When it's been a while since your last claim, it can be tempting to reduce your insurance coverage and save some money. But before you adjust your policy, it's important to consider whether you can really afford to take the risk.
Remember, the primary purpose of insurance is to protect you financially. Unexpected events are just that: unexpected. You can't predict the cost of a car accident or natural disaster.
Insurance can help you avoid severe financial consequences by helping pay those costs, but only if you have the right types and amount of coverage. Read on to learn more about which types of insurance are essential and which are nice to have.
What insurance coverage do I need?
Some types of insurance are so important that they're often required. Every state requires that drivers have a minimum amount of auto liability insurance. Mortgage lenders and some landlords will also require homeowners or renters insurance respectively.
But there's a lot more to insurance than just your home and car. There are a variety of policies available to help you protect the things that matter most to you. Let's get familiar with some other types of available insurance products:
- Valuable personal property insurance. This provides extra protection for your special possessions like jewelry, cameras and guns.
- Umbrella insurance. It's a separate policy that boosts the liability coverage amount on your property insurance or auto insurance protection in case you get sued.
- Pet insurance. It helps you financially keep the furry, four-legged members of your family happy and healthy.
- Electronics protection. This can help supplement coverage provided by your property policy for things like high-end computers, gaming systems and other devices.
- Cell phone insurance. This can help save you money on mobile phone repairs and replacement.
With all these options, you can easily build up coverage that meets your unique needs, lifestyle and budget.
How do I protect my stuff?
Your personal property can often be expensive and inconvenient to replace. For example, in the event of a theft or a natural disaster, insurance can help offset the costs of replacing your stuff. If you're renting, you'll want renters insurance. If you own a home, you'll need homeowners insurance. Both policy types will offer protection for your personal property, but a homeowners policy will also cover the physical structure of your home.
What homeowners coverage do I need?
Your home is likely your biggest asset and protecting it should be a primary concern. Let's look at the different components of a homeowners insurance policy:
Dwelling coverage
When you think about home insurance coverage, the physical structure of your home is typically your top priority. That's what dwelling coverage, also known as Coverage A, is for. It helps cover the cost of repairing or rebuilding your home if it's damaged or even destroyed.
For most people, the cost of rebuilding a home after a total loss would be difficult, if not impossible. That's also why most mortgage lenders require this type of coverage before you can get a loan. They want to protect their investment.
As a homeowner, having enough coverage to rebuild your home can help limit your out-of-pocket expenses after major damage or destruction — and provide peace of mind. If your budget is stretched thin, look for other options to help save money that don't put you at financial risk.
What if your home isn't the only structure on your property? If you've got a storage shed, detached garage or other structure, you'll need to purchase additional coverage. Otherwise, they won't be covered by your homeowners policy.
Personal property coverage
Your home is more than walls, doors and windows. It's also filled with the things that truly make it yours, like furniture, decor, appliances, electronics and clothing. If these items get stolen, damaged or destroyed in a covered event, personal belongings coverage can help pay to repair or replace them.
With personal belongings, you can choose the amount of coverage you want. According to the Insurance Information Institute, most homeowners policies offer coverage at about 50% to 70% of the insurance on your dwelling, but you may be able to choose more or less depending on your insurance provider.
For military service members, your personal belongings including military uniforms and gear See note 1 can be covered by a USAA renters insurance policy. It can cover whether you're at home or deployed overseas. See note 2 Plus, you can get an extra discount if you're living on base or post. See note 3
Personal liability coverage
If a member of your household — including your pets — is responsible for an accidental injury or damage to someone else's property, you don't want to be caught without coverage. This is especially true if the incident turns into a lawsuit.
Fortunately, liability protection with your homeowners or renters policy can help pay for medical bills, repairs and even legal fees, if necessary.
Picking your deductible
Be sure to request quotes at different deductibles so you can find the option that best meets your financial circumstances and the risk level you're willing to accept. Remember to choose a deductible that you have savings to cover if and when you need it.
Another thing to consider is that your mortgage lender may require your deductible to stay below a certain amount. If you want to change your deductible, be sure to consult your lender first.
Loss of use coverage
If you experience a covered loss that leaves your home unlivable, the costs you experience like lodging can be offset with loss of use coverage.
For some people, loss of use insurance falls in the “nice to have” category. But don't underestimate the costs of being displaced from your home. Housing, food, transportation, storage and pet boarding can make that limbo period quite expensive if you're not covered.
What car insurance coverage do I need?
Your home insurance needs may not change often. But for many people, their car insurance is a different story. Whether you're changing vehicles, adding or removing drivers, or simply driving less, you may want to review coverage and make sure you still have the right fit.
Like a homeowners or renters policy, your auto policy can be made up of many kinds of coverage.
- Liability coverage. This is for property damage or bodily injury you may cause while driving. This is the type of car insurance that is typically required by law, although each state has their own minimum coverage requirements.
- Collision coverage. This helps pay to repair damage to your vehicle in a covered accident in which you are at fault, such as a collision with a stationary object or another vehicle.
- Comprehensive coverage. This can help pay for other types of damage that are often out of your control. Things like hail damage, vandalism or hitting a deer are only covered if you have comprehensive insurance.
- Uninsured and underinsured motorist coverage. This is what you need when another driver hits you but doesn't have insurance, or has coverage that isn't enough to cover the damages. Some states also require uninsured or underinsured motorist protection.
- “Full coverage” insurance. This isn't an insurance product. It's just a quick way to say you have liability, collision and comprehensive coverage on your vehicle. If you have a car loan, your lender may require you to carry full coverage on your car.
5 tips for reviewing your auto policy
- If your vehicle is leased or you have a lienholder, consider their requirements before removing or reducing your coverage.
- Remove or reduce coverage only if you no longer have a need for that coverage.
- Remember to reinstate any coverage that you may have removed or reduced previously before driving your vehicle.
- Determine if the coverage limits you choose are sufficient to protect your assets or net worth.
- If you only have one vehicle in your household, we encourage you to maintain your current coverage should you need to drive your vehicle, even if you rarely drive. Even if you only have one vehicle or rarely drive, you should make sure you have enough coverage to protect you, your property and your finances.
Insurance for other vehicles
Just because you don't drive a car doesn't mean you don't need insurance. Whether you drive a motorcycle, ATV, motorhome or RV, even a boat, plane or bike, you better believe there's insurance for it. And sometimes it's required. Learn more about each of these types of insurance:
- Motorcycle and ATV insurance
- Motorhome or RV insurance
- Boat insurance
- Plane insurance
- Bike insurance
Get discounts
Bundle and save
You may enjoy discounts if you have multiple policies with one insurance provider.
Home monitoring services
Discounts are typically available for features you add to your home that help prevent or deter risks to your property. Consider installing a home alarm system : Opens in a New Window. You might also want to consider adding water leak detection sensors or enrolling in a smart home system. These can help reduce the risk and severity of water damage in your home, with the added bonus of a potential discount.
Update your policies.
Review your policies at least annually to make sure your coverage reflects your needs. You may also want to see if you can improve your premium and your driving skills with a safe driving program.
Get started with USAA.
Find personalized coverage that fits your life and budget.