I’m a bit embarrassed to say that I had been a financial planner long before I took a real interest in property insurance or even liability insurance. During my early career, my focus was on retirement, investments, taxes and estate planning. Not surprisingly, my arrival at USAA marked a watershed in my understanding of auto, homeowners, liability and the like.
This was a good thing. If you view your finances like an old-school food pyramid or the hierarchy of needs diagram from your developmental psychology class, insurance is foundational. And the thing about foundations is, we usually don’t know there’s a problem until it’s a big problem. My goal here is to help you identify any cracks in your insurance coverage before they become fissures.
Here are seven things everyone should understand when it comes to their property and liability insurance:
Not being prepared for your deductible. I recognize that insurance is not a fun place to spend money. However, don’t cut corners in a way that puts you in jeopardy. One of the primary levers you have to reduce the premium of any insurance is the deductible, the amount of money you pay before the insurance kicks in. Raising deductibles can make sense, but you need to be able to pay the deductible. In other words, you should have at least that much money stashed in savings.
Ensure your property damage coverage is adequate. If you’re like me in my pre-USAA days, you could be fearlessly navigating the road under the mistaken belief that your “full coverage” auto insurance – comprehensive, collision and state-mandated liability coverage – was all you needed. What I didn’t understand is that my property damage coverage protected me in the event I was liable for damage to other people’s stuff. Sure, my car was going to be repaired, but if broke something expensive…like just about any car on the road, the $15,000 of property damage I had was going to leave me on the hook for any damage I did above and beyond $15K. Look around the next time you’re driving and ensure your coverage is adequate if you happen to break something expensive. The good news is that neither property damage or bodily injury (if you hurt someone) liability coverage is very expensive. It’s easy to check out your coverage and effect of potential changes on usaa.com.
There are limits on certain personal property coverage. Take a quick glance at your homeowners insurance policy and you’ll probably see you have tens if not hundreds of thousands of personal property coverage. However, don’t stop there. Dig into the details. You may find that you have caps on certain types of property that could leave you in the cold if the worst happens. For example, a standard policy might limit replacement of cash to $200, jewelry to $1,500 and china, silverware and the like to $2,500. A special Valuable Personal Property policy or endorsement to your homeowners policy might be required to give you the coverage you need.
Dwelling coverage doesn’t equal market value. Sticking with homeowners, it’s important to remember that the market value of your home is not necessarily a good guide for an appropriate amount of dwelling coverage. Insurance companies have a vested interest in making sure you have adequate coverage to rebuild your home in the event of a catastrophe and that’s why they spend a lot of time asking you about the type of appliances, flooring and fixtures you’ve got. Rebuild cost, not market value should be the guiding light in determining dwelling coverage.
Why get USAA Renters Insurance?
Our basic coverage offers more features than many policies out there. Take a look at some of the ways we can help protect you here.
Don’t count on your landlord for renters coverage. A couple of years ago there was a lot of hoopla when companies that provided privatized housing on military installations dropped renters insurance as part of the contract. Most landlords don’t offer it and the majority of renters across the country don’t have the coverage. It can provide valuable protection for your personal property for a few bucks a month. Don’t skip it.
The “right” amount of liability insurance changes over time. Liability coverage is normally part of your homeowners/renters and auto policies. If you need additional coverage, you can purchase an umbrella policy. As you make more money and accumulate more assets your liability coverage should increase. You’ve got more to protect and your coverage should reflect the same.
Failing to Inventory. Your policy will pay to replace or value of your property, but you need to know and be able to document what you have. Make a list of your property and back it up with a video inventory. If something bad happens your groundwork will eliminate one potential headache. I’m going through our house this weekend.
Don’t wait as long as I did to take an interest in your property and liability insurance.
Have something to add to this article? Share your advice below.
About the Author: JJ Montanaro is a Certified Financial Planner® professional and part of the Military Affairs team at USAA. He’s a graduate of the U.S. Military Academy and has over 20 years of financial planning experience.
Disclosures: Certified Financial Planner Board of Standards, Inc. owns the certification marks CFP® and CERTIFIED FINANCIAL PLANNER™ in the United States, which it awards to individuals who successfully complete the CFP Board’s initial and ongoing certification requirements.
The information contained is provided for informational purposes only and is not intended to substitute for obtaining professional financial advice. Please thoroughly research and seek professional advice before acting on any information you may have found in this article. This article in no way attempts to provide financial advice that relates to all personal circumstances.
No Department of Defense or government agency endorsement.
Renters insurance provided by United Services Automobile Association, USAA Casualty Insurance Company, USAA General Indemnity Company, Garrison Property and Casualty Insurance Company, and USAA Ltd. (Europe), San Antonio, TX, and is available only to persons eligible for P&C group membership. Each company has sole financial responsibility for its own products.
253981 - 0718
You must be a registered user to add a comment. If you've already registered, sign in. Otherwise, register and sign in.