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Your 2020 Ultimate Guide To Insurance

Good insurance can save you money.  And bad insurance can cost you even more money.

How do you know what kind of insurance you need and how much of it you need? 

Welcome to insurance 101. For all the answers to your insurance questions, keep reading. 

Insurance 101

A few basic principles apply when you’re looking at any kind of insurance.

First, always look at multiple companies. Do not settle for the first insurance quote you find.  Search for quotes online, and always compare at least three different companies. 

Also, make sure you’re comparing identical amounts of coverage. If companies have different limits or deductibles, you’re not comparing the same policies. So look at more than basic costs. 

Consider what customers are saying. Look carefully at reviews about customer service for companies as you consider different insurers as well. 

What is Car Insurance

Everyone who owns a car must have basic car insurance. A basic auto policy is pretty simple. You pay a car insurance company a specific amount each month so that if your car is damaged, the car insurance company will pay for repairs or replacement of a damaged vehicle.

Depending on the policy and circumstances, your company will also pay for the physical injuries you receive as a result of the accident. 

Car insurance comes in three different forms:

  • Liability

    With liability insurance, your insurance company covers the cost of the damage your vehicle causes if you are at fault. This insurance will cover the cost of repair for vehicles or property that your car damaged. In most states, it is required by law to have at minimum liability car insurance if you own a car. 

  • Collision

    Collision insurance covers the damage to your car no matter who is at fault. This insurance will repair or replace your car. 

  • Comprehensive

    Comprehensive is additional insurance you can add to a policy. If someone steals your car or if extreme weather damages it, comprehensive insurance kicks in. 

How Much is Car Insurance

Car insurance cost depends on the make and model of the car and your driving record. Typical auto insurance ranges from $1,000 a year to $2,000 a year. 

What is Renter’s Insurance? 

Many insurance companies offer renter’s insurance. Much like homeowner insurance, renter’s insurance will cover your personal possessions, liability, and any living expenses. So if your apartment burns down, renter’s insurance will pay for your lost possessions as well as your living expenses while you look for another place to live. 

To make sure your renter’s insurance covers everything, you need to take a home inventory. Write down and take pictures of everything you own, and keep it in a safe place away from your apartment, like a safety deposit box. 

An actual cash value policy means that your policy will cover the actual value of what you lost. A replacement cost policy will cover the cost of replacing your items. 

Typical renter’s insurance does not cover earthquakes or natural disasters like floods. 

Some policies will have an ALE or additional living expense part in addition to the cash value or replacement value. ALE will give you money to live on while you look for another place to live. 

How Much is Renter’s Insurance? 

Renter’s insurance is cheap. It costs around $15 a month on average. 

What is Business Insurance?

Business insurance is much like personal insurance except for your business. Each of the following types of insurance fall under the term “business insurance.” 

  • Property Insurance: This insures your building from fire and theft. It also covers your building assets like inventory, computers, machinery, and just about anything inside. Some property insurance will also cover a loss of business caused by a natural disaster like a hurricane. 
  • General Liability Insurance: Also called business liability insurance, general liability insurance covers any physical injuries or damage that results from your product or service. So if your customer slips and falls, you have insurance to protect you. 
  • Commercial Auto Insurance: This is automobile insurance for your business vehicles. It covers everything basic automobile insurance would cover. 
  • Workers’ Compensation Insurance: If you are an employer, this insurance protects you and your employees from injuries that happen on the job.  
  • Product Liability Insurance: This insurance protects your business if your product malfunctions or has defects. You should have this insurance if you produce, sell, or distribute a product. 
  • Professional Liability Insurance: If you are a professional, you should consider professional liability insurance. Malpractice insurance falls under this category, so if you’re a doctor, an attorney, a real estate agent, or even an IT consultant, you might need professional liability insurance.  

How Much is Business Insurance?

Depending on the service and business you have, business liability insurance can cost anywhere from $500 a year up to $15,000 a year. 

What is Health Insurance?

To find a health insurance quote, start with the health insurance marketplace.   If your employer provides your insurance, then your employer is your marketplace.

You always have the option to look for alternative healthcare plans even if your employer provides you with one. However, the plan will most likely cost more than the marketplace because your employer usually pays a part of your premium.

If you do not have health insurance through your employer, you can find health insurance through your state’s public market place or the federal marketplace. 

You can choose a health insurance policy through a private exchange or an insurer as well.  Four different basic plans exist as you look at healthcare plans. If you’re receiving a plan through your employer, ask your human resource department about a summary of the benefits so you fully understand them. 

HMO – Health Maintenance Organization

If you have an HMO, you must stay in the network of doctors who belong to the HMO for your insurance to cover you. Special procedures and specialists usually require a referral with an HMO.

On the positive side, you pay less out of pocket with an HMO, and you get a primary doctor who coordinates your care. You do have less freedom to choose your provider

PPO – Preferred Provider Organization

With a PPO, you do not have to stay in-network to get coverage. However, you do pay less for in-network care. Also, you do not need a referral for a specialist.

A PPO offers you more provider options and no required referrals but you end up with higher out-of-pocket costs. 

EPO – Exclusive Provider Organization

With an EPO, you have to stay in-network except for emergencies. However, you do not need a referral for a specialist. Thus you pay less out of pocket,  but you have less freedom to choose a provider.

POS – Point of Service Plan

With a point of service plan, you do not have to stay in-network, but in-network care costs less, giving you more choices. You also need a referral for a specialist. Thus you have more provider options and a primary doctor who coordinates your care.

In-network doctors cost less because insurance companies contract a lower rate with those providers. Also, out-of-network doctors do not have to agree on a plan or rates.

Whenever you’re looking at plans, make sure your preferred doctor is in-network. Also, look for a plan with a large network so you have choices. 

How Much Is Health Insurance? 

Compare all of your out-of-pocket costs. Out-of-pocket costs consist of deductibles, copayments, and coinsurance costs. 

If you pick a plan with a higher premium, the plan will typically pay a higher portion of your medical costs. So pick this type of plan if you see a doctor or specialist frequently. Also, if you tend to need emergency care frequency or have expensive medications, you will want a higher premium plan. If you plan on having a baby or have small children, think about this plan as well.

If you are in good health and cannot afford a higher monthly premium, look at a lower monthly premium. 

What is Life Insurance?

Approximately 40 percent of Americans do not have life insuranceLife insurance pays out when the policyholder dies. People buy it so their family has some financial support when they die. 

Life insurance will serve to cover funeral costs, secure a mortgage, pay off credit debts, pay estate taxes, and protect a family’s lifestyle if their main provider dies. 

Two different types of life insurance exist. 

Whole Life

Whole life insurance is a permanent form of insurance that covers you for the term of your life. It typically has the highest premium of the two types of insurance

Universal life is a  type of whole life that qualifies as an investment. It allows people to borrow money from their life insurance policy for investment purposes. 

Term Life

Term life is the most affordable option of life insurance. You purchase it for a specified term and not for the duration of your whole life It comes with a fixed rate, so you can budget your payments for that term. 

Term life insurance usually stretches for 10 to 30 years. This life insurance covers you during this period and not for the duration of your life. Because this insurance covers you only for a limited time, it is the least expensive option.

How Much Is Life Insurance? 

The cost of life insurance depends on the type of policy you get, your age, and your habits. For example, a 20-year term life insurance policy of $500,000 can cost as little as $25.67 a month for a 25-year-old nonsmoker and as much as $1,600 for a 65-year-old smoker.

What is Home Insurance?

A quality home insurance policy will cover anything that is destroyed or damaged in your home, including the house itself.  Home insurance kicks in even in the case of theft and personal liability. So if your cantankerous cousin is visiting and slips on your front steps, your home insurance covers their medical bills. 

How Much Is Home Insurance? 

Home insurance has three different levels of coverage: actual cash value, replacement cost, and extended replacement cost or value. 

Actual cash value covers the actual value of your home and belongings after you deduct depreciation costs. So while a new home may cost your $500,000, if your old home was worth $250,000, you will receive $250,000. 

Replacement value covers the cost of replacing everything. In this case, the insurance company does not factor in depreciation, but rather you receive the cost of replacing your goods and home. 

Extended replacement cost or value is the most thorough policy. This policy will cover the cost of repairing or rebuilding your home, even if the cost exceeds your policy limit. 

Typical home insurance does not cover damage that the company deems caused by acts of God or nature or war. 

On average, home insurance average cost is $1,200 a year.  

What is Pet Insurance?

Pet insurance is a healthcare policy for your pet. It pays you back for medical expenses and protects you from having to pay expensive medical care fees. Pet insurance even covers the cost of having your pet put down. 

How Much Is Pet Insurance?

This is a significant cost, considering euthanasia costs between $50 and $300

Pet insurance is different than typical health insurance. You pay the vet out of pocket and file a claim with the insurance company

Pet insurance commonly excludes behavior issues, grooming, routine checkups, dental disease, pre-existing conditions, and hip dysplasia. 

Deductibles for pet insurance range from $1 to $1000 with the insurer usually paying between 50 and 100 percent of the bill. 

What is Unemployment Insurance?

Unemployment is not insurance you pay for directly or even look for. Instead, it is something you apply for when you lose your job. 

The U.S. Department of Labor provides unemployment checks to any eligible person who loses their job through no fault of their own. 

You can apply by filing a claim with the unemployment insurance program in your state

What is Rental Car Insurance and Do You Need It?

When you rent a car, your car insurance typically covers you if you have an accident. However, if you do not own a car or have car insurance, you need to consider getting rental car insurance.

Rental car insurance is optional coverage. It protects a rented vehicle and you if you damage the vehicle or receive an injury while driving.

A rental company will typically offer extra coverage, so be aware if you’re already covered before you lay down the credit card. Rental car insurance will cost you as little as a few bucks a day up to $30 a day. 

Frequently Asked Questions

Learn some of the basics of Insurance

Do you need auto insurance?

Most states have laws that require drivers to have at least some auto liability insurance.  These laws were created so that victims of auto accidents can receive compensation from those that caused the accident.

What affects the cost of auto insurance?

There are many factors that can influence how much you pay for auto insurance.  Some of these include the following:

  • Your automobile
  • Your driving record
  • Marital Status
  • Age
  • Location
What does homeowners insurance cover?

Homeowners insurance takes care of the property of the insured, as well as personal liability for the insured.

How much life insurance should you get?

A standard rule is that you should get the amount of 6 to 8 times your annual earnings in life insurance.  Other factors should also be looked at including income sources outside of your salary, dependents and your marriage status.

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