focus on the premiums and insurance rates instead of making sure they are adequately
covered. How often do you ask yourself: What’s the amount of coverage under my insurance policy?
Does the coverage provided make sense for my situation? And am I missing anything important that
could be purchased through my insurance company?
When looking at your personal insurance, there are a few areas that SWIA Personal Insurance
Executive, Leigh Hasty, recommends you review to ensure your coverage is sufficient and you’re
getting maximum financial protection for yourself and your family members. On that note, let’s see
what she has to say.
Homeowners Insurance
The homeowners insurance policy is the most challenging of all the personal lines policies. This is
the policy with the most potential for coverage exclusions and missing endorsements. The top issues
I see when evaluating policies are as follows:
- Is my home insured to full value?
More than 80% of my new clients had their home underinsured with their prior company. With
inflation, builders are charging anywhere between $250 and $500 per square foot to rebuild in
Georgia, and some states are a lot higher. Most companies have a cap on how much they will pay to
rebuild a home, so they don’t care if the home is insured to full value. The insurance company knows they are only on the hook for a certain amount. And once that amount is exhausted, the rest falls on the shoulders of the homeowner. One quick solution is to find a company that offers guaranteed replacement cost coverage. This means the company will pay out whatever it costs to rebuild your home. This endorsement is truly the only solution to knowing if your home is insured to full value. - Water backup
Water claims are expensive! Home insurance policies cover the ensuing property damage if a pipe
bursts, but what if your sewage line goes in reverse and your home is flooded as a result? In Georgia, we have a lot of homes on septic, and we have a lot of old trees that have roots that can cause that sewage line to overflow in your house. Does your policy show an endorsement for water backup? If so, how much? If your policy only offers $5,000, then I’m afraid you are greatly underinsured. I recommend at least $50,000 in water backup. Are you comfortable paying $25,000 to $50,000 out of pocket if this claim occurred at your home? - Ordinance or law
There are new building ordinances mandated every year. If you have a loss to your home, you will be
required to rebuild your home up to code. Your home policy doesn’t provide any coverage for that expense unless you have ordinance or law coverage. I recommend that my clients carry anywhere between 10% and 30% in ordinance or law coverage. This is a percentage of the dwelling value. Therefore, with 10% in ordinance or law coverage on a $1,000,000 home, you would have $100,000 in ordinance or law coverage to rebuild our home to code. - Deductibles
Are my deductibles sufficient? If you are considering a higher deductible, I recommend you look at
the savings between your current deductible and the higher deductible. My rule of thumb is if you can make back the deductible savings in five claims free years. To go from a $5,000 to $10,000 deductible, I believe the savings should be at least $1,000/year. However, if you are comfortable with higher deductibles, you can disregard this bullet point.
Automobile Insurance
As common as car accidents are, auto insurance is a lot simpler than home insurance. You simply
want to make sure your auto insurance policy has sufficient liability protection and uninsured motorist
policy limits, and you have physical damage coverage for every car that you want covered for
physical damage.
What are sufficient liability and uninsured motorist limits? That depends on what the umbrella policy
requires. I recommend that everyone has an umbrella policy, and every umbrella policy requires that
you carry a certain liability limit before the umbrella pays out. The coverage limits are usually
$250,000 / $500,000 / $100,000 split limits or $300,000 combined single limits. As for uninsured
motorist limits, I always recommend that you match your uninsured motorist limits to your liability
limits.
As for the proper deductibles, I recommend at least $500 deductibles. If you can save at least $100
per year to go from $500 to $1,000, then I recommend $1,000 deductibles. The same math applies
for these deductibles. Can I make back the deductible in five claims-free years?
Scheduled Valuables Insurance
There is little to no coverage on your home policy if your jewelry, silver, and/or firearms are stolen or
misplaced. For informational purposes, those are the two most common reasons for losing these
items. Are you okay self-insuring for these items in the event of a loss? If not, you’ll want to add a
scheduled valuables policy to cover your items at a $0 deductible.
Umbrella Insurance
What is the proper limit? This is one of the toughest questions to answer! Overall, my
recommendation depends on your situation. Do you have rental properties or young drivers that
increase your exposure of being pulled into a lawsuit? If so, I recommend 1.5 times your net worth. If
your exposures aren’t as high due to your stage in life, etc., then I recommend you carry a limit
around your net worth.
I recommend that most of my clients purchase at least $1,000,000 in excess uninsured motorist
coverage. I’m a huge fan of excess uninsured motorist coverage because there are a lot of
underinsured and uninsured motorists on the road. You have uninsured motorist coverage on your
automobile policy, but excess uninsured motorist coverage will offer at least $1,000,000 in additional
coverage if you are injured by an uninsured driver. Unfortunately, in our world we are seeing more
and more of these types of claims. What happens if you have a major bodily injury and can no longer
work again? This could help pay for some of your pain and suffering.
Let’s continue the conversation
Keeping some of these key points in mind will go a long way in better understanding your personal
insurance program and getting the most out of it. After all, medical expenses and legal fees can be
quite hefty, so ensuring you have proper coverage can go a long way in saving you both money and
peace of mind. We hope this blog was helpful, but we’re more than happy to chat if you’d like to learn
more about the different types of insurance policies—contact us here to get started.