Summer refresher on insurance basics
Welcome to summer school. Today’s lesson: insurance basics 101. I promise it will be fun.
We all know auto insurance is required by state law. One of the questions I’m often asked is how are insurance rates determined?
Insurance companies use your age, driving record, credit, MVR (motor vehicle record) and past claims (sometimes called a CLUE report) to determine your premium. Insurance premiums also are rated by territory. Your rate might be higher than someone in a large city, for instance, where the risk of an accident is higher.
Auto insurance rates also are determined by the year, make and model of your vehicle. Generally, pickup trucks are more expensive to insure, primarily because of the damage they can cause in an accident, as well as how much they cost to repair.
Next on the basic list, you should have home or rental insurance. If you let your home insurance lapse, you will probably be the lucky recipient of a letter from your mortgage company regarding force-placed insurance. You don’t want this.
Why? Because force-placed insurance, whether it be for your financed vehicle or home, is vastly more expensive than an insurance company’s.
You’ll want renters insurance if you are renting your place. At a nominal cost of just a few hundred dollars a year, you can receive a package discount with your auto insurance.
So, that right there would essentially pay for itself.
Health insurance — yep, I’m going to go there. As mentioned in my first Citizen Telegram column in January of this year, it might help if you weigh the cost of a large medical bill vs. health insurance monthly premiums.
I used the example of my $16,000 bill from several years ago divided into monthly payments. At the time, my individual medical policy cost $300 a month. Divide that $16,000 bill by $300 a month and it would have taken 53 months to pay it off, or just over four years.
Having said that, yes, a lot of people opt out of (or simply cannot afford) health insurance and choose to take the tax penalty. To put it politely, health insurance premiums are outrageous here in our valley. Let’s hope our elected officials continue to make this a priority.
And lastly, though some folks don’t think it to be a necessity, life insurance. Available at a variety of coverage levels, this would help your loved ones or business financially when you pass away. Peace of mind for the cost of a nice dinner out once a month.
Other insurance policies that might apply to you are motorcycle, boat, snowmobile, ATV/UTV, business liability, professional liability, commercial auto, dwelling, fire and others.
As always, talk to your insurance professional about your specific needs.
Susan Nichols-Alvis is the owner of Nichols Insurance Agency in Rifle. You can reach her at 970-625-0411 or visit http://www.farmersunioninsurance.com/snichols.
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