Insurance Services

Car Insurance

The amount of money you spend for car insurance can vary dramatically depending on the insurance company you choose, the coverage you want and the kind of car you drive. Are you spending more than you need to on insurance premiums? This Financial Guide will help you get the most for your car insurance dollar.

  • Choose Your Coverage Carefully
  • Maximize Discounts
  • Drive Carefully
  • Auto Information Checklist

Choose Your Coverage Carefully

Although certain minimum coverages are mandatory in most states, the amounts of such coverage vary among policies. Most coverages are discretionary. Therefore, you should choose your coverage carefully to avoid being over insured, resulting in unnecessary premium costs. For those who are not familiar with auto insurance policies, all drivers are required to have the following basic coverages:

Liability covers physical injuries to other people, including compensation for expenses that might arise from such injuries, and damage to other people’s property.

Comprehensive and collision covers damage to your car due to collision or overturning, fire, flooding, or theft (there is usually a deductible).

Uninsured (or underinsured) motorist covers the expenses of an accident if the other driver has insufficient insurance.

Medical protects you against medical costs for injuries to you and other riders in the car.

Note: In certain states with “no-fault” insurance laws, personal insurance protection coverage is required and there are some restrictions on liability lawsuits.

Your policy will show the total amounts of bodily injury, liability, and property damage coverage. For instance, a policy of $25/$50/$20 means that, in a single accident, you are covered for $25,000 for an individual injured, $50,000 for all persons injured, and $20,000 of property damage.

The amount of coverage you choose will depend on the state’s minimum requirements, the replacement cost of your vehicle, and how much medical coverage you already have under other policies.

Maximize Discounts

Most insurance companies will reduce premiums 10% to 20% for some or all of these situations. However, you may have to bring up the subject with your agent.

  • Automatic seat belts and air bags
  • Anti-lock brakes
  • Insuring more than one car
  • No accidents in three years
  • No accidents ever
  • Drivers over 50 years of age
  • Driver training courses
  • Anti-theft devices
  • Good grades for students
  • Low mileage discounts
  • Insuring your home or apartment with the same company
  • College student living at least 100 miles away from home without a car on campus
  • Not smoking
  • Not drinking
  • Serving in the armed forces (past or present)
  • Car pooling
  • Ignition cutoff system and/or a hood or wheel-locking device
  • Being a doctor, lawyer, farmer, or member of a profession that the insurance company regards as a good risk
  • Being female and the only driver in the household
  • Renewing for longer than a year

Drive Carefully and Take Your Car Key

Finally, at the risk of being obvious, drive carefully. Accidents can greatly increase your premiums as well as cause the insurance company to refuse to renew (or, in serious cases, to cancel) your policy. And don’t forget to take your car key when leaving your car: a car is stolen every 19 seconds in the U.S. and over 20% have the key in the ignition.

Auto Information Checklist

When calling insurers to request price quotes, this checklist of information will come in handy.

Automobile Information

  • Year
  • Manufacturer
  • Model
  • Body Style
  • Vehicle ID No.
  • City/State/Zip For Car’s Location
  • Total miles driven per year

Vehicle’s Use

  • Miles Driving to and from work
  • Miles driving to and from school
  • Miles driving for business

Driver Information (needed for each driver to be insured)

  • Name
  • Date of birth
  • Sex
  • Marital Status
  • Occupation
  • Moving violation convictions in the past three years
  • Accidents in the past three years

Home Owner Insurance

Maintaining adequate homeowner’s insurance is a vital part of owning a residence and your homeowner’s policy should be chosen carefully. This Financial Guide discusses the policy provisions to consider when deciding which homeowner’s insurance policy to buy to be sure that your home is adequately insured and that you are getting the most insurance value for your money.

What Homeowner’s Insurance Generally Covers

Tip: It is equally important that renters maintain insurance. Many renters neglect to obtain insurance, perhaps deterred by cost or perhaps, or because unlike homeowners, they are not required to maintain insurance. Studies show that about three-quarters of all those who rent a residence do not have renter’s insurance. Adequate replacement cost coverage and liability insurance can be obtained for about $200 per year–less if combined with an auto policy for instance since most insurers offer discounts for multiple policies.

Note: Homeowner’s insurance is usually required by mortgage lenders

What’s Covered

Although exact coverage and policy limits vary, homeowner’s insurance usually covers damage caused by the following events or catastrophes:

  • Fire
  • Lightning
  • Explosion
  • Smoke
  • Vandalism
  • Theft, including check forgery and counterfeit currency
  • Unauthorized use of credit cards
  • Falling objects
  • Ice, snow, or sleet weighing on vehicles
  • Windstorm
  • Hail
  • Riot
  • Volcano
  • Freezing of plumbing
  • Flooding due to plumbing overflow
  • Hot water heater bursting
  • Heating system malfunction
  • Power surges

Basic coverage may also include food spoilage, lock replacement, temporary repairs, and removing debris. If these items are not initially included in your basic coverage, it is possible to have them added.

If you incur expenses for temporary living quarters because your home is rendered uninhabitable by an insured event/casualty, most policies will reimburse you in part for this so-called “loss of use.”

Tip: Earthquakes and sinkholes are not covered under standard policies; however, earthquake insurance can be purchased as an endorsement for an additional fee in all states except California. Flood insurance, which also includes mudflow, must also be purchased as a separate policy. It is only available National Flood Insurance Program run by the federal government. Other types of water damage such as overflows or backups from a sump pump, sewer system, or drains are also excluded and require a separate endorsement.

There is usually a deductible of $100 to $500 for personal property losses. Raising the deductible can lower the premium.

Actual Cash Value Or Replacement Cost

If you insure your belongings for their “actual cash value,” you will not get their replacement value at the time of a loss. Actual cash value refers to the value of your belongings after taking into account depreciation and wear and tear. This is also known as Fair Market Value (FMV). For instance, the actual cash value of a television you bought ten years ago may be worth only $50. On the other hand, “replacement cost” coverage provides you with the costs to replace your belongings. Thus, you would get the $500 you need to replace that ten-year-old television, not the $50 “actual cash value.”

Limits on Coverage

You choose the limits on the amounts of coverage on your home and personal property. The premium you pay depends on the limits you choose. Regardless of the policy limit, there is a separate limit on the replacement of high-value items, such as jewelry and artwork. If you want increased coverage for certain items, you must purchase an endorsement or floater (also known as a “rider”). You must generally pay extra for the following:

  • High-value items (e.g., jewelry, furs, silverware, weapons)
  • Personal computers and other home-office equipment
  • Waterbeds
  • Business operated in the home
  • Earthquake, flood, and hurricane (depending on location)

Policy Coverage: What to Consider

If your home is damaged or your possessions are stolen, will your homeowner’s policy pay as much as you are expecting? If you are willing to pay the premium for full protection, here are the policy coverages you might consider.

100% of Rebuilding Costs

The amount of insurance that you buy should be based on the cost of rebuilding–not on the price of your home. The cost of rebuilding your house is usually higher than the price you originally paid for it, and often, even the price you could sell it for today. Most insurance companies recommend you insure your home for 100% of the cost of rebuilding it.

Tip: Your insurance agent or company representative may be able to help you calculate rebuilding costs. If not, you could hire an appraiser to do this. Real estate agents can provide you with the names of appraisers.

The cost of rebuilding is affected by local construction costs and by the type of house you have; however, the following are some of the factors that enter into the calculation:

  • The type of exterior wall construction such as wood frame, masonry (brick or stone) or veneer
  • The square footage of the structure
  • The style of the home, ranch or colonial, for example
  • The number of bathrooms and other rooms
  • The type of roof and materials used
  • Whether the home was custom built

Whether the home has an attached garage, a fireplace, exterior trim, or any special features such as arched or bay windows

Tip: For a rough estimate of the cost of rebuilding your house, calculate the square footage and multiply it by local building costs per square foot for your type of house. Ask a real estate agent or appraiser for average building costs in your area.

If you already have homeowner’s insurance, it’s very important to make sure that you have enough. If your home is one of the few that are totally destroyed, and it is insured for less than 100% of the rebuilding cost, you risk not having enough money to replace it with one of similar size and quality.

Make sure your insurance agent or broker knows about any improvements or additions to your house that have been made since you last discussed your insurance policy. If you haven’t increases your policy limits to cover the cost of rebuilding that new deck, second bathroom, or other improvements that have increased the value of your home, then you risk being under-insured. If you lack sufficient insurance, your insurer may pay only a part of the cost of replacing or repairing damaged items–depending on the kind of policy you have.

Look at your policy to see what the maximum amount that your insurance company would pay if your house was damaged and had to be rebuilt. The limits of the policy usually appear on the Declarations Page under Section 1, Coverage A Dwelling. Your insurance company will pay no more than this amount to rebuild your home–no exceptions.

Some banks require that you buy homeowner’s insurance to cover the amount of your mortgage. However, if the limit of your insurance policy is based only on your mortgage, your policy is unlikely to cover the cost of rebuilding. Make certain that the value of your insurance policy keeps up with increases in local building costs.

Caution: If the limits of your policy have not changed since you bought your home, it is likely that you are under-insured.

Tip: Ask your agent about adding an “inflation guard clause,” which automatically adjusts the limit to reflect current construction costs when you renew your policy.

Replacement Cost

Consider buying replacement cost coverage for structural damage. A replacement cost policy will pay for the repair or replacement of damaged property with materials of similar kind and quality. The insurance company will not deduct for depreciation. Depreciation is the decrease in value due to age, wear and tear, and other factors.

If you own an older home, you may not be able to buy a replacement cost policy. Instead, you might buy a modified replacement cost policy that will pay for repairs using standard building materials and construction techniques in use today, rather than repairing or replacing features typical of older homes, like plaster walls and wooden doors, with similar materials.

Insurance companies differ greatly in the way they insure older homes. Some refuse to insure older homes for 100% of replacement cost because of the expense of re-creating special features like wall and ceiling moldings and carvings. Other companies will insure older homes for 100% of replacement cost as long as the dwelling is in good condition.

Caution: If you cannot insure your home for 100% of replacement cost–or choose not to do so–because the cost of replacing a large old home is prohibitive, then make sure the limits of the policy are high enough to provide you with a house of acceptable size and quality.

Guaranteed Replacement Cost Insurance

A guaranteed replacement cost policy will pay whatever it costs to rebuild your home as it was before the fire or other disaster, even if it exceeds the policy limit. This policy protects you against sudden increases in construction costs due to a shortage of building materials, for example, or other unexpected situations, but generally does not cover the cost of upgrading the house to comply with building codes.

Tip: Building codes require structures to be built to minimum standards. If your home is severely damaged, there may be an extra cost in rebuilding it to comply with standards enacted since the home was built. Complying with building code may require a change in design or building materials. Generally, homeowner’s insurance policies will not pay for this extra expense, but some insurers offer an endorsement (a form attached to an insurance policy that changes what the policy covers) that pays a specified amount toward these costs.

Note: A guaranteed replacement cost policy may not be available if you own an older home.

Flood Insurance

If your home is located in an area prone to flooding, contact your insurance agent or the National Flood Insurance Program (800-427-4661).

Tip: Your homeowner’s insurance policy does not cover flood damage. If you buy a federal government flood insurance policy, consider insuring your home for 100% of replacement cost and buying insurance to cover the contents of your home as well as the dwelling.

Contents Insurance

This list should include everything you and other members of your household own in your home and in other buildings on the property, except your car and certain boats, which must be insured separately. Among the items you should include are indoor and outdoor furniture, appliances, stereos, computers and other electronic equipment, hobby materials and recreational equipment, china, linens, silverware and kitchen equipment, and jewelry, clothing and other personal belongings.

Tip: Estimate the value of your personal possessions at current prices and not what you paid for it. The total is the amount of insurance you would need to replace the contents of your home with new items if everything were destroyed.

Check your homeowner’s policy to find out how much insurance you have for the contents of your home. The limit of the policy is shown on the Declarations Page under Section 1, Coverage, and Personal Property. The contents limit generally is 50% of the amount of insurance on the dwelling. For example, on a home insured for $100,000 the contents would be limited to $50,000. Now compare the contents limit with the total value of the items on your list of personal possessions. If you think you are under-insured, give your insurance agent or broker a call.

As discussed before, there are two ways of insuring your personal possessions. If you have a homeowner’s insurance policy, find out whether claim payments for damage to your personal property would be based on replacement cost or actual cash value. Check your policy under Section 1, Conditions, and Loss Settlement or ask your agent. As with insurance for the structure, a replacement cost policy pays the dollar amount needed to replace a damaged item with one of similar kind and quality without deductions for depreciation. An actual cash value policy pays the amount needed to replace the item minus depreciation.

Special Limits

Check the limits on certain kinds of personal possessions, such as jewelry, art, silverware, and furs. This information is in Section 1, Personal Property, and Special Limits of Liability. Some insurance companies also place a limit on what they’ll pay for computers and other home office equipment. If the limits are too low, consider buying a special personal property endorsement or rider.

Note: An endorsement is an addition to your policy. A floater is a form of insurance that allows you to insure valuable items separately. Under a rider or floater, you will be able to insure these items for higher amounts than under a standard homeowner’s policy.

Tip: If you have a claim, the more information you have about the damaged items–a description of each and the date of purchase and purchase price–the faster the claim can usually be settled.

Videotape or take photographs of rooms and their contents. Note where and when you bought each item and the price. Write down the brand names and model numbers of appliances and electronic equipment. Add new items as you buy them, and keep receipts with the list.

Store the list, photos, and other records in a safe place outside the home-in a bank deposit box or with a neighbor or relative-so that they are not destroyed if your home is damaged.

Shopping For A Policy

The price you pay for homeowner’s insurance can vary by hundreds of dollars, depending on the insurance company. Companies offer several types of discounts, but they do not offer the same discount or the same amount of discount in all states. Here are some things to consider when buying homeowner’s insurance:

Shop Around

Although it may take a few phone calls to shop around for the best insurance, you could save a few hundred dollars by taking the time to do so. Conduct a preliminary search by compiling a list of possible insurers. Check with your insurance broker or agent, ask your friends, check the Yellow Pages, search online, check consumer guides, and/or call your state insurance department. A thorough investigation of available insurers will give you an idea of price ranges and tell you which companies or agents have the lowest prices.

Tip: Do not consider price alone. The insurer you select should offer a fair price, good coverage and excellent service. Quality service may cost a bit more, but it provides added conveniences. Talking to insurers will give you a feel for the type of service they offer.

When talking to insurers, ask them what they would do to lower your costs. Once you’ve narrowed your search to three companies, get price quotes.

Raise Your Deductibles

Deductibles on homeowners’ policies typically start at $250. You might save up to 12% of the premium by increasing your deductible to $500, up to 24% by increasing it to $1,000, up to 30% by going up to $2,500, and 37% by raising it to $5,000.

Considering Buying Home And Auto Policies From the Same Insurer

Many companies that sell homeowner’s, auto and liability coverage will take 5 to 15% off your premium if you buy two or more policies from them. This is called a multiple policy discount.

Consider Insurance Cost Before Buying A Home

When buying a home, don’t overlook the insurance costs. These may affect the price you are willing to pay for the home. Among the factors to consider:

  • The home’s construction in relation to the geographical region. For example, brick houses may result in less costly premiums in the East whereas frame houses are less costly in the West. Choosing wisely could cut your premium by 5 to 15%.
  • Whether the area is prone to floods (if so, you will have to pay additional money for an endorsement). Visit to determine your flood risk and find out whether you are in a flood zone.
  • Whether the home is new or used (insurers may offer you a discount of 8 to 15% for a new home).
  • The electrical system, plumbing, and structure.

Whether the town has full-time or volunteer fire service and whether the home is close to a hydrant or fire station (the closer it is, the lower your premium will be).

Don’t Insure Land

When deciding how much homeowner’s insurance to buy, do not include the value of the land under your house. It is not at risk against theft, windstorm, fire, or other disasters, so why pay for wasted coverage.

Increase Home Security

You can usually get discounts of at least 5% for a smoke detector, burglar alarm, or dead-bolt locks. Some companies offer to cut your premium by as much as 15 or 20% if you install a sophisticated sprinkler system and a fire and burglar alarm that rings at the police station or other monitoring facility. Although these discounts are incentives to invest in home security and yard maintenance systems, be aware that these systems are not inexpensive and that not every system qualifies for the discount.

Tip: Before you buy an alarm system, find out what kind your insurer recommends and how much you’d save on premiums.

No Smoking Discounts

Insurers may offer lower premiums if all the residents in a house do not smoke.

Senior Discounts

If you are at least 55 years old and retired, you may qualify for a discount of up to 10% at some insurers.

Investigate Group Coverage

Employers, alumni and business associations can often benefit from an insurance package at competitive rates. Ask your company’s human resources department or your association’s director if such a package is available.

Stay With the Same Insurer

If you’ve kept your coverage with one company for several years, you may get a reduction in your premiums of 5 or 10%, depending on the insurer.

Check Your Policy Once A Year

Compare the limits in your policy with the value of your possessions at least once a year to make sure your policy covers major purchases and/or additions to your home.

Tip: On the other hand, you do not want to spend money for unnecessary coverage. If your five-year-old fur coat is no longer worth the $20,000 you paid for it, reduce your rider and cut your premium.

Look For Private Insurance First

If you live in a high-risk area, that is, one that is vulnerable to coastal storms, fires, or crime, and have been buying your homeowner’s insurance through a government plan, you may find that there are steps you can take to buy insurance at a lower price in the private market. Check with your insurance agent or broker.

To be sure you have adequate homeowner’s insurance, ask your insurance agent questions about the issues discussed in this Financial Guide. A thorough inquiry into specific coverage and costs should result in a policy that offers the best coverage and value. It is also important to ask your agent or broker to explain what factors were used to calculate the policy limits for the dwelling.

Inventory of Belongings

Use this form to document and determine whether your personal property coverage is adequate. Go through each room and inventory your belongings. Write in the year you bought the item and how much you paid for it. Then write in the approximate cost to replace the item today. Finally, calculate the totals at the end of the form. This list will also help in case you need to submit a claim.

Tip: Make a photographic or video record of your belongings, too, and of the outside of your home. This will help should you ever need to submit a claim.

Download the Inventory of Belongings