Beating Broke

Personal Finance from the Broke Perspective

When Do You Need Umbrella Insurance?

By Leave a Comment

You likely have the insurance you’re required to get, such as auto and home insurance, and you probably have health insurance, and hopefully life insurance.  For many, that’s enough insurance to adequately protect you and your assets.  However, in some cases, you may also want to consider more coverage.  If you’re wondering when do you need umbrella insurance, there are several situation when buying it may be wise.

When Do You Need Umbrella Insurance?

What Is Umbrella Insurance?

Think of umbrella insurance as an extension of the auto and home insurance you already have in place.  If you have an auto policy with a $500,000 cap for injuries sustained, and you have an accident in which several people are severely injured, that $500K may be used in very little time.  When that amount is exhausted, umbrella insurance steps in and covers the rest of the costs, up to the limit of the policy.

When Do You Need Umbrella Insurance?

Likely, most people living low risk lives do not need umbrella insurance.  The basic insurance they have in place will cover them.  However, there are some times when you’d benefit from umbrella insurance.

You Have Significant Assets

If you have assets over $500,000, you may want to consider an umbrella policy.

You Have a Teenage Driver in the Home

When Do You Need Umbrella Insurance?
Photo by Matt Chesin on Unsplash

Teens are inexperienced and can be reckless, increasing your liability.

You Frequently Have Visitors to Your Home

More visitors mean more chances for injuries or accidents to occur.

You Have a Trampoline

Fun, but an accident waiting to happen, especially if you don’t have net fencing around it.

You Have a Rental Home

A rental home can be a great income source, but having one opens you up to lawsuits and expenses, especially if someone is injured or if the house sustains damage in a fire or other weather-related event.

You Have a Pool

Minimize your liability by having a fence around your pool, but still, someone might drown or fall and hurt themselves.

You Have a Dog

You may think your dog is gentle, but it only takes once for a dog to get aggressive and bite someone.

Caveats

There are two important pieces of information, should you be considering purchasing umbrella insurance.

First, your rates on your existing auto and home insurance policies will likely go up.  If you buy your umbrella policy from the same company that you purchase your auto and home insurance, they may first want you to increase your coverage for those policies.  The umbrella pays out only AFTER the auto or home insurance is exhausted, so they want those limits to be high enough, which raises your premiums.

Second, if you are sued in the future and have your auto, home, and umbrella insurance with the same company, the insurer may hire you an excellent lawyer because they want to avoid paying out the money, if they can.

Few people discuss this type of insurance, and most people don’t need it.  However, if you have liabilities in your life, such as a pool where someone may drown or slip on wet tile and hurt themselves, you may want the peace of mind that umbrella insurance offers.

Read More

Does Your Car Insurance Pay for These Items?

When Do You No Longer Need Life Insurance?

4 Insurance Policies That Will Save You Money in the Long Run

Clever Tips for Saving Money on Insurance

By 2 Comments

Saving money is a topic that is on most people’s minds. Whether it’s spending less on groceries, powering down the utility bill, or shopping for the cheapest gas, there are plenty of great tips floating around the internet. You may have tried some of them yourself, hopefully with great results. However, there is always room for improvement when it comes to balancing the family budget.

If you are taking a hard look at your budget, you’ll need to categorize the ways you spend money. Some monthly costs are fixed, and others are flexible. Likewise, some costs are “needs,” while others fall partway into the “wants” category. Insurance is definitely a “need,” but there are ways to trim down the monthly bill. Read on for a few clever tips to help you keep saving money on insurance.

Own Less

They say the more you have, the more you have to take care of. It’s true. Owning things comes with responsibility, which invariably leads to an outflow of cash. For instance, if you currently own three vehicles, consider selling the one you rarely use. You’ll put money in your pocket from the sale, and you will save on your monthly auto insurance premium. Other possessions can be pared down, as well. Homes, valuable collections, and expensive equipment can all be downsized in the interest of saving money.

Pay a Higher Deductible

A quick look at online insurance plan comparison tools will show you that monthly premiums are lower when a plan has a higher deductible. Shouldering a $1,000 deductible is basically like insuring yourself. If you are a safe driver, you never leave the coffee pot on when you leave the house, and your home has an alarm system, go for the higher deductible and keep saving on insurance premiums. On the other hand, if you have a history of recklessness and you’re always strapped for cash, paying more per month and having a lower deductible might be in your best interest.

Ask for an Annual Review

Because a lot can happen in a year, it is wise to take an annual look at your insurance needs. As your family ages, your needs will change. Children become teenagers with a driver’s license, which can result in higher auto premiums. However, when they grow up and move out, you may qualify for lower premiums again. As you and your spouse age, your insurance needs will change too, especially if you decide to downsize your possessions.

Shop Around Every Year

Shopping for insurance has gotten easier, thanks to the internet. If you feel like you are spending too much, take a moment to use an online tool and shop for a better deal. Learn more about your options, and make an informed decision. You may be surprised at the money you can save each month.

Learning how to save money on your monthly expenses can be a lot of fun. After all, a dollar saved is a dollar earned. Saving money on insurance is simpler than you might imagine if you use the tips mentioned above.

Do You Compare Your Finances to Others?

By 9 Comments

I belong to several Facebook groups, and recently, a woman in one group asked the seemingly innocent question, “What do you pay for cell phones and car insurance?”  She added, “We pay $180 a month for our cell phones and $345 a month for our car insurance.”

Say what?

When you read that number, you automatically think one of two things–“Wow, she’s paying a fortune for cell phones and car insurance!” (that was my initial thought), or, you think, “Sounds about right.”

Comparing FinancesA few of you may even think she’s getting a good deal.

My husband and I each carry a cheap cell phone from Tracfone that is for emergencies or occasionally checking in with one another.  We don’t spend any more than $10 to $20 a month on them.  Our car insurance is about $55 per month.  (We only have one vehicle.)

After reading how much this woman spent, I was feeling pretty good about myself.  But why?  I really don’t know her situation.  Her cell phone plan might include cell phones for the whole family.  Her car insurance is likely for multiple cars.  Maybe she has teenage drivers, or maybe she or her spouse has gotten a ticket recently.

Besides, I have no idea how much money she makes.  These bills might not be that extravagant in relationship to her income.

There’s really no point comparing my situation to hers.  To do so would invite complacency toward my own budget at best, and a loosening of the purse strings at worst because, hey, other people are spending a lot more than me.

The Only Time You Should Compare Your Spending to Others

Generally, I try not to compare my spending or budget to others.  Circumstances vary widely, and knowing another person’s exact financial situation is difficult.  Too often, especially online, we get a snapshot of someone’s finances and think we see the whole picture when we don’t.

We make assumptions of our own financial situations based on others.

Ultimately, we need to strive to do the best we can do with our own budgets.  To beat ourselves by spending less and/or saving more than we did the month before or the year before.

The only time it makes sense to look at someone else’s finances and spending is when they are doing considerably better than you, and you want to learn from and emulate them.  For instance, I knew my husband and I were spending too much for groceries.  One blogger I read has grown a large garden and planted fruit trees so that she can feed her family of 9 for less than $300 per month.  (Yes, you read that right.)

I know I won’t  ever have a grocery budget of $300 per month, but reading her techniques and strategies has encouraged me to cut my grocery budget and try to spend less.  It’s even inspired me to try out once a month shopping to reduce costs.

Ultimately, we shouldn’t compare our finances to others, but if we’re going to, we should only compare to those we wish to emulate.

Do you look at other people’s spending to make you feel better about your own or to motivate you to improve your finances?