Personal Insurance from AmeriCU Insurance Services
Whether it’s your house, apartment, car, boat, or trailer, you want to be confident you’re protected in the event of an unforeseen circumstance. If you ever need to make an insurance claim, are you sure you have enough coverage? Could you afford to replace or repair your car, home or other investment? While it’s important to get a good price, it’s just as important to be sure you have the coverage you need! Get the right insurance at the right price and protect yourself today!
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Personal Insurance Resources
Most people don’t read too deeply into their homeowners insurance policies. We simply expect that if our roof is destroyed by a storm or other event, the insurance company will pay the costs to repair it, minus the deductible. But that’s not necessarily the case. Many insurance carriers have been using an underwriting approach that keeps premiums down, but lowers the total amount that is payable for roof repairs. These carriers don’t insure the roof for the actual cost to replace it, but for something called “actual cash value.”
Here’s how it works: We all expect to have to replace roofs every 15 to 20 years or so. For this reason, roofs are a depreciating asset. From an accounting perspective, their cash value is highest when they are new – and then they gradually decrease in value through depreciation and wear and tear. An old roof is simply less valuable than a new roof because of the inevitability of replacement. If your homeowners insurance covers the actual cash value of a roof rather than the replacement cost to calculate benefits, it will subtract depreciation from your settlement amount. This results in lower compensation from the insurance company – but it also allows them to set lower premiums.
The lower compensation for a destroyed roof is less of a financial burden if you’ve been putting money aside to replace the roof. After all, you were going to replace it anyway. Storm damage would just move the timeline to the left, and the insurance company would cover the money you didn’t get a chance to save because the storm destroyed your roof before the scheduled replacement date. This really hurts people who have not or could not save in advance to replace their roofs. Many people whose roofs were damaged or destroyed by terrible tornadoes will get an unpleasant surprise when their settlements come in. But if you are diligent about planning to replace your roof, you should be fine.
It’s a tough situation. Many working families need to borrow money to finance a car just to get to work. If you can afford a new car, your warranty should see you through the term of your loan on most major repairs. But many used cars don’t come with warranties. If the car breaks down, you’re still on the hook.
The vast majority of car loans are just that: loans. The bank, credit union or consumer lender makes the loan in good faith, and you are expected to pay back the money on schedule – regardless of the condition of the vehicle. But if the vehicle is disabled while you still owe money on it, you may find yourself in a bind. Here are some things you can do to lessen your exposure.
Keep your insurance current. This is a big help, because if you lose the use of your car due to theft, or – if you carry collision insurance – accident, your insurance company will reimburse you to pay off your loan. This will theoretically help you qualify for a new loan for another car. The only thing you are out is your deductible – so make sure that whatever your deductible is, it’s an amount you can afford to lose. Many car loans require insurance as a condition of the loan, so check the fine print on your loan agreement. Note: Collision insurance is expensive. Many people choose to go without it, especially on older cars. That can lower your monthly premiums by quite a bit and make it that much easier to save money.
Don’t skimp on maintenance. Many breakdowns are preventable – or they can be delayed until after you’ve paid the car off. But don’t neglect routine maintenance to help keep it running well. Check the oil. Change your oil and filter as scheduled. Use the correct transmission fluid, brake fluid and coolant. Keep your tires balanced. Monitor their wear. Rotate them. Don’t neglect the spare. Pay special attention to your tires as you transition from one season to another. Bad tires cause accidents.
Buy “gap” coverage. Unless you come up with a large down payment, chances are you will, at some point, owe more on the loan than the car is worth. If you crash your car, your insurance company will reimburse you only up to the insured value of the car. But if you own “gap” coverage, your insurance company will reimburse you enough after an insurable event to pay off the loan.
Consider the warranty. Think about purchasing the warranty on your used car, if one is available. If a major engine, transmission or drive train issue is a risk you can’t afford to bear, then you might need to consider buying the warranty. Otherwise, you run the risk of owing money on a car you can’t even drive. Don’t take risks you can’t afford to lose.
This is the most basic form of life insurance, and often the least expensive option for those under the age of 50. Term policies are drawn up for a certain number of years, usually ranging from 1 to 10 years. They are renewable at the term’s end, but as the policyholder ages, the premiums will increase with each renewal.
There are several variations of term insurance, each with the same basic idea. One is a level term policy, in which the annual premium will be locked at a set amount for up to 40 years, depending on the insured’s age.
Another common variation, the declining balance term policy, is often used as a mortgage insurance. It’s set up to match the amortization schedule of the insured’s mortgage principal. The premium remains constant over the term of the policy, but the face value, or the policy’s original death payout, will decline throughout the term. Once the entire mortgage balance is paid up, the policy expires as the insurance is no longer necessary. A third takeoff of term insurance is a return of premium term policy. This policy offers to repay all of your premium payments if you outlive your insurance’s term. By purchasing this kind of insurance, your premiums are guaranteed to stay in your family – either as benefits to your dependents or as money back in your own pocket.
One major caveat of term insurance is that the policies have no cash value; they are pure insurance. Benefits are only paid if the policyholder passes on during the policy’s term. At the term’s end, the policy will expire and no benefits will be paid in case of death unless the term is renewed. If you are considering term insurance, be sure to purchase a policy that is renewable up to an age when you think you will no longer need insurance.
Whole Life Insurance
Whole life insurance offers protection coupled with a cash value component. You can lock in your premium payments at a level rate as long as you are consistent with your payments. A portion of your premium goes toward increasing your policy’s cash value. As your cash value grows, you can borrow money against it, up to 90% of the policy’s entire cash value, completely tax-free. Bear in mind, though, that borrowing against your life insurance should only be done as a last resort as outstanding loans accrue interest, reduce the policy’s death benefit and increase the odds that the policy will lapse.
Universal Life Insurance
Universal life policies offer increased flexibility for policy holders. Premiums can go up or down, or even be deferred within certain limits. Cash values can be accessed and withdrawn, though this directly decreases the death benefit. Face values can be modified as well.
Universal life policy is the preferred choice for those who’d like lots of flexibility along with a guaranteed rate on cash value. Policy holders are afforded an annual statement clearly delineating the policy’s current cash value, total protection, cash value accumulation and a summary of all associated fees.
Variable Life Insurance
Variable life insurance promises fixed premiums and a slew of investment options for the financially savvy and the true risk-takers. The policyholder’s cash value will not lay dormant in the policy; instead, it will be invested in the insured’s choice of stock, bond or money market portfolio. Naturally, cash values and death benefits will fluctuate along with the investments’ performance.
Death benefits generally have a floor, so even if your stocks do terribly, your dependents won’t be left without any payouts. Conversely, cash values offer no guarantees; investing them means risking a significant loss, like any other investment. These policies usually have higher fees than universal life insurance. On the bright side, though, any cash value accumulation is allowed to grow tax-free, as long as the funds remain in the policy.
Universal Variable Life Insurance
In a convenient policy that combines the best features of universal and variable life insurance, this type of policy will offer investment options, along with the flexible premiums and the ability to modify face values that characterize universal insurance policies. Of course, this level of flexibility and volatility is not without risk.
*AmeriCU Insurance Services is affiliated with AmeriCU Credit Union. The purchase of insurance from AmeriCU Insurance Servicesis not required to obtain credit or other services from AmeriCU Credit Union. Insurance products are not credit union deposits and are not NCUA insured, nor are they obligations of or guaranteed by AmeriCU.