Many insurance consumers buy policies without understanding what is covered, exclusions that remove coverage, and conditions you need to meet in order to apply the insurance if you suffer a loss.
To avoid situations like this, you should thoroughly review the coverages and benefits before purchasing any insurance policy.
Reading through the policy helps you confirm the policy meets your needs, and you understand the responsibility of both you and the insurance company if you are ever lost.
Before buying insurance, review your homeowners policy to find out whether you are already covered adequately.
If you have an homeowners policy, the insurer – who has agreed to assume the economic consequences of that risk – will pay $5,000, minus any deductible (the portion that you must pay). Because coverage is a kind of catastrophic insurance, policies typically have a higher deductible, which is a percentage of the insured structures replacement value, and may be anywhere from 10%-25%.
Most homeowners insurance policies offer at least $100,000 in liability insurance, but higher amounts are available, and it is increasingly recommended that homeowners consider purchasing liability insurance worth at least $300,000 to $500,000. To write an umbrella policy, or excess policy, most companies will require at least $300,000 in base liability insurance in your standard homeowners policy. An umbrella policy protects you by providing extra liability protection from lawsuits for amounts exceeding the coverage on your main auto, homeowners, or renters policies, with higher limits of liability coverage, usually $1 million or more. A personal excess policy provides similar coverage as that provided by your primary policy (homeowners), but with a higher amount of liability coverage provided than that provided in your primary policy.
Many policies offer about 20% of your home insurance covered. Check your policy (or ask an insurance professional) about your limits on covering anything that is expensive. If you believe that you should have more coverage, talk to your insurance professional and ask for higher limits on personal items.
If you are running a business, you need to talk to a knowledgeable insurance agent or broker about your insurance needs in depth, and describe the business fully, so whatever insurance you purchase is appropriate. Your insurance agent, broker, or licensed sales representative can discuss your coverage needs and help determine an appropriate amount of coverage. In any case, once you have an understanding of how insurance is important for your business, you will be better equipped to determine the how much of it you will need. Your perception about insurance, especially if you are just starting out, might be that it is a luxury item that large, successful businesses can afford to buy, but one that you cannot afford to bother with at this point.
A business policy is generally more expensive than an owners policy, as the risks are proportionally higher, and are likely more expensive for an insurer. In certain circumstances, if you own a home-based business where risks are low, you may be able to request that your homeowners policy be added with a lower-cost rider or endorsement that covers damages to business assets; however, some insurance companies will not allow you to have your business covered if your customers, employees, or vendors are visiting your home. In the case of a loss, you might need to reconstruct your home according to a new code, and homeowners policies typically do not pay this additional cost. If your insurance policy limits are based on your mortgage (as required by some banks), they may not properly cover the rebuilding costs.
Policies available for small businesses include commercial owners policies, product liability, professional malpractice, and general liability. Small business owners need to maintain a wide range of appropriate coverage, and they should regularly review and update their coverage when circumstances change.
As a business owner, you will have to weigh the costs of insurance for various risks versus the economic impacts of a loss that is not covered. It is obvious that insurance protection for personal losses is necessary, since insurance is the main way of protecting you and your business from problems that can stem from personal losses. It is essential that you obtain supplemental coverage, such as an independent personal life insurance policy, with an adequate amount guaranteed.
For car insurance, check out what extra damages are covered, and what the policies exclusions are for ordinary wear of your car. While your insurance provider will give you the recommended limits for your homes structure, it is also good to educate yourself. Remember, however, insurance is only as good as the highest limit on your policies coverage. The rule of thumb is to get coverage sufficient to pay off all of your liabilities and debts.
Make sure that you are protected with a policy that includes the coverage you need, keeping liability and operating costs down. Ensure that you explore cyber-insurance policies, which can be a smart expenditure that covers gaps in coverage while you are getting adequate insurance coverage. It is also important to review existing insurance policies periodically to make sure that they are providing sufficient coverage.
