Continuously serving Kosciusko County since 1854
In financial planning, we spend a lot of time thinking about, talking about, and working toward long-term goals that are integral to attaining the life you want to live. An important aspect that sometimes gets ignored is protecting your assets and all that you’ve worked for from unexpected events. That’s where insurance comes in. Life insurance is a big part of that, but we’ll save that for another day. Today, we are going to cover auto, home, and umbrella policies.
In the state of Indiana, as in most states, automobile insurance is required. Basic coverage includes liability, medical payments, and uninsured/underinsured motorists. Liability protects you against claims of property damage or bodily injury to a third party that you caused accidentally while driving your car. This coverage applies if you are responsible for the accident that caused the property damage or bodily injury. Medical payments, as the name implies, will pay the medical bills of the occupants of your car. This pays regardless of who caused the accident. Uninsured pays for property damage and bodily injury if you happen to be in an accident caused by an uninsured motorist. This coverage usually applies in cases of hit-and-run as well. Underinsured covers you when the other driver is at fault but doesn’t have enough coverage for your injuries.
If you want to protect your own vehicle in cases where you are at fault, you can carry collision and comprehensive coverage. Collision pays for damage caused by accidental impact with another car or object. Comprehensive pays for damage to your car that is not caused by a collision such as glass damage, falling objects, fire, theft, windstorm, hail, water and vandalism. Other optional coverages include towing, roadside assistance and rental reimbursement.
Homeowners insurance is like automobile insurance in that it is designed to protect you from damage to your home as well as from personal liability. Dwelling coverage protects your actual home. Other structures coverage protects buildings that are not part of the actual house, such as a detached garage, gazebo or shed. Personal property coverage will help to replace things like clothing, furniture and appliances that are damaged. Loss of use coverage pays for housing and other expenses if you have a major loss. This coverage may also pay for meals and laundry while your home is being repaired or replaced. The personal liability portion of your homeowner’s insurance provides coverage for bodily injury or property damage for which you are legally responsible, like if a guest falls on your steps or your son throws a ball through the neighbor’s window. The policy will define which perils are covered and usually includes things like fire, lightning, windstorm, hail, explosion, vehicle, riot or civil uprising, smoke, theft and vandalism. Some policies will also cover falling objects, the weight of ice and snow, freezing of plumbing and accidental plumbing discharge. Homeowners’ policies generally do not cover floods. Flood insurance is a separate coverage that you may want to explore. Other perils that are often not covered are earthquakes, mudslides, war or intentional loss.
Both auto and home usually have a deductible, which is the amount that you must pay before the insurance company starts to pay. A higher deductible will generally result in lower premiums, but will also mean more out-of-pocket expenses if you do have a covered loss.
In addition to auto and home insurance, you may wish to add an umbrella policy. Umbrella policies are “extra” insurance in addition to your other policies. For example, say you caused an auto accident, and the injured party sued you, winning a $4 million judgement. If your auto policy had a limit of $300,000, you would be responsible for the other $3.7 million dollars. An umbrella policy would cover the amount above the auto policy’s limit. You could lose your assets if you didn’t have insurance to cover that. Umbrella policies are not just for the rich, and they are usually fairly inexpensive.
The purpose of insurance is to protect against financial loss. It won’t prevent a car wreck or a house fire, but it can help limit the financial damage of that unexpected event. We believe it should be considered in your financial plan.
To hear the podcast of the Smart Money Management radio show on this topic, or others, visit beaconpointe.com/ financial-advisors/in/warsaw/wain/
Important Disclosure: Alan Alderfer is a Partner, Managing Director at Beacon Pointe Advisors, LLC. The information contained in this article is for general informational purposes only. Opinions referenced are as of the publication date and may be modified due to changes in the market or economic conditions and may not necessarily come to pass. Past performance is not a guarantee of future results. Beacon Pointe has exercised all reasonable professional care in preparing this information. The information has been obtained from sources we believe to be reliable; however, Beacon Pointe has not independently verified or attested to the accuracy or authenticity of the information.
The discussions, outlook, and viewpoints featured are not intended to be investment advice and do not consider specific investment objectives or risk tolerance you may have. Insurance payouts, terms, and conditions vary by company and by policy. Please carefully review the details of any insurance policy and consult with a professional to ensure it meets your specific needs. All investments involve risks, including the loss of principal. Consult your financial professional for guidance specific to your circumstances.
