How to Know If You Are Underinsured

 

You buy insurance primarily for the purpose of protecting yourself and your family against certain losses from which you would otherwise be helpless to handle financially.  For example:

• Life insurance protects the financial future of the loved ones that depend on your income, so their standard of living can continue at a similar level in the event of your untimely death.
• Auto insurance protects you from losses associated with liability suits if you're held responsible for causing injury, death or property damage to a third-party with your vehicle.  You can also insure against damage or destruction to your vehicle, personal injuries and more.
• Homeowner's insurance provides a long list of protections for what is likely to be your most valuable asset, your home.  If your home is damages or destroyed as a result of any of the perils listed within you insurance policy, the insurer is responsible for helping you deal with the financial costs.

Life Insurance 

Since life insurance is meant to help replace your income should you die prematurely, you're underinsured if the death benefit of your policy falls short of taking care of such things as:

• The income your now provide
• Debts/financial liabilities your have incurred, including your home mortgage
• End of life expenses
• Higher education expenses for your children

Auto Insurance

Almost every state requires a minimum amount of liability coverage for every vehicle driven on public roads but these minimums are woefully inadequate.  In North Carolina, for example, you're required to have liability insurance of $30K per person (bodily injury),  $60K per accident (bodily injury) and $25K for damage to a third-party's property.

An accident for which you're held liable could incur costs many times these minimum amounts and any amount above your policy limits would fall directly to you for payment.  One serious accident could ruin you financially for life.  Unless your auto liability coverage is many times higher than the minimum required, you are underinsured.  For best coverage, look into purchasing an umbrella policy.

Homeowner's Insurance

The worst case scenario for the company insuring your home is if it becomes totally destroyed by something like a house fire or a tornado.  If your insurance policy would pay 90% or less of the cost to completely rebuild your home, you are underinsured.  This includes using the same or similar materials and replacing everything in your home.  Homeowner's coverage should be rechecked every year or two.

What Drives Auto Insurance Rates Up?

 

Many of our clients are noticing that their Greensboro auto insurance rates continue to increase year over year and they're wondering why.  There are a number of answers to this question and they can be divided into two sections:

1.  Rate increases affecting everyone
2.  Rate increases specifically affecting you

Everyone's Coverage Rates Going Up

The auto insurance business is highly competitive and many auto insurance companies are struggling to stay profitable in these days of unusually high claims payments.  This has caused insurance rates to spiral upwards during the past several years.  This affects your Greensboro auto insurance rates as well as rates with companies all across the country.

Like any other business, an auto insurance company must stay profitable in order to remain in business.  They make money in two ways:  by collecting premium dollars from their policyholders and by putting these collected funds into profitable investments.  These funds are then used to pay out claims and to cover employee salaries and other administrative costs.  When claims payments going out surpass premiums coming in, a phenomena that's known as underwriting loss, premium costs must be increased in order to make ends meet.   There are some definite reasons why claims have risen so much recently.  Consider this:  

In the past several years, eight out of the ten largest auto insurance companies in the U.S. have reported losing money in their policy underwriting efforts.  In other words, they've paid out more in claims than they've collected in premiums.  Reasons for this include:

• A record number of disasters occurred in 2018-2019, including wildfires, hurricanes, floods and more.  These disasters not only negatively affected home insurance companies but also those companies insuring automobiles.  An inordinate number of claims were made on vehicles that burned, suffered flood damage or were damaged in tornadoes.
• An increase in distracted-driving accidents, mostly attributed to cell phone use, have been occurring lately.  Millions of crashes are blamed on distracted driving, causing insurers to raise rates.
• Expensive technology added to newer vehicles have made repairs more costly.  What used to be a simple rear bumper repair, for example, now includes repair of rearview video cameras, now required on all new cars sold in the U.S.

Rate increases affecting you individually may result from:

• Too many claims filed
• Adding a teen driver to your policy
• Moving to a higher crime/higher accident-prone area
• Too many moving violations
• You've turned 70 years old