By Jeffery Lee
When purchasing insurance coverage, it is very important to choose adequate coverage. Because insurance is an intangible product – something one cannot see or touch – it is easy to think that the least expensive option is the best. This is usually not true! Insurance should cover a client fully in a worst-case, potentially life-changing scenario. At the time of purchase, the cheapest price may seem like the best option, but without good coverage, clients can end up spending far more than the extra few dollars per month that proper coverage would have cost. And by the time something bad has happened, it is too late to buy coverage.
Here are a few specific coverages to pay attention to when buying an auto or home insurance policy:
• If a car is 2010 model or newer, always carry full coverage. “Liability only” is a cheaper policy, it but will not pay for damage to your vehicle.
• Carry at least $100,000 of Property Damage Liability on a car insurance policy. Many companies sell coverage at $25,000 or $50,000, but if the client is at fault in an accident in which the other driver’s vehicle must be completely replaced, many newer model vehicles cost more than this amount. With these lower limits, the client would have to pay the difference out of their own pocket.
• On car insurance, it is important to carry the same limit of Uninsured/Underinsured Motorist coverage as Bodily Injury Liability. This coverage protects the owner from other drivers who do not carry insurance, or do not have enough insurance to pay for an accident.
• On home insurance, it is a good idea to carry replacement cost instead of actual cash value. Actual cash value policies are less expensive, but if there is a disaster, replacement cost will cover rebuilding or repairing the home to the same size and specifications as before the disaster. Actual cash value will only pay the depreciated cost of a home, which becomes less and less as the home gets older.
In all insurance coverage, it is recommended to carry liability limits that will protect everything in a worst-case scenario, where the owner is at fault, and is sued. Discuss this limit with an agent, as these assets include savings and investments, property, and even future earnings