Having the proper insurance coverage is vital to ensuring peace of mind.
When it comes to insuring your most valuable possessions, you have important choices to make. In the event of a loss involving your home or car, do you know how you would like to be reimbursed? Does your current policy reflect these preferences? It is critically important you evaluate the following two types of coverage to ensure you are well-informed.
Actual Cash Value vs. Replacement Cost
If you elect for an actual cash value insurance policy, you will likely be compensated for the fair market value of the item at the time it was lost or damaged.
Pro: These policies often have less expensive monthly premiums, so you could insure expensive items for less.
Con: The payout is not based on what you paid for the item. This means you could be out the difference if something has depreciated in value since you purchased it.
For example, if you had a wreck and wanted to replace the car you bought five years ago, you will probably be accepting payment for what a vehicle of that make and model would fetch now, minus your deductible and wear and tear.
Many agents recommend replacement cost insurance, especially for homeowners. This sets you up to be reimbursed for the full amount it would take to rebuild your home and replace everything in it.
Pro: You can replace older items for what they would cost to purchase new.
Con: This option tends to be more expensive. Also, you must replace all items claimed to recoup the payout and cannot use the money for other things.
Keep in mind multiple factors come into play when determining how an insurance claim will be paid out, including how accurately you can describe, document and show the lost value of your property in your proof of loss, the type of policy you have, and the basis of claims settlement. By understanding your options, however, you can be assured of success.
Three Common Myths About Auto Insurance
There is no shortage of wrong information about car insurance. And unfortunately, making decisions based on half-truths can complicate your life and cost you money. Need help deciphering myth from fact? Be aware of these commonly held, yet not quite true, beliefs.
Myth 1: If you total your car, you do not have to pay off the remainder of your loan.
Truth: Unless you carry optional gap insurance to supplement the difference between the balance of your loan minus the fair market value of the car, you could be facing a loss if you owe more than the car is worth. Review your options when buying coverage to make sure you minimize this risk.
Myth 2: Comprehensive covers everything.
Truth: A better way to say it is that comprehensive insurance coverage will pay when your vehicle is damaged by something besides another driver. Essentially, it probably will not kick in for incidents triggered by a collision. However, it should cover damage caused by things like vandalism, natural disasters and fallen tree limbs.
Myth 3: If a friend is driving your car, they are responsible for any damage done.
Truth: While that may be the most socially acceptable answer, it is not the rule. In most cases, the owner’s insurance policy follows the vehicle, not the person driving it. So even if you were not in the car at the time of the collision, you will probably still have to file the claim.