by Libby Ludwig
At its core, insurance is hedging your bets against the universe. Will a thief decide to pick on my apartment or the one next door? Will someone run a stop light and crash into my vehicle or will they stop like they’re supposed to? I’m in a low chance area for flooding, so I’ll probably never have that problem in my lifetime… right?
Paying too much for insurance or having the wrong kind of insurance can leave you short for your necessary obligations each month. But not being covered can cost you thousands if the chaos of the universe decides to strike your home or car. To help you understand your coverage, I want to delineate between three common types of insurance that often get confused.
- DOES protect a homeowner from structural damage and basic natural damage like from hail or lightning
- DOES protect a homeowner if someone injures themselves on your property
- DOES NOT usually protect against flooding since this is separate coverage
- DOES NOT protect renters’ property inside the dwelling
- DOES protect the lender if you default on your loan. It’s generally accurate to think of it as a fee for a higher risk loan.
- DOES get added to a loan where the value is not significantly higher than the balance on the mortgage itself
- DOES NOT necessarily get removed automatically when your balance on the mortgage goes down. It depends on the type of loan whether you can have it removed.
- DOES NOT guarantee loss mitigation options if you fall behind. However, what you pay in mortgage insurance can help fund a partial claim (moving the past-due amount to the end of a mortgage on an FHA loan) if you qualify.
- DOES protect a renter’s property in the case of theft or damage (and is the only comprehensive insurance to do so). This includes furniture, clothing, jewelry, electronics, etc.
- DOES tend to be very economical, usually under $20/month depending on the value of your belongings and the area of the country in which you live.
- DOES NOT protect the dwelling itself (house or apartment building), that would be covered by the homeowner’s insurance
Insurance is just as much a part of a plan for savings as retirement and Christmas club funds. It’s money set aside in case of an emergency, and in the case of homeowner’s or renter’s insurance, often a pretty drastic emergency.
Uncertain about what kind of coverage you have or need? If you have questions, let one of our Financial Service Specialists talk you through your options and finances by contacting us at 800-355-2227. If you’re a first time home buyer or a first time renter, Apprisen offers free education sessions. Click here to learn more.
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