Thursday, March 24, 2016

Should You Shelter Under Umbrella Insurance?

For most people, competing financial demands means balancing the different types of insurance coverage they need. You want the best possible auto insurance coverage, but the cost of that could affect how much homeowner’s insurance you can afford. Or an expensive homeowner’s policy could force you to limit your liability coverage. The thing about insurance coverage is that you never know when you may need it. If you knew in advance what the future holds, there would be little need for insurance. 

What an Umbrella Policy Offers

An umbrella policy is what its name says. It is a policy that covers you if you are found liable for injury or damages beyond the coverage of your homeowner’s, renter’s or auto insurance policies. For example, if you are a tenant and are sued by your landlord and your legal costs and judgments are more than the coverage you have under your renter’s insurance policy, an umbrella policy will cover the excess costs. The coverage will, of course, be up to the limits of the umbrella policy itself. The benefits of an umbrella policy are clear, but many people wonder if increasing the coverage on their existing policies is not a better option than taking out another one. The answer to that is an umbrella policy makes sense because it gives you the liability protection you need at a low cost.

Because these policies are rarely used, the costs are low. The cost for the first million dollars of coverage is typically between $150 and $300. The second million could cost just be $75 and the third only $50. These are typical numbers and the cost could vary depending on your location, risk profile and insurance company. Keep in mind that an umbrella policy does not cover damage to your own home, automobile or other personal properties.

Who Needs It?

An umbrella policy is a good idea for anyone with assets of $1 million or more. It is also recommended for those who may be presumed to have more assets than they actually possess, especially if they are public figures. People in this category are easy targets for lawsuits and umbrella insurance can give them the additional coverage they might need at any time. Balancing insurance coverage with premiums costs is not easy. A common solution is to increase deductibles on another policy and use the reduced premium to purchase umbrella coverage. While this will cover any major liabilities, it could leave you vulnerable to paying for fender benders, small damages or loss out of your pocket. An insurance professional will be able to help you weigh the risks, costs and benefits.

An umbrella policy may be right for you, but you need to be sure before investing in it. The right way to make an informed decision is to contact your insurance agent to discuss your specific circumstances and the possible benefits of taking an umbrella policy.

Tuesday, March 15, 2016

New Earthquake Insurance Options

According to the CEO of the California Earthquake Authority (CEA), less than 10% of homes in the state have earthquake insurance. This is not news, but why the figure should be so low in a state riddled with geological fault lines is something that has been discussed for years. In an effort to bring more homeowners into the coverage fold, the CEA is offering new coverage options this year. The main features of the new options, which are part of the CEA’s Earthquake Brace and Bolt program include:

  • Deductibles ranging from 5% to 25%
  • Increased coverage limits for personal property and for additional living expenses
  • Increased discounts for homeowners who submit proof of retrofitting their homes to achieve better earthquake protection
  • An expanded residential mitigation program that can provide up to $3,000 to owners of homes who are eligible for seismic upgrades.

Policies must be bought from participating insurance companies along with a homeowner’s insurance policy. One of the main reasons why people are reluctant to buy earthquake insurance has been that it was felt that deductibles and premiums were too high. The previous deductible options were limited to 10% and 15%. Now policy holders can choose from a variety of options ranging from 5% to 25%. The basic concept of the lower the deductible the higher the premium still applies. To put it in another way, a home with an earthquake insurance policy for $500,000 and a 10% deductible will have to suffer damage of $50,000 or more before the policy pays off. If the deductible is 5%, the damage must be $25,000 or more for the policy to pay out. Of course, the premium in the 5% deductible will be higher, even though the coverage is the same in both cases.

It’s Expensive, but Essential

The overall cost of earthquake insurance has not been reduced by the new program. However, with the option to go in for higher deductible, it is expected that the lower premiums will bring more homeowners in the coverage fold. If your home has been retrofitted, you are entitled to a 5% discount on your premium. If you get the improvements verified by a licensed engineer or contractor, you may be eligible for a higher discount, but note that the cost of the verification could be a few hundred dollars.

The improved coverage for personal property and living expenses is welcome. The personal property cover is now $200,000 which is double of what it was and living expenses coverage is up 4 times to $100,000. Once again, the increased overage option comes at a cost in terms of higher premiums.

What it boils down to is that the cost of earthquake insurance has not come down. However, there are now a number of coverage options and deductible choices that can make purchasing a policy more affordable. All this may seem to confusing. It will be a good idea to contact your insurance broker to find out how these changes could benefit you and how much they will cost.