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Personal Insurance: Balancing Coverage and Cost

Christina Abrams - Dec 11, 2020 2:45:00 PM


Whether it's a house fire or water damage, an unexpected illness, or a car accident, we can’t always keep a catastrophe from happening. But what we can do is purchase insurance to help safeguard us, at least financially, when these unexpected events blindside us.

While it may seem like you could just run out and buy any insurance policy, it isn’t quite that easy. There are various types of insurance, and even among the same types of insurance, there are additional variables to understand. 

Understanding Insurance Policies

Though there are many kinds of insurance, there are four types of insurance that the average American adult should have:

1. Home Insurance

Home insurance, also called homeowners or hazard insurance, is another necessity for most American adults. Home insurance covers your home and property in the event of a loss, such as fire, wind, hail, smoke, vandalism, and malicious mischief. Keep in mind, if you're taking out a loan or mortgage for a home, banks will usually require full replacement value coverage. 

Homeowners insurance covers damage to the exterior and interior of your home. If a fire, hurricane, vandals, or other covered events damage your home, your insurance agency will compensate you to help you repair the damage or rebuild. The contents of your home may also be replaced if they have been damaged by a covered event.

One of the best ways to determine how much coverage to purchase is to consider the replacement costs of both your home and the assets within. For example, if you work from home, you likely have computers and expensive equipment in your home that would be mandatory to replace for your livelihood. So you would want to make sure your coverage could help cover the costs if those were damaged in a covered catastrophe or a similar unexpected event. Need some more research? Read our “15 Preventable Homeowners Insurance Claims and How to Avoid Them” to get you started.


2.  Renters Insurance

Even if you don’t own your home, you may still need to have a type of home insurance called renters insurance. When you are renting a home, some landlords require tenants of their rental properties to have this type of coverage. Even if it isn’t required, it is still smart to have this type of coverage. 

There are different types of renters insurance. One type is personal property coverage. This coverage will repair or replace your personal belongings against certain events. This type of insurance policy may also cover additional living expenses so that you can stay in a hotel, do laundry, eat meals, etc., if your apartment becomes uninhabitable. 

Liability coverage is also part of your renters insurance policy. This will protect you if someone is injured in your apartment due to your negligence. So aside from just considering your assets and valuables, you'll also want to understand how much risk you'd like to cover. Of course, an agent can help you learn how to balance that. We're always available to answer any questions or concerns you have to ensure you feel protected by your insurance plan. 

3. Auto Insurance

Over 4.4 million people were injured seriously enough in car accidents in 2019 that they needed medical treatment. An estimated 38,800 people died in car accidents last year. While accidents are one reason to have automobile insurance, many states require drivers to have car liability insurance that will at least cover the financial liability of their actions in a car accident. 

Certain types of car insurance will also protect you against theft or vandalism of your vehicle, as well as natural disasters that could damage your vehicle, such as hail. As with all insurance, it is important to check with your insurance agent and have them help you determine what type of car insurance coverage is best for your situation. 

4. Health Insurance 

Studies have shown that many people are only one unexpected critical illness away from needing to file bankruptcy. With that said, it's not surprising that many people who file bankruptcy have had to do so due to medical issues. Those numbers alone should encourage you to obtain insurance with health benefits, including prescription drug coverage and dental insurance (if you haven’t already done so).

However, health coverage isn’t as simple as it sounds. With copayments, deductibles, and prescription exclusions, health insurance seems like a luxury to some people and something they can’t afford. But considering that spending just three days in the hospital can cost $30,000, even a minimal policy is better than not having health care insurance at all. 

So when considering how to balance the cost of insurance with the coverage, consider what you are legitimately willing and capable of paying out of pocket. We always advise assuming that you will have to pay those costs at some point or another; that way, you're prepared if the time comes. 

If you are 65 or older, keep in mind that you can qualify for Medicare (a standard insurance plan for all seniors in the United States). But anyone below that age will need another form of health coverage.

The Right Deductible for You

A deductible is the amount of money you will have to pay out of pocket towards an insured loss. This is a way to share risk between yourself and your insurance company. In most situations, the larger your deductible, the less your premium will be for your insurance policy. Depending on the type of insurance, your deductible may be a specific dollar amount or a percentage of the total amount of insurance on a policy. 

The deductible will apply each time you file a claim in most situations. Deductibles can be as little as $200 or as high as $1,000 on average. But keep in mind that if you have a loss and report a claim, you will be responsible for the deductible. So be sure that as the policyholder, you are able to pay that amount if needed.

What’s Most Important When Choosing?

Professional services are hard to shop for. As a consumer, if we are shopping for a cup of coffee or a new pair of shoes, we can decide without overthinking it (usually). But the same can’t be said about home insurance, auto insurance plans, and other insurance programs. Here are a few things to consider when purchasing insurance:

  • Do they pay their claims? – Some insurance providers have developed a bad reputation for policing payments with zero tolerance and canceling policies if someone falls behind. But they are much less rigorous about paying their payments in return. If you are looking at an insurer that has a history of rejecting claims, finding exclusions, or simply not paying them, you should probably think again. 
  • Check their customer service – Consider calling their service line a few times before committing to a policy. Customer service is vital in the insurance industry. Ensure that you can ask questions and get answers. Ask if they will follow up in an email or if they resist putting information in writing. Does a representative try to hurry you off the phone or take time to answer all your questions? 
  • Test their financial strength – Insurance companies receive ratings from Independent companies, like A.M. Best., that help you determine their financial strength. However, each agency’s ratings may differ, so be sure to compare an insurance company’s score on two or more sites before deciding on a policy.  
  • Coverage and Price – Last but not least, be sure you know the insurance solutions you are getting for the money you are paying. Shop carefully because the same types of insurance products are not the same across the board.

Finding the Best of Both Worlds

Deciding what insurance and coverage you need might not be the most fun or exciting activity, but just imagine life without it. What would happen if you lost everything in a fire and didn’t have insurance to help you get back on track? Everything you've spent years accumulating, hand-selecting, and gathering — all of a sudden gone. We wouldn't wish that on our worst enemy. 

But we understand how overwhelming the insurance process can be. There are so many things to consider, and it can be exhausting. You need someone with your best interests in mind to guide you through the process and be there for you when unexpected life events happen.

Questions for an advisor?

Conover Insurance advisors are some of the best at what they do, and they can help you navigate through the confusion and find the right insurance for you at the right price. Whether you are searching for a life insurance company, automobile coverage, or a homeowners policy, talk to us. You'll be surprised at how refreshing and easy the process can be when you work with a team that cares as much as we do.

Topics: Personal Insurance- Personal Insurance- Featured

Christina Abrams

Christina Abrams

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