Last week we talked about the different types of Military Life Insurance coverage options available to you. This week I want to touch on all of the other types of insurance coverage you should be aware of, and my thoughts on how to use them to mitigate your risk!
Note, there are a lot of types of insurance coverage out there, these are just a few you should know about!
Renters Insurance (for yourself)
What it is:
Renter’s insurance is available to persons who are renting or subletting their residence. This property insurance provides coverage for a policyholder’s liabilities, belongings, and potentially even living expenses.
When you might use it:
Renter’s insurance should be used at any time you are renting a residence. Yes, that includes base housing or even the barracks room.
Pros:
– Protects your belongings in the event that something happens in your residence. This could be flooding, fire, etc.
o For example, my barracks room flooded when I was a Sgt (The Marine above me got drunk and passed out with the shower running). My laptop got destroyed, and renter’s insurance was able to replace my laptop.
– Renter’s insurance gives you a sense of safety for your belongings and assets. If something gets destroyed you can replace it without having to utilize a credit card.
– This insurance is very affordable for the amount of coverage you get.
Cons:
– It’s another cost (albeit small)
– Depending on your coverage choices, it might have a high deductible.
My thoughts:
Don’t spend so much money on renter’s insurance that it eats into your finances, but I believe it is a smart move to pay for renter’s insurance if you have any expensive items.
Property Insurance
What it is:
Property insurance is a broad term for various different police that provide either property protection or liability coverage for property owners. There is homeowners’ insurance, renters insurance, flood insurance, earthquake insurance, etc.
If you have very high value and expensive personal property it is usually covered by purchasing an addition to the policy called a “rider.”
There are three types of property insurance coverage: Replacement cost, extended replacement costs, and actual cash value.
Replacement cost: covers the cost of repairing or replacing your property at equal value.
Extended replacement costs: will pay more than the coverage limit if the cost of construction has gone up. Usually won’t exceed 25% of the limit though.
Actual cash value: pays the owner the replacement costs minus depreciation. Meaning that the older a property is, the less you will get paid out if it is destroyed.
When you might use it:
You don’t really have a choice here. Nobody will lend you money to purchase a property without insurance.
Pros:
– Will repair or replace your property if something goes bad while you own it
– This will cover your but in the case of an emergency, major storm, or other issues that threaten the existence of your property
Cons:
– Homeowners insurance is another expense that must be factored into your expenses when purchasing real estate.
– There aren’t any other cons, in my opinion, because this is the insurance you need, and want to have on your property!
My thoughts:
Shop around for the best rates rather than just sticking with a bank because that is who you’ve used previously. Many insurers will give discounts for having all of your policies under one roof.
Definitely pay for homeowners’ insurance!
Landlord Insurance
What it is:
Landlord insurance is very similar to homeowners insurance, but for landlords. These policies can cover property damage, liability protection, and lost rental income, depending on what you need.
You could also pay for guaranteed income insurance, flood insurance, emergency coverage, etc. to cover the various needs of landlords.
When you might use it:
When you own rental properties or other real estate investments that homeowners insurance does not cover adequately.
Pros:
– Landlord insurance is quite versatile
– Can even cover missed rent payments if you want
– You can deduct the cost of landlord insurance on your tax return
– Lots of insurance companies to shop rates with
Cons:
– More expensive than regular homeowners insurance
– An additional expense to budget for as a landlord
– These policies can be complicated
My thoughts:
I have landlord insurance on my rental properties, though I don’t utilize the rental income insurance benefits. I would prefer to budget for these with cash reserves than pay a higher premium when unnecessary.
Definitely utilize landlord insurance if you own rental properties. Otherwise, just stick with homeowners’ insurance for your primary residence.
Auto Insurance
What it is:
Auto insurance is a policy vehicle owners maintain in order to mitigate the costs associated with an automobile accident. This insurance is also required in the United States.
You can get property insurance, liability, medical, bodily injury liability, property damage liability, and several other types of auto insurance.
When you might use it:
From the moment you purchase a car, until the moment you sell it. There is no reason to fight this, if you own a vehicle that drives, insure it!
Pros:
– Covers hit and run accidents
– Covers medical bills
– Will cover replacement of the vehicle
– Covers you in case of any vehicular incident
– You won’t get a citation for “failure to provide proof of insurance”.
Cons:
– It can be expensive depending on your driving record
– It can be expensive depending on the amount of coverage you’re paying for
– Premiums will increase after claiming benefits. Meaning that if you have a string of accidents, or get a DUI, your insurance will become even more expensive. This is not the case if you weren’t at fault for the incident though.
My thoughts:
You need to have auto insurance. There is no excuse for not having auto insurance. This is the probably most common of the types of insurance coverage you will see.
As with all insurance I recommend shopping around in order to get the best pricing. Also, be a safe driver in order to ensure your insurance isn’t outrageously expensive.
Umbrella Insurance
What it is:
Umbrella insurance picks up where your other insurance policies leave off.
For example, suppose you own a rental property and found yourself in a lawsuit for whatever reason. If you lost that lawsuit, and the sum is greater than what your existing insurance will pay, umbrella insurance will step in to save you!
The last thing you want is to have to eat into your savings over something that could have been avoided.
Umbrella insurance will pick up where your watercraft’s liability insurance leaves off, auto insurance, homeowners insurance, and even certain liability claims such as slander, libel, false imprisonment, etc.
When you might use it:
Umbrella insurance is a great safety net to have in place to insure you against a worst-case scenario. If you’re scared of the lawsuit-happy world we live in this could be a good hedge to purchase.
Pros:
– Provides extra liability coverage and legal defense costs once the limits on your insurance have been exhausted
– Starts at $1,000,000 in coverage
– Covers unique incidents that your main insurance might not
– Often applies worldwide
– Inexpensive for the amount of coverage you’re receiving
Cons:
– You must already carry auto or property insurance
– You might be required to buy a minimum amount of auto/property insurance before you can add umbrella insurance
– Doesn’t cover damage to your own property, this is liability insurance
– Won’t cover damage incurred in business or professional activities which would require business liability insurance
– Doesn’t cover liability you agreed to assume under a contract that you signed
– You are paying for insurance coverage that you may never need
My thoughts:
Hopefully, you never need to use umbrella insurance, but this is definitely a case of “I’d rather have it, and not need it…than need it, and not have it”.
Umbrella insurance is smart if you have assets, large savings, or partake in activities that open you up to the potential for more lawsuits.
- Determine your types of insurance coverage needs
- Don’t get “sold” insurance, do your research and buy it on your terms
- Don’t let fear talk you into paying way more for insurance than you need
- Always maintain home, auto, renters, and life insurance
- The caveat is when you have the money to cover yourself
Types of Insurance Coverage
These 5 types of insurance coverage are all important to understand. Insurance is not something you want to skimp on. You should always be sure to cover your A$$ in case of an unexpected emergency!
I love this article about whole verse term life. Whole life is one of the types of insurance coverage I don’t think you need, and this article explains that well.
3 Responses
I really didn’t know these tips before which you have informed us through your helpful and informative article!! Thank you and keep sharing awesome stuff.
It’s great to learn that property insurance can cover your house in case of an emergency or natural disaster. My wife and I are wanting to move to an area that is known for its hurricanes and we were wondering how we could protect our home. I’ll be sure to tell her that we should get property insurance for the house.