Insurance

Make sure you are paying for what you need

Insurance can be complicated, but some basic knowledge can go a long way. That’s where an insurance agent can help.

Here are a few things agents say are helpful for customers to know.

1 Insurance doesn’t cover everything

Pay attention to what is included in your policy.

A standard homeowners policy won’t cover flood or earthquake damage. If your home is at risk for these disasters, you need a separate policy.

Auto policies generally cover only personal use of your car, so if you’ve picked up a side gig delivering groceries or meals during the pandemic, you likely need extra coverage, says Keya Pratt, an agent in Richmond, Virginia. Otherwise, accidents you have on the job may not be covered.

Insurance policies of all types also generally exclude wear and tear, says Katherine Navarro Wong, an agent in Santa Rosa, California. She often gets calls from policyholders asking if their insurance will pay for things like broken dishwashers or aging gutters.

The answer is no. Insurance is designed to cover sudden, accidental damage, not regular maintenance.

2 Gaps can be costly

There are various reasons you might let your car insurance policy lapse, whether you’re having trouble paying your bills or you no longer own a vehicle. But this could cost you.

Insurers view customers with a gap in coverage as riskier and often charge them higher rates. You can avoid this by shopping for quotes before your policy expires, buying nonowner car insurance if you’re between vehicles and asking your carrier for leniency if you’re struggling.

3 Timing matters

You cannot get insurance for an event that has already happened. Say a storm leaves water in your basement and you don’t have flood insurance. You can still buy a policy for future disasters, but it won’t pay for damage your home has already sustained.

The same goes with other lines of insurance.

4 Don’t overlook liability

While people focus on buying enough coverage for their belongings, the liability insurance may be even more important. It pays for injuries or property damage that you’re at fault for.

A lawsuit “is going to be more devastating than losing your laptop [or] ring,” Wong says. Including legal fees, the cost can total hundreds of thousands of dollars, especially if someone is seriously injured.

To protect yourself, buy enough liability insurance on your auto and home insurance policies to cover your net worth.