Insurance is a smart way to manage risk yet most of us go about our daily lives without giving it much thought. At a minimum, you need to think about your insurance at least once a year and more often if significant events take place in your life, such as buying or selling a car/home or when a family member is newly licensed to drive. Whether it’s being in a car accident or having your home burn down, human nature tends to think such tragedies won’t happen to us but rather to “the other guy”. The reality is that the risk of these accidents is small, but if one of them were to happen, the effects could be catastrophic. Without insurance, you’d have to come up with the money on your own to repair or replace your car or rebuild your home.
We’ll walk you through the basics of auto and home insurance so you can make informed decisions about managing these risks while also protecting you and your family.
Auto insurance protects you, and others, from financial ruin in the event of an auto accident. And, depending on your policy, it covers your vehicle if it is ever vandalized, damaged by fire or stolen. Besides providing financial protection, most states require drivers to carry auto liability insurance - so driving without it is illegal.
Basic Types of Auto Coverage:
A basic auto insurance policy contains the following coverage options:
- Bodily Injury Liability
- Property Damage Liability
- Medical Payments or Personal Injury Protection (PIP)
- Uninsured/Underinsured Motorists Coverage (UM/UIM)
Depending on where you live, certain coverage is required and some is optional. For more, read about the minimum levels of required auto insurance in your state.
Liability insurance coverage pays for the damage you do to others in the event of an accident. Generally, liability coverage is referenced in terms of your coverage limits in thousands of dollars and usually stated in three numbers, such as 100/300/50. The first number indicates your bodily injury coverage per person ($100,000), the second number indicates your bodily injury coverage per accident ($300,000), and the last number indicates your property-damage coverage per accident ($50,000).
Bodily injury liability applies to injuries you cause to others. It covers their medical bills and lost wages. It can also pay for "pain and suffering" damages and your legal bills if someone sues you after a car accident — but only up to your liability limits.
Property damage liability pays to repair or replace property that you damage or destroy. This includes other cars or property, such as a building or light pole, damaged during an accident. It also pays your legal bills if someone sues you after a car accident — but only up to your liability limits.
Again, most states require certain levels of minimum liability insurance as this coverage pays for damage you do to others. States want drivers to be financially responsible. However, you should consider many factors in your life and not simply the state minimums when selecting your liability limits. Keep in mind, you are financially responsible when you cause an accident and the total costs may exceed your liability limits, especially if those limits are state minimums. You can be held liable for the damage amounts that exceed your policy limits.
Collision and Comprehensive coverage
Collision insurance covers damage to your car when your car hits, or is hit by, another vehicle, or other object. Comprehensive coverage pays for damage to your car that isn't caused by collision. Comprehensive includes theft, fire, vandalism, natural disasters and collisions with animals (such as hitting a deer). Neither collision nor comprehensive coverage is required by any state but it may be required by your lender if you are financing your vehicle. Lenders generally require that you carry this coverage until you have paid for your vehicle in full, at which point, you have the option of dropping this coverage.
A simple rule of thumb is the higher your collision and comprehensive deductibles, the lower your premium. But remember, you'll have to pay that deductible amount out of your pocket before your insurance coverage kicks in.
Medical payments, PIP and No-Fault
Medical payments (also often referred to as “Med Pay”) coverage pays for the medical expenses suffered by you and your passengers caused by an accident. Medical Payments may also provide coverage for you, other drivers listed on your policy or other household members for injuries you receive while a pedestrian. Med Pay will respond no matter who caused the accident, although if another party is determined to be at-fault your insurance carrier will likely seek to recover damages from the other party.
Personal Injury Protection (PIP) coverage pays for medical expenses and lost wages for you and your passengers who are injured in an accident. It also covers funeral costs. PIP is required by law in certain states. For more information, read about the minimum levels of required auto insurance in your state.
Uninsured/Underinsured motorist coverage
Uninsured motorists (UM) coverage pays for bodily injury you or your passengers receive if an uninsured driver causes the accident. UM coverage is required by law in certain states.
Similarly, underinsured motorists (UIM) coverage pays when the at-fault person doesn't have enough insurance to cover all of the medical bills. In that case, their insurance pays out to its maximum limits and then your UIM coverage pays for the remaining bills, up to your own limit.
For more, read about the minimum levels of required auto insurance in your state
Additional auto coverage options
The above coverages represent the basics of auto insurance. There are a number of other optional coverages you can buy. For more information, read the description of coverage offered on autos or call YouTopia® at 877-968-8674 to speak with a representative.
Homeowners insurance is available to those that own a house, condominium or mobile home and to those that rent an apartment or house. Standard coverage for homeowners insurance policies is well defined within the insurance industry so it doesn’t vary from company to company…but the rates do.
Standard perils covered in HO-3, HO-4 and HO-6 policies:
- Fire or lightning
- Windstorm or hail
- Riot or civil commotion
- Damage caused by aircraft
- Damage caused by vehicles
- Vandalism or malicious mischief
- Volcanic eruption
- Falling objects
- Weight of ice, snow, or sleet
- Accidental discharge or overflow of water or steam from within a plumbing, heating, air conditioning, or automatic fire-protective sprinkler system, or from a household appliance.
- Sudden and accidental tearing apart, cracking, burning, or bulging of a steam or hot water heating system, an air conditioning or automatic fire-protective system.
- Freezing of a plumbing, heating, air conditioning or automatic, fire-protective sprinkler system, or of a household appliance.
- Sudden and accidental damage from artificially generated electrical current (does not include loss to a tube, transistor or similar electronic component).
YouTopia offers the following home insurance policies:
HO-3 Policy: Homeowners insurance policy.
Covers all perils except those specifically excluded by the policy.
HO-4 Policy: Renters insurance policy.
Covers specific perils but does not insure the dwelling itself.
HO-6 Policy: Co-op or condominium owners insurance policy.
- Provides personal property coverage, liability coverage and specific coverage of improvements to the owner’s unit.
- Normally, the owner’s association insures the actual structure.
Rating your homeowners policy
Many factors go into rating a homeowners policy: age of home, materials used to build home, location of home, square footage of home, and home’s distance from a fire hydrant and fire department.
Replacement cost coverage vs. actual cash value
When selecting your home insurance coverage, it is very important you understand the difference between "replacement cost" and "actual cash value." Your policy will clearly identify the property that will be valued at actual cash value, and the property that will be valued at replacement cost.
Replacement cost gives you more protection than actual cash value coverage. Replacement cost coverage pays for the full cost of replacing or repairing a damaged or destroyed home as well as replacing or repairing damaged, stolen, or destroyed household contents (furniture, clothes, appliances, etc.). Actual cash value is an item´s replacement cost, minus depreciation. Most homeowner policy limits track inflation in building costs. We can provide you an estimate for rebuilding your house in the event of a total loss.
Lending institutions usually require mortgage customers to purchase home insurance but don’t rely on the coverage levels mandated by your lender. Those levels are designed to protect the house itself, but not necessarily your possessions.
Unfortunately, it’s usually only after a fire or theft, when many people learn the hard way that they didn´t have enough personal property coverage. Taking inventory will help you decide how much insurance you need and it will simplify claims.
Your inventory should list each item, its value with a receipt and serial number when possible. Photograph or videotape each room, including closets, open drawers and your garage. Keep this information in a fireproof place.
Homeowners Insurance Policy Basics
Each homeowners insurance policy provides a combination of property insurance and liability insurance and covers loss of use resulting from damage.
For the homeowner, property insurance includes coverage for the dwelling, other structures, personal property and loss of use. For the renter, coverage is provided for personal property and loss of use.
Dwelling - Coverage A
You should carry a limit of coverage that replaces your home in the event of a total loss. Replacement cost is not the same as Market Value (the amount you can sell your home for).
For condominium owners, you may be responsible for anything within your door. This would include the walls or even the cabinets attached to the interior walls. Our policy automatically gives 10% of the Personal Property limit you select but it may be a good idea to increase that coverage amount.
Other Structures - Coverage B
Your policy will give coverage for another building on your property that is not connected to your house. This can include a detached garage or a gazebo.
Personal Property - Coverage C
This section covers your property, such as your furniture, clothing, game systems or even household decorations.
Loss of Use
Loss of use coverage reimburses you for hotel, restaurant and other living expenses you may incur as a result of your home being uninhabitable. The purpose of this coverage is to help you maintain your standard of living in the event of a disaster.
Liability coverage protects you or covered family members against lawsuits. A couple examples are:
A friend falls off your deck because the railing breaks.
Your son breaks a neighbor’s window while playing ball.
Medical Payments to Others
This coverage pays the medical expenses to others because of an accident caused by an insured or a condition on the residence premises or even by an animal of the insured.
The above coverages represent the basics of home insurance. Homeowners policies regularly provide other types of coverage, some of which have been included standard in your policy while others require additional premium. Make sure you understand which provisions are included in the standard coverage and which might require endorsements and additional premiums. Some of the most common scheduled property endorsements cover jewelry, camera equipment, computer equipment, coins, and china/silverware. For more information, read the description of coverage offered on homes or call YouTopia at 1-877-968-8674 to speak with a representative.
Homeowners policies do not cover flood damage. The National Flood Insurance Program (NFIP) offers flood insurance. Please visit their website for more information.
Standard homeowners policies do not cover earthquake damage. If you are concerned about earthquakes, you can add earthquake coverage for additional premium.
If you want more liability coverage than your home and car insurance policies provide, you can purchase a separate personal umbrella insurance policy from YouTopia.