Risk Management and Insurance Basics, Part IX

This week, we’ll return and continue our discussion on homeowner’s insurance.

Last week we discussed the first four forms of coverage from your homeowner’s insurance policy. If you haven’t had a chance to view that post, you may want to go back and check that out before proceeding, with the link here!

Fifth is personal liability coverage. This will provide coverage when you or someone living with you are liable for bodily injury or property damage to others on your property.

Sixth, and closely related to the previous coverage, is medical payment coverage for any medical bills incurred by people invited to your dwelling who are injured on your property as a result of your personal activities.

For those with renter’s insurance, your policy will generally include those last four coverages – personal property, loss of use, bodily injury liability, and medical payment coverage.

Now that we’ve discussed the different coverages of a homeowner’s insurance policy, what exactly are you covered against? For protection to your dwelling and any other structures on your property, this depends on which type of policy you have. While we won’t spend the time to cover all of the specific differences of HO-1, HO-2, all the way through HO-8, it’s important to understand that not all homeowner’s policies are the same. Some only cover a small number of named risks (HO-1), some cover additional named risks (HO-2), some cover a broader range of risks and only exclude specific perils (HO-3, H0-5), and some are specialized for specific dwellings like insurance for renters (HO-4), condos (HO-6), mobile homes (HO-7), and older homes (HO-8).

Regardless of which policy you have, two risks that are rarely covered in a standard homeowner’s insurance policy, that can be prevalent depending on where you live, are earthquakes and floods. Additionally, maintenance issues for things such pest damage, rust, rot, and most, are generally not covered by homeowner’s insurance.

Lastly, here are some additional homeowner’s insurance tips. Paying your premium annually will often reduce the cost, but be sure you have no issues paying for that large cost each year, particularly if your insurance policy is not being paid directly from a mortgage escrow account. Check for any discounts for safety devices such as alarm systems and smoke detectors. Select a deductible that isn’t too high for you to save for, but not so low it results in an unnecessarily high premium. If your home is in a flood zone, consider purchasing separate flood insurance. If you’re not sure if you’re located in a flood zone, check out FEMA’s Flood Map Service Center, linked here. Lastly, for any insurance claims, be sure to document any and all damages!

That concludes our discussion on homeowner’s insurance, we’ll return next week to discuss life insurance!

Risk Management and Insurance Basics, Part VIII

Over the next two weeks we’ll discuss homeowner’s insurance.

While most of us know what homeowner’s insurance is, not everyone knows what it entails. Most homeowner’s insurance policies include six different coverages.

First is coverage for damage to your home or dwelling itself as well as any attached structures such as an attached garage. To be considered fully covered, you generally need to insure for at least 80% of the house’s total replacement value, otherwise you run the risk of only getting partial payments for losses. As an example, let’s say you have a home with a replacement cost of $200,000. To be fully covered, you would need to purchase coverage of at least $160,000. However, let’s say your insurance policy will only cover up to $120,000 of damages or replacements. Now let’s say you have a fire that causes $60,000 in damages. At first glance, you would think you’re fully covered for this. However, with the typical 80% rule, what would generally happen is you would only be covered for the proportion of the 80% coverage you had – so in this example, you are covered up to $120,000 of the $160,000 needed to be fully covered, so your insurance would only pay 75% of the damages. In the case of this $60,000 fire, you would be responsible for $15,000 yourself for being underinsured!

Second is coverage to any structures other than your home that’s located on your property. This can include things like detached garages and sheds.

Third is personal property coverage. Personal property covers the contents of your home such as furniture, appliances, clothing, and possibly jewelry and collectables. However, to be sure there’s no issues with potential claims for your personal property, be sure to annually take an inventory of anything you would like to be covered, including their value or cost. This includes personal property not only in your house, but items in your garage, shed, and yard. Be sure to get appraisals for the value of jewelry, antiques, and any collectables. Also, you will often have the option of guaranteed replacement cost or cash value. While replacement cost will generally be more expensive, it will pay for the cost to replace any furniture or appliances instead of just paying for the current cash value. For instance, if a ten-year-old refrigerator is damaged during a fire, a guaranteed replacement policy would pay for a new fridge, while a cash value policy would only cover the market value of your old refrigerator.

The fourth coverage is for any loss of use of your dwelling from a covered event. For instance, if your home is unsafe to live during repairs from fire damage, your homeowner’s insurance policy will often cover the cost for you to stay in a hotel during the interim.

Next week, well return and discuss the last two coverages of a homeowner’s insurance policy, and what events and sources of damage your insurance policy will typically cover.

Risk Management and Insurance Basics, Part VII

This week, we’ll return and conclude our discussion on health insurance.

Are you looking to enroll in a new insurance plan, but don’t know where to start?  Have you lost your job and access to an affordable health insurance plan? Are you at a reduced income? Here are just a few things to know if you’re in the market for a new health insurance plan!

Typically, if you want to enroll in a new plan, you’ll have to do it during a specific window each year, known as the open enrollment period. There are exceptions, however – if you have a qualifying life event, such as getting married, having a baby, getting a divorce, or losing your job and/or health insurance plan, there is generally more flexibility with enrollment.

What if your employer does not provide access to an affordable health insurance plan? In 2010, the Affordable Care Act introduced the Health Insurance Marketplace, which provides subsidies in the form of tax credits to those below 400% of the federal poverty level. For reference, 400% of the federal poverty level for a family of four would equal a household income of about $105,000.

If you make less than 138% of the federal poverty level, which is roughly equal to a household income of about $36,000 for a family of four, you may qualify for the federal Medicaid health insurance program. However, this income limit depends on whether or not your state opted in to the Medicaid expansion, another facet of the Affordable Care Act. For states that opted out, the income limit may be below 138% of the federal poverty level. Fortunately, in 2018, Virginia opted in to the Medicaid expansion. Depending on your state, your Medicaid coverage may have no premiums, no deductibles, but may require you to spend a certain amount of your countable resources before Medicaid will begin paying for medical costs.

If you’re below 300% of the federal poverty level (which is roughly equal to a household income of about $78,000 for a family of four), while you may not qualify for Medicaid yourself, your children may, in which case you can get in touch with your local Department of Social Services about enrollment.

Next week, we’ll return and discuss homeowner’s insurance.

Risk Management and Insurance Basics, Part VI

Over the next two weeks we’ll discuss health insurance.

In earlier portions of this series, we’ve discussed a number of terms that are important to health insurance, including deductibles, copayments, coinsurance, and max out-of-pocket – if you haven’t had a chance to check those out, I would encourage you to go back and watch or read those posts before proceeding, with the links provided here (Part II, Part III).

If you’re in the process of selecting a health insurance plan, you may hear terms like HMO or PPO thrown around and may not think it’s important to know the difference. However, there are some critical differences that are important to you as the potential insurance holder. Before we discuss the difference, let’s talk about the similarities between a Health Maintenance Organization, or HMO, and Preferred Provider Organization, or PPO.

Both HMOs and PPOs are managed health care plans that provide access to a network of doctors and providers. Both plans typically have premiums in order to be enrolled in the plan, copayments to see doctors or specialist, along with co-insurance, max out-of-pocket costs, and often have annual deductibles. Both plans prioritize preventative care, and as such, typically allow policy holders to have annual check-ups without having to pay a copayment.

Now for the differences – HMOs often require the policy holder to select a primary care physician, or PCP. This is important since many HMOs also require you to get a referral from your PCP if you need to see a specialist, like a dermatologist. HMOs are also generally less flexible when it comes to seeing doctors or providers out-of-network, with policy holders often having to pay for the entire cost of medical services out-of-pocket. PPOs, on the other hand, typically do not require a PCP, nor do they generally require referrals to see specialist. PPOs also allow for more flexibility to see doctors or specialist out-of-network, typically covering at least some of the medical costs incurred from providers not in the network.

With all of these benefits, why would anyone select an HMO? The biggest reason is cost. In general, HMOs will have lower premium and lower (sometimes no) deductibles compared to an equivalent PPO. Whatever you decide for health insurance, be sure to select something that meets your needs in terms of cost, flexibility, network availability, and coverage.

Next week, we’ll return and conclude our discussion on health insurance.

Risk Management and Insurance Basics, Part V

This week, we’ll wrap up our discussion on auto insurance.

Last week we discussed liability insurance, but what happens if your vehicle is damaged and the accident was your fault? What if the collision didn’t even involve another car? What if you hit a tree? What if the car damage wasn’t even caused by a collision?

This is where collision insurance and comprehensive automobile insurance come in. Collision insurance will reimburse you for losses resulting from a collision with another car or object, or even from a rollover. The policy will pay for the cost of repairing or replacing your car regardless of who’s at fault; however, if another driver is at fault, your insurance has the right to obtain reimbursement from that driver’s auto liability insurance.

Comprehensive auto insurance will provide protection against property damage caused by risks other than collision or rollover – such as fire, theft, vandalism, hail, and wind, among others. Both collision and comprehensive auto insurance typically include a deductible. As we’ve mentioned in previous posts, the higher the deductible, the lower the premium; however, you’ll then be responsible for covering more of the cost of repairs or replacement. For both collision and comprehensive, if the estimate for repairs exceeds the book value of the vehicle, the car is considered “totaled,” and the insurance company will pay the book value of the vehicle minus the deductible. For this reason, many drivers will drop their collision and/or comprehensive insurance for older car that no longer have much book value. While states do not require collision or collateral by law, if you have a car loan on the vehicle, your lender likely will.

The final two portions of auto insurance we’ll discuss are medical payment insurance and gap insurance. Automobile medical payment insurance covers bodily injuries suffered by the insured driver and their passengers regardless of who’s at fault. Medical payment coverage is generally a single policy limit, which is applied per person, per accident – for example, covering up to $5,000 of medical payments for each individual covered.

Gap insurance is an optional insurance that covers the difference between the balance of your loan and the book value of the car, if the balance is higher. For example, if you total your car and the vehicle is valued at $10,000, but you owe your lender $12,000 on your loan, gap insurance will cover the $2,000 difference.

That concludes our discussion on car insurance, next week we’ll return and discuss health insurance.