Electing the Right Coverage



In this fiery presidential election season, we know full well the impact that our votes can have. You’ve given lots of thought and care to your choice for the next president and you may have already even cast your ballot. But your elections in your personal insurance plan matter just as much. The choices you make when buying your insurance program today can have an impact far down the road.


The deductible you select can significantly affect your premium.  The higher the deductible you carry, the less the insurance company pays if you have a loss; therefore, the lower your premium. But keep in mind that this is the amount you must pay before your insurance company pays a penny towards your damages. Sure, a $10,000 or 2% deductible saves you a lot of money up front, but make sure you’re able to absorb that amount in the event of a loss. For example, if you have a $50,000 roof claim and a $10,000 deductible, your insurance company will only pay $40,000. The remaining $10,000 comes out of your pocket. If you don’t have access to that cash, you may want to elect for a lower deductible.

Type of Coverage

Another consideration on a property policy is the type of coverage you choose.  Many policies offer two options. The first is  Actual Cash Value (ACV) – where you are compensated at the time of loss for the ACV of the lost property. This includes any “time and use” deprecation from the original purchase price of the property before any deductible is applied. The other type of coverage is Replacement Cost coverage. Replacement Cost is just that: your policy will pay to replace the lost property with like kind and quality minus any deductible you have on the policy.

As you can imagine, a replacement cost policy is more expensive than one that offers ACV, so if you elect for the cheaper option up front, remember that during a time of loss, you may be unhappy with your pay-out.

Liability Limits

The State of Texas requires minimum liability limits for auto policies of 30/60/25. This means that an auto liability policy will pay up to $30,000 per person for up to $60,000 per accident for bodily injury caused to another person, and up to $25,000 for any property that is damaged due to a covered loss. These limits are the bare minimums required for bodily injury and property damage in the event that you cause an accident and harm another person and/or their property.   While these limits satisfy the state requirements, they usually far underinsure the “covered” party.

For example, if a driver carrying these limits, which satisfy state requirements, is involved in an accident and total another driver’s car, injuries 1-2 people in that car and then damages his/her own car, you can quickly see where these limits are not enough to protect our driver.  When given the opportunity, always elect for higher liability limits, because you just never know.

Umbrella Coverage

A personal umbrella policy provides liability protection above and beyond your basic liability policies and can be one of the most important elections you choose. Take the above scenario, but let’s say in this case our driver had the maximum liability limits on his policy – $500,000 combined single limit for injury and property damage. In the accident he caused, if the damages were more than $500,000, his insurance policy would pay the limit – $500,000 – and no more. But an umbrella policy on top of that would pick up the remaining liabilities he incurred (up to the umbrella policy limits, of course).

An umbrella policy usually has a very low premium for the coverage it provides and therefore, we vote “yes” when we are asked if they should be purchased!

Smart choices today result in a better tomorrow! Set up a time to review your coverage elections with your DDM Advisor today!

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