We all face the threat of a potentially catastrophic event every day, whether at home or at work, and we need financial protection against these inevitable risks. It’s virtually impossible to avoid risk – the good news is we as individuals and/or organizations have the ability to exchange some of these risks for premium payments in the form of insurance policies. In previous Atheneum articles we have discussed life, disability, long-term care and insurance for businesses, today’s focus will be on the various personal lines of property and casualty insurance.
Many different coverages fall under the banner of property and casualty insurance but the two major areas of protection are for physical items (property) and protection against legal liability (casualty). Simply put, property insurance protects the things we own while casualty insurance provides protection against the claims of others. Let’s first take a look at some of the different property coverages available for individuals and families:
- Homeowners Insurance – a requirement by lenders before funding a mortgage loan, this form of insurance is one of the best things you can buy and hope you’ll never have to use. Homeowners insurance covers both damage to property and liability for injuries that occur in your home or on your property. These policies are typically long and can be difficult to understand, however, it is very important to know exactly what you’re protected against. A standard homeowners policy should provide coverage for the structure of the home, coverage for personal belongings, liability protection and provide additional living expenses for time displaced from your home.
- Auto Insurance – a package of different coverages, auto insurance policies may provide collision, comprehensive, liability, medical payments, personal injury protection and uninsured motorist coverage. It’s important to understand what each of these options does and how it would work if you ever needed it. No insurance policy is perfect but with auto insurance it’s prudent to carry “full coverage” – meaning not only liability insurance but comprehensive and collision, as well.
- Renters Insurance – if you are renting your house or apartment, this form of insurance can help replace your valuables in case of a covered incident, such as a fire or burglary. Renters insurance may also cover personal liability (legal costs) if someone is hurt in your apartment as well as medical payments of the injured party. This type of policy may also cover additional living expenses should your rented home or apartment become damaged by fire, for instance, causing increased costs, such as hotel bills.
Each one of these coverages, homeowners, auto and renters should provide some form of liability protection, but we must ask ourselves – is it enough protection? Many homeowners and auto policies will allow an individual to carry up to $500,000 of liability protection. What sounds like a decent amount of coverage could quickly be eaten up if you are sued and forced to pay defense costs and possibly a legal judgement. This is where the primary form of casualty insurance becomes so important, which is an umbrella liability policy.
- Umbrella Insurance – this type of policy provides excess liability protection up and above what auto and homeowners insurance may provide. For example, if you have $500,000 in liability coverage under your auto or homeowners policy and a $1 million umbrella policy, you would have liability coverage totaling $1.5 million. Umbrella coverage is not only for those with significant assets but may also be a good idea for anyone with earning years ahead of them – a legal judgement could possibly be tied not only to current assets but also future earnings.
Having the appropriate protections in place not only provides a financial safety-net for the unexpected but also significant peace of mind. If there are any doubts about your coverage, please don’t hesitate to reach out to us at Ballast.