Get covered, not buried, or burned

03/18/2014 8:00 AM

03/18/2014 10:00 AM

Tax time is always a good time to take time to see where your money goes. I’ll say this: It’s too bad most insurance premiums aren’t tax-deductible, because we sure pay a lot of them. Of course, some insurance premiums can actually be paid for on a pre-tax basis – like health premiums – but I’m talking about home, auto and individual life insurance.

These premiums can look and feel like a giant hole in your budget, right up until you need the policies! That’s when you realize their value, or their shortcomings.

Many people believe that anything beyond the minimum coverage levels is unnecessary. And while I’m all for never paying more than you should, these decisions come down to protecting your biggest purchases – and your family – so this is no place to skimp. While I am no insurance expert, I’ve learned over the years that knowing the right questions to ask is a great starting point.

So how much is enough, and what is too much? Great questions! And here are some questions to ask your provider to ultimately get at these broader questions:

How’s my coverage for property damage and bodily injury?

State minimum auto insurance requirements (http://www.dmv.org/mo-missouri/car-insurance.php) cover you only for property damage up to $10,000 and bodily injury per person up to $25,000 or $50,000 per accident. An alternative is to pay a little more for $100,000 bodily injury, $300,000 per accident and $100,000 property damage (abbreviated 100/300/100). This provides for coverage if you hit a new Lexus SUV, or up to $100,000 in hospital bills per person or $300,000 per accident. Expenses relating to being underinsured in the case of an incident are one of the top five causes of bankruptcy (http://www.investopedia.com/financial-edge/0310/top-5-reasons-people-go-bankrupt.aspx).

What’s the “replacement cost” for personal property and the dwelling on my homeowner’s policy?

If a tree falls on your garage, it will definitely make a noise. And it can make a long-term dent in your savings and investment plans. And it can destroy everything inside it, so if you only have “actual value” coverage, you could receive only half of what it costs to replace everything. “Replacement cost” protection, on the other hand, allows you to rebuild and repurchase for only the cost of your deductible.

Do I have water backup coverage?

You can float along with minimal coverage, but at your own peril. You should consider adding this type of homeowner’s policy (http://www.allstate.com/home-insurance/flood-insurance-main.aspx), which protects you in the event of a sump pump failure that floods your finished basement. Without this “rider” on a policy, you’re on your own for the refinish — and drift into unexpected debt.

What about personal possessions?

Homeowners’ policies have a maximum payout on things like jewelry, musical instruments, firearms, antiques and artwork, unless there are appraisals for them. Because these items can increase in value each year, ask your agent if the total value of your possessions falls within the max. If not, get appraisals and consider some additional coverage. You can do this with a renter’s policy (https://www.statefarm.com/insurance/home-and-property/renters), too.

How much life insurance do I need?

Group life coverage at work is nice, but the benefit is typically just a percentage of one year’s salary. And if you leave, your policy usually doesn’t go with you. Think about those who depend on you and your income. If you’re under 50, a $250,000 individual term life policy is pretty affordable. For a few more bucks, you can jump to $500,000. Out of mind doesn’t mean peace of mind. There are some topics people don’t want to face, but the consequences can be devastating.

Before you make a decision on an insurance policy, be sure to research the best possible deal and assess what you really need, or don’t need. I’m a big fan of insurance brokers, who can shop a number of different carriers for you at one time. Seek referrals for agents with a track record of protecting clients and consistently reviewing the best coverage plans for their clients. Most agents work for commission so they should be able and willing to do this. Once you find the right partner, be sure to schedule ongoing reviews to fully understand the scope of your plan.

Kat's Money Corner is posted on Dollars Sense every Tuesday. Kat Hnatyshyn, when not blogging or caring for her little one, is a manager with CommunityAmerica Credit Union. For more financial chatter, click http://twitter.com/savinmavens.

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