Money Monday: Are You Covered?

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Fall is one of the most expensive seasons of our financial cycle. It’s the time when we experience or read about reports of storms and other natural disasters. Scientists credit climate change for the frequency and magnitude of these events. And, you may, like many others, sense that events occurring today are not normal and that we are moving towards a crisis of biblical proportions.

Whatever the forecast, or the cause, your good stewardship requires responsible management of the assets under your control. Today’s Money Monday raises the question concerning our insurance coverage and the best bang for our buck.

Insurance Environment

According to a recent survey from the Insurance Information Institute, almost 33 % of homeowners have stated that weather conditions and storms have had a negative impact on their most prized asset,  their real property. This has driven insurance companies into dropping–failing to provide–insurance for certain areas of the country.

Insurance companies have also taken a negative position when it comes to insuring our vehicles. Post Covid-19, insurance companies have seen a 16% increase in driving reckless behavior, speeding and impaired driving. The costs associated with covering the results of reckless driving are now being passed on to the rest of us. So if you are wondering why your insurance costs escalate, this is a factor in the equation.

Home Insurance Cost

Home insurance premiums and costs can be a moving target. Both home values, and replacement costs have increased significantly because of inflation and increasing construction costs. Review your homeowner’s policy to ensure that it covers the value of your property. In other words, you want to know what is covered and not covered, and for how much. You don’t want to find yourself surprised, uncovered, or with insufficient coverage after paying years and years of insurance premiums on your property.

This is critical because what you really want to be insured against rebuilding or replacement costs, and these costs are not the same as sales price or appraised value necessarily. Your house may be valued at close to one million, but how much does it cost to replace or rebuild your house if something happened to it now? Knowing that number and its relationship to your policy and premiums is the goal.

Ask your insurance provider whether you can add an inflation guard to your policy.  An inflation guard would increase your coverage when your policy is renewed annually. The other consideration would be adding an extended replacement cost coverage endorsement to your policy. An endorsement could provide an additional 5%, up to 25%,  above your policy’s replacement cost in the event that you need to replace or rebuild your home.

Also, make sure your policy provides coverage for living expenses while the repairs are being performed. Some policies may cover hotel stays and meals up to capped amounts . Know what those amounts are especially since there could be supply chain issues and your property may not be completed in the projected or expected time frame.

Finally, when it comes to cost protection against your most valuable asset, you should note whether your policy covers flooding, lawsuits if someone gets hurt on your property, water and sewer pump failures. If you need assistance finding insurance for some issues, you may want to consider finding an independent insurance broker at trustedchoice.com, or contact FEMA at floodsmart.gov.

Vehicle

With regards to vehicles, if you like to drive the latest vehicles or have a preference for electric vehicles etc, the premiums may be higher along with deductibles. Pay close attention to a critical part of your policy–damage to your vehicle from an accident. The issue here is replacement parts and whether they are original manufacturer parts or aftermarket parts. Some policies permit the use of aftermarket replacement parts. However, with the advancement of technology as it relates to vehicles, will parts that may not have been crash tested function the same way on your vehicle after repairs?

Another potential cost saving item is gap insurance. You will not need this type of insurance unless there is a difference between your vehicle’s value or market price and any amount owed. But the question to consider is should you acquire this insurance from your insurance company, or pay a one-time fee from the seller or dealer for this coverage?

The other question to consider is whether you still need gap insurance if your debt on the vehicle is less than the sales price or market value of the vehicle? As you continue to pay your car note and the liability decreases, at some point the amount owed may be less than what you can acquire for your vehicle on the open market. Gap insurance could be adding an additional $20 dollars to your monthly or an additional $200 to your annual premium amount.

THAT’S WHAT’S UP!

Here are some tips to save on insurance.

1. Shop around for coverage

2. Pay your premium on time and annually. Check to see if doing this will qualify you for discounts on your policy.

3. Take steps to mitigate the risk of loss, such as smoke detectors, security cameras and other measures. Use this to negotiate your policy and to obtain rate reductions where possible

4. Keep your credit score high. Insurance companies are factoring your credit scores when it comes to policy rates and premiums. Therefore you should also be checking your credit reports for errors and mistakes. And that’s what’s up!

Ruthven R. Phillip, Esq., is a tax attorney, Stewardship and Philanthropy Ministry Assistant, and CEO of Give2Getrich, LLC. Give2Get Rich, LLC 2023. All Rights Reserved. Any distribution or reproduction of part or all of the contents in any form is prohibited.

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