Whether it’s a cozy micro-cabin or a rambling Colonial, your home is probably the single largest purchase you’ll ever make and your biggest physical asset. An investment like that is worth protecting.
That’s where homeowners insurance comes in; it gives you peace of mind that if you were to have major damage or get robbed, there would be funds to repair and restore your home. But what happens when you think it’s time to change your policy?
Here’s what you need to know about switching your homeowners insurance policy, as well as a step-by-step guide to getting it done as quickly as possible and with a minimum of hassles.
Can I Switch Homeowners Insurance at Any Time?
Good news: yes! No matter the reason, you’re allowed to change your homeowner’s insurance at any time. This is good, since shopping around for the right policy can save you a lot of money in some instances.
If you’re shopping for a new home as we speak, it can be a good idea to start looking at insurance before you sign the purchase agreement. And if you’re an existing homeowner looking to save money or simply find a new policy, you absolutely can do so whenever you like. But it’s important to follow the steps in order to ensure you don’t accidentally have a lapse in coverage.
💡 Quick Tip: Homeowners insurance covers three basic categories: the building itself, the belongings inside, and your liability if someone gets hurt on your property.
When Should I Change My Homeowners Insurance?
There are certain events that should also trigger a review of your insurance, including paying off your mortgage (your rates may well go down) and adding a pool (your rates may go up). Also, you may find you are offered deals if you bundle your homeowners insurance with, say, your car insurance; that might be a savings you want to consider.
You never know what options might be available out there to help you save some money. And since homeowners insurance can easily cost more than $1,800 per year, it can be well worth shopping around.
How Often Should I Change My Homeowners Insurance?
You’re really the only person who can answer this one, but in general, it’s a good idea to at least review your coverage annually.
However, it does take time and effort. Sometimes, a cheaper policy means less coverage, so it’s not always a good deal. Be sure you’re able to thoroughly review all the fine print and make sure you know what you’re getting.
Ready to change your homeowners insurance? Follow these steps in order to ensure you don’t accidentally sustain a loss in coverage!
Step One: Check the Terms and Conditions of Your Existing Policy
The first step toward changing your homeowners insurance policy is ensuring that you actually want to change it in the first place!
Take a look at your existing policy and see what your coverage is like, and be sure to look closely to see if there are any specific terms about early termination. While you always have the right to change your homeowners insurance policy, there could be a fee involved. In many instances, you may have to wait a bit to receive a prorated refund for unused coverage.
Step Two: Think about Your Coverage Needs
Once you have a handle on what your current insurance covers, you can start shopping for new insurance in an informed way. You probably don’t want to “save money” by accidentally purchasing a less comprehensive plan. But do think about how your coverage needs may have shifted since you last purchased homeowners insurance.
For example, the value of your home may have changed (lucky you if your once “up and coming” neighborhood is not officially a hot market). Or perhaps you’ve added on additional structures or outbuildings and need to bump up your policy to cover those.
Step Three: Research Different Insurance Companies
Now comes the labor-intensive part: looking around at other available insurance policies to see what’s on offer. Keep your current premiums and deductibles in mind as you shop around. Saving money is likely one of the main objectives of this exercise, though sometimes, higher costs are worth it for better coverage.
Make sure you are carefully comparing coverage limits, deductibles, and premiums to get the best policy for your needs. Also consider whether the policy is providing actual cash value or replacement value. You may want to opt for a slightly pricier “replacement value” so you have funds to go out and buy new versions of any lost or damaged items, versus getting a lower, depreciated amount.
In addition to the theoretical coverage you encounter, it’s a good idea to stick with insurers with a good reputation. All the coverage in the world doesn’t matter if it’s only on paper; you need to be able to get through to customer service and file a claim when and if the time comes!
Fortunately, many online reviews are available that make this vetting process a lot easier. A few reputable sources for ratings: The Better Business Bureau and J.D. Power’s Customer Satisfaction Survey, and Property Claims Satisfaction Study. You can also do some of the footwork yourself by calling around to get quotes, though this is time-intensive and you might want to simply use an online comparison tool instead.
Step Four: Start Your New Policy, Then Cancel Your Old One
Found a new insurance plan that suits your needs better than your current one? Great news! But here’s the really important part: You want to get that new policy started before you cancel your old one.
That’s because even a short lapse in coverage could jeopardize your valuable investment, as well as drive up premiums in the future. Once you’ve made the new insurance purchase call and have your new declarations page in hand, you are ready to make the old insurance cancellation call. Be sure to verify the following with your old insurer:
• The cancellation date is on or after the new insurance policy’s start date.
• The old insurance policy won’t be automatically renewed and is fully canceled.
• If you’re entitled to a prorated refund, find out how it will be issued and how long it will take to arrive.
Congratulations: You’ve got new homeowners insurance!
The last step, but still a very important one, is to notify your mortgage lender about your homeowners insurance change. Most mortgage lenders require homeowners insurance, and they need to be kept up-to-date on who’s got your back should calamity strike. Additionally, if you still owe more than 80% the home value to your lender, they may still be paying the insurer for you through an escrow account — so you definitely want to make sure those payments are going to the right company.
💡 Quick Tip: A basic homeowners insurance plan doesn’t cover floods, earthquakes, or sinkholes. If you live in an area prone to natural disasters, you may want to look into supplemental coverage.
The Takeaway
Homeowners insurance is an important but often expensive form of financial protection. It can help you cover the cost of repairing or rebuilding your home if you undergo a covered loss or damage. Since our homes are such valuable investments, they’re worth safeguarding. Plus, most mortgage lenders require homeowners insurance.
Sometimes, changing your policy can help you save money for comparable or better coverage. Reviewing and possibly rethinking your homeowners insurance is an important process, especially as your needs and lifestyle evolve. If you’ve added on to your home, put in a pool, bought a prized piece of art, or are enduring more punishing weather, all are signals that you should take a fresh look at your policy and make sure you’re well protected.
If you’re a new homebuyer, SoFi Protect can help you look into your insurance options. SoFi and Lemonade offer homeowners insurance that requires no brokers and no paperwork. Secure the coverage that works best for you and your home.
Find affordable homeowners insurance options with SoFi Protect.
Photo credit: iStock/MonthiraYodtiwong
Insurance not available in all states.
Experian is a registered service mark of Experian Personal Insurance Agency, Inc.
Social Finance, LLC ("SoFi") is compensated by Experian for each customer who purchases a policy through Experian from the site.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
By Janet Siroto |
Insurance |
Comments Off on How Much Auto Insurance Do I Really Need?
Figuring out just how much car insurance you really need can be a challenge.
At minimum, you’ll want to make sure you have enough car insurance to meet the requirements of your state or the lender who’s financing your car. Beyond that, there’s coverage you might want to add to those required amounts. These policies will help ensure that you’re adequately protecting yourself, your family, and your assets. And then there’s the coverage that actually fits within your budget.
We know it may not be a fun topic to think about what would happen if you were involved in a car accident, but given that well over five million drivers are involved in one every year, it’s a priority to get coverage. Finding a car insurance policy that checks all those boxes may take a bit of research — and possibly some compromise. Here are some of the most important factors to consider.
How Much Car Insurance Is Required by Your State?
A good launching pad for researching how much car insurance you need is to check what your state requires by law. Only two states do not require a car owner to carry some amount of insurance: New Hampshire and Virginia. If you live elsewhere, find out how much and what types of coverage a policyholder must have. Typically, there are options available. Once you’ve found this information, consider it the bare minimum to purchase.
💡 Quick Tip: Saving money on your fixed costs isn’t always easy. One exception is auto insurance. Shopping around for a better deal really can pay off.
Types of Car Insurance Coverage
As you dig into the topic, you’ll hear a lot of different terms used to describe the various kinds of coverage that are offered. Let’s take a closer look here:
Liability Coverage
Most states require drivers to carry auto liability insurance. What it does: It helps pay the cost of damages to others involved in an accident if it’s determined you were at fault.
Let’s say you were to cause an accident, whether that means rear-ending a car or backing into your neighbor’s fence while pulling out of a shared driveway. Your insurance would pay for the other driver’s repairs, medical bills, lost wages, and other related costs. What it wouldn’t pay for: Your costs or the costs relating to passengers in your car.
Each state sets its own minimum requirements for this liability coverage. For example, in California, drivers must carry at least $15,000 in coverage for the injury/death of one person, $30,000 for injury/death to more than one person, and $5,000 for damage to property. The shorthand for this, in terms of shopping for car insurance, would be that you have 15/30/5 coverage.
But in Maryland, the amounts are much higher: $30,000 in bodily injury liability per person, $60,000 in bodily injury liability per accident (if there are multiple injuries), and $15,000 in property damage liability per accident. (That would be 30/60/15 coverage.)
And some may want to go beyond what the state requires. If you carry $15,000 worth of property damage liability coverage, for example, and you get in an accident that causes $25,000 worth of damage to someone else’s car, your insurance company will only pay the $15,000 policy limit. You’d be expected to come up with the remaining $10,000.
Generally, recommendations suggest you purchase as much as you could lose if a lawsuit were filed against you and you lost. In California, some say that you may want 250/500/100 in coverage – much more than the 15/30/5 mandated by law.
Collision insurance pays to repair or replace your vehicle if it’s damaged in an accident with another car that was your fault. It will also help pay for repairs if, say, you hit an inanimate object, be it a fence, tree, guardrail, building, dumpster, pothole, or anything else.
If you have a car loan or lease, you’ll need collision coverage. If, however, your car is paid off or isn’t worth much, you may decide you don’t need collision coverage. For instance, if your car is old and its value is quite low, is it worth paying for this kind of premium, which can certainly add up over the years?
But if you depend on your vehicle and you can’t afford to replace it, or you can’t afford to pay out of pocket for damages, collision coverage may well be worth having. You also may want to keep your personal risk tolerance in mind when considering collision coverage. If the cost of even a minor fender bender makes you nervous, this kind of insurance could help you feel a lot more comfortable when you get behind the wheel.
Comprehensive Coverage
When you drive, you know that unexpected events happen. A pebble can hit your windshield as you drive on the highway and cause a crack. A tree branch can go flying in a storm and put a major dent in your car. Comprehensive insurance covers these events and more. It’s a policy that pays for physical damage to your car that doesn’t happen in a collision, including theft, vandalism, a broken window, weather damage, or even hitting a deer or some other animal.
If you finance or lease your car, your lender will probably require it. But even if you own your car outright, you may want to consider comprehensive coverage. The cost of including it in your policy could be relatively small compared to what it would take to repair or replace your car if it’s damaged or stolen.
Personal Injury Protection and Medical Payments Coverage
Several states require Personal Injury Protection (PIP) or Medical Payments coverage (MedPay for short). This is typically part of the state’s no-fault auto insurance laws, which say that if a policyholder is injured in a crash, that person’s insurance pays for their medical care, regardless of who caused the accident.
While these two types of medical coverage help pay for medical expenses that you and any passengers in your car sustain in an accident, there is a difference. MedPay pays for medical expenses only, and is often available only in small increments, up to $5,000. PIP may also cover loss of income, funeral expenses, and other costs. The amount required varies hugely depending on where you live. For instance, in Utah, it’s $3,000 per person coverage; in New York, it’s $50,000 per person.
Uninsured/Underinsured Motorist Coverage
Despite the fact that the vast majority of states require car insurance, there are lots of uninsured drivers out there. The number of them on the road can range from one in eight to one in five! In addition, there are people on the road who have the bare minimum of coverage, which may not be adequate when accidents occur.
For these reasons, you may want to take out Uninsured Motorist (UM) or Underinsured Motorist (UIM) coverage. Many states require these policies, which are designed to protect you if you’re in an accident with a motorist who has little or no insurance. In states that require this type of coverage, the minimums are generally set at about $25,000 per person and $50,000 per accident. But the exact amounts vary from state to state. And you may choose to carry this coverage even if it isn’t required in your state.
If you’re seriously injured in an accident caused by a driver who doesn’t carry liability car insurance, uninsured motorist coverage could help you and your passengers avoid paying some scary-high medical bills.
Let’s take a quick look at some terms you may see if you shop for this kind of coverage:
Uninsured motorist bodily injury coverage (UMBI)
This kind of policy covers your medical bills, lost wages, as well as pain and suffering after an accident when the other driver is not insured. Additionally, it provides coverage for those costs if any passengers were in your vehicle when the accident occurred.
With this kind of policy, your insurer will pay for repairs to your car plus other property if someone who doesn’t carry insurance is responsible for an accident. Some policies in certain states may also provide coverage if you’re involved in a hit-and-run incident.
Underinsured motorist coverage (UIM)
Let’s say you and a passenger get into an accident that’s the other driver’s fault, and the medical bills total $20,000…but the person responsible is only insured for $15,000. A UIM policy would step in and pay the difference to help you out.
Guaranteed Auto Protection (GAP) Insurance
Here’s another kind of insurance to consider: GAP insurance, which recognizes that cars can quickly depreciate in value and helps you manage that. For example, if your car were stolen or totaled in an accident (though we hope that never happens), GAP coverage will pay the difference between what its actual value is (say, $5,000) and what you still owe on your auto loan or lease (for example, $10,000).
GAP insurance is optional and generally requires that you add it onto a full coverage auto insurance policy. In some instances, this coverage may be rolled in with an auto lease.
Non-Owner Coverage
You may think you don’t need car insurance if you don’t own a car. (Maybe you take public transportation or ride your bike most of the time.) But if you still plan to drive occasionally — when you travel and rent a car, for example, or you sometimes borrow a friend’s car — a non-owner policy can provide liability coverage for any bodily injury or property damage you cause.
The insurance policy on the car you’re driving will probably be considered the “primary” coverage, which means it will kick in first. Then your non-owner policy could be used for costs that are over the limits of the primary policy.
Rideshare Coverage
If you drive for a ridesharing service like Uber or Lyft, you may want to consider adding rideshare coverage to your personal automobile policy.
Rideshare companies are required by law in some states to provide commercial insurance for drivers who are using their personal cars — but that coverage could be limited. (For example, it may not cover the time when a driver is waiting for a ride request but hasn’t actually picked up a passenger.) This coverage could fill the gaps between your personal insurance policy and any insurance provided by the ridesharing service. Whether you are behind the wheel occasionally or full-time, it’s probably worth exploring.
Car insurance is an important layer of protection; it helps safeguard your financial wellbeing in the case of an accident. Given how much most Americans drive – around 14,000 miles or more a year – it’s likely a valuable investment.
What If You Don’t Have Car Insurance?
There can be serious penalties for driving a car without valid insurance. Let’s take a look at a few scenarios: If an officer pulls you over and you can’t prove you have the minimum coverage required in your state, you could get a ticket. Your license could be suspended. What’s more, the officer might have your car towed away from the scene.
That’s a relatively minor inconvenience. Consider that if you’re in a car accident, the penalties for driving without insurance could be far more significant. If you caused the incident, you may be held personally responsible for paying any damages to others involved; one recent report found the average bodily injury claim totaled more than $24,000. And even if you didn’t cause the accident, the amount you can recover from the at-fault driver may be restricted.
If that convinces you of the value of auto insurance (and we hope it does), you may see big discrepancies in the amounts of coverage. For example, there may be a tremendous difference between the amount you have to have, how much you think you should have to feel secure, and what you can afford.
That’s why it can help to know what your state and your lender might require as a starting point. Keep in mind that having car insurance isn’t just about getting your car — or someone else’s — fixed or replaced. (Although that — and the fact that it’s illegal to not have insurance — may be motivation enough to at least get basic car insurance coverage.)
Having the appropriate levels of coverage can also help you protect all your other assets — your home, business, savings, etc. — if you’re in a catastrophic accident and the other parties involved decide to sue you to pay their bills. And let us emphasize: Your state’s minimum liability requirements may not be enough to cover those costs — and you could end up paying the difference out of pocket, which could have a huge impact on your finances.
Discover real-time vehicle values with Auto Tracker.¹
Now you can instantly monitor vehicle prices in this unprecedented market—to help you make smart money moves.
Finding the Best Car Insurance for You
If you’re convinced of the value of getting car insurance, the next step is to decide on the right policy for you. Often, the question on people’s minds is, “How can I balance getting the right coverage at an affordable price?”
What’s the Right Amount of Car Insurance Coverage for You?
To get a ballpark figure in mind, consider these numbers:
Type of Coverage
Basic
Good
Excellent
Liability
Your state’s minimum
• $100,000/person for bodily injury liability
◦ $300,000/ accident for bodily injury liability
◦ $100,000 for property damage
• $250,000/person for bodily injury liability
◦ $500,000/ accident for bodily injury liability
◦ $250,000 for property damage
Collision
Not required
Recommended
Recommended
Comprehensive
Not required
Recommended
Recommended
Personal Injury Protection (PIP)
Your state’s minimum
$40,000
Your state’s maximum
Uninsured and Underinsured Motorist (UM, UIM) Coverage
Your state’s minimum
• $100,000/person for bodily injury liability
◦ $300,000/ accident for bodily injury liability
• $250,000/person for bodily injury liability
◦ $500,000/ accident for bodily injury liability
Here are some points to consider that will help you get the best policy for you.
Designing a Policy that Works for You
Your insurance company will probably offer several coverage options, and you may be able to build a policy around what you need based on your lifestyle. For example, if your car is paid off and worth only a few thousand dollars, you may choose to opt out of collision insurance in order to get more liability coverage.
Choosing a Deductible
Your deductible is the amount you might have to pay out personally before your insurance company begins paying any damages. Let’s say your car insurance policy has a $500 deductible, and you hit a guardrail on the highway when you swerve to avoid a collision. If the damage was $2,500, you would pay the $500 deductible and your insurer would pay for the other $2,000 in repairs. (Worth noting: You may have two different deductibles when you hold an auto insurance policy — one for comprehensive coverage and one for collision.)
Just as with your health insurance, your insurance company will likely offer you a lower premium if you choose to go with a higher deductible ($1,000 instead of $500, for example). Also, you typically pay this deductible every time you file a claim. It’s not like the situation with some health insurance policies, in which you satisfy a deductible once a year.
If you have savings or some other source of money you could use for repairs, you might be able to go with a higher deductible and save on your insurance payments. But if you aren’t sure where the money would come from in a pinch, it may make sense to opt for a lower deductible.
Checking the Costs of Added Coverage
As you assess how much coverage to get, here’s some good news: Buying twice as much liability coverage won’t necessarily double the price of your premium. You may be able to manage more coverage than you think. Before settling for a bare-bones policy, it can help to check on what it might cost to increase your coverage. This information is often easily available online, via calculator tools, rather than by spending time on the phone with a salesperson.
Finding Discounts that Could Help You Save
Some insurers (including SoFi Protect) reward safe drivers or “good drivers” with lower premiums. If you have a clean driving record, free of accidents and claims, you are a low risk for your insurer and they may extend you a discount.
Another way to save: Bundling car and home insurance is another way to cut costs. Look for any discounts or packages that would help you save.
💡 Quick Tip: If your car is paid off and worth only a few thousand dollars, consider updating your car insurance: You might choose to opt out of collision coverage and double down on liability.
The Takeaway
Buying car insurance is an important step in protecting yourself in case of an accident or theft. It’s not just about repairing or replacing your vehicle. It’s also about ensuring that medical fees and lost wages are protected – and securing your assets if there were ever a lawsuit filed against you.
These are potentially life-altering situations, so it’s worth spending a bit of time on the few key steps that will help you get the right coverage at the right price. It begins with knowing what your state or your car-loan lender requires. Then, you’ll review the different kinds of policies and premiums available. Put these pieces together, and you’ll find the insurance that best suits your needs and budget.
When you’re ready to shop for auto insurance, SoFi can help. Our online auto insurance comparison tool lets you see quotes from a network of top insurance providers within minutes, saving you time and hassle.
SoFi brings you real rates, with no bait and switch.
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¹SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc’s service. Vehicle Identification Number is confirmed by LexisNexis and car values are provided by J.D. Power. Auto Tracker is provided on an “as-is, as-available” basis with all faults and defects, with no warranty, express or implied. The values shown on this page are a rough estimate based on your car’s year, make, and model, but don’t take into account things such as your mileage, accident history, or car condition.
Insurance not available in all states.
Experian is a registered service mark of Experian Personal Insurance Agency, Inc.
Social Finance, LLC ("SoFi") is compensated by Experian for each customer who purchases a policy through Experian from the site.
External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
What can you do if you’re buying or living in a home that’s considered “high risk” because of its location or other factors, and you can’t find the insurance protection you need? In some states, including Florida and California, where insurers are limiting their coverage or exiting the market altogether, it can be challenging to find a renters or homeowners policy. You may even find the insurer you’ve had for years is no longer willing to provide coverage.
There’s no need to panic just yet, or give up on your efforts to get the policy you want or need. There may be options you haven’t thought about that are just a few computer taps away.
What Makes a Home, Area, or State High Risk?
There are a few different factors that can make a home, neighborhood, region, or state high risk when it comes to getting insurance coverage. Some of these factors may affect homeowners only, while others can affect both homeowners and renters.
Sometimes a home is determined to be high risk because it’s fallen into a state of disrepair. The insurance company may say, for example, that the home needs a new roof, the foundation is unsafe, or the plumbing or electricity needs updating. If that’s the case, following through on those repairs may make it easier to keep or qualify for a traditional homeowners policy.
It’s also possible that the way the home is constructed — with certain types of building materials or a roof style that doesn’t meet the insurer’s underwriting standards — is making it harder to get insurance. Or it could be that the home is in an area that makes it more vulnerable to certain crimes, such as burglary or vandalism. Sometimes, a person’s own history (a criminal background, bankruptcy, or too many past claims) could lead an insurer to cancel a policy or say no to a new one.
Increasingly, it’s the propensity for serious, damaging weather that can cause an entire region or state to be considered high-risk. In California, wildfires are one reason insurers cite for pulling out. In Louisiana, it’s flooding. And in Florida, insurers are leaving the state because of the expensive damage hurricanes and tropical storms can cause.
💡 Quick Tip: A basic homeowners insurance plan doesn’t cover floods, earthquakes, or sinkholes. If you live in an area prone to natural disasters, you may want to look into supplemental coverage.
What Can You Do If You’re Denied Coverage?
Though homeowners and renters insurance policies aren’t mandated by any state or federal laws, mortgage lenders and landlords can and often do require a certain amount of coverage. Even if yours doesn’t, you may find it makes sense to get a policy to protect yourself, your home, and/or your belongings.
It can be frustrating and scary to find out you’ve been denied the insurance you want or need, or that the policy you have is being canceled. Here are a few things you can do to find protection:
Shop Around
There are many insurance companies out there, so don’t feel as though you have to give up just because the carrier you wanted won’t cover you. You may be able to find a similar or better policy online, or you could search the old-fashioned way and call around. While you’re looking, try not to limit your options based on brand names or because you have car insurance or another type of policy through a certain company.
If you’re buying homeowners insurance: Before you start shopping, consider how much and what types of coverage you need and what your lender requires. Depending on where you live, you may need to buy additional protection for flooding, earthquakes, sinkholes, etc. This coverage is usually not a part of a basic homeowners policy.
If you’re buying a home, you may want to ask the current homeowners or your new neighbors what coverage they think is necessary.
If you’re buying renters insurance: Keep in mind that even though your landlord might have insurance that covers the building you’re living in, that policy won’t cover your possessions should they be damaged or stolen. And the landlord’s policy probably won’t pay for additional living expenses if you need to move out while your unit undergoes repairs.
As you shop renters policies, it’s important to compare apples to apples, and to be sure you’re getting the renters insurance coverage you might need in a worst-case scenario. Remember: Most renters policies won’t cover damage from flooding. To be sure you’re protected, you’ll likely need to purchase a separate renters policy from the National Flood Insurance Program, which is managed by FEMA.
Use a Broker or Independent Insurance Agent
If you don’t have the time to shop for a policy yourself, you may want to hire an insurance broker or independent insurance agent to get quotes from multiple insurers for you. Before you get started in this process, it’s a good idea to be clear on how your insurance professional will be paid (fee, commission, or both), and how broad or limited the policy search will be.
Contact Your State Department of Insurance
The consumer division of your state insurance department can provide you with a list of insurers that are writing policies in your area. And they may be able to help you work with your current provider regarding a nonrenewal — that is, if the company isn’t pulling out of the state altogether.
Ask Your Current Insurance Professional for Advice
If your current insurance company is leaving your region or state and you need to change your homeowners insurance, your representative — who is familiar with your policy needs — may have suggestions for which companies you could try next.
Consider a FAIR Plan
Many states have Fair Access to Insurance Requirements (FAIR) plans available for homeowners who can’t get a traditional homeowners policy. FAIR insurance coverage is different for each state, but generally, these are bare-bones policies provided by a pool of insurance companies. They often do not include personal liability coverage, and you may have to make upgrades to your property to get or keep your policy.
A FAIR plan may be your last resort if you can’t get a policy anywhere else. Still, it’s important to be clear on what you are getting — and what your premium will be — before moving forward.
Look into Beach and Windstorm Plans
If you live in a coastal state that is prone to wind and hail damage, you may want to look into getting a beach and windstorm insurance plan. These plans are similar to FAIR plans and can provide coverage to homeowners in areas that aren’t insured through the voluntary insurance market.
Can You Go Without Insurance If You Can’t Get Coverage?
Although you aren’t legally required to purchase a renters or homeowners policy, you may not have a choice. If you’re renting, your landlord might say it’s a must. And if you’re buying or still owe money on your home, your mortgage company will let you know how much homeowners insurance you need.
If you can’t get a policy, or if the coverage is deemed insufficient, your mortgage company might buy “force-placed” insurance for your home. With force-placed insurance, the lender typically pays upfront for the insurance, then adds the premium cost to your monthly mortgage payment. You won’t have control over the type of coverage you get, or the policy limits, and it might be more expensive than the policy you would purchase for yourself.
You also may be required to have homeowners insurance if you live in a condominium or co-op.
Even if you don’t have to get insurance, you may want to seriously consider the downsides of going without coverage. You might discover that the security a policy can offer is worth the extra effort or cost involved with finding coverage.
If you’re a homeowner: It’s quite likely your home is your biggest asset, and insurance can help you protect that investment and your overall financial wellness. Your homeowners policy doesn’t just cover the structure you live in; it also insures your belongings and provides liability protection in case of an injury or property damage.
If you’re a renter: Your personal property (furniture, electronics, clothes, jewelry, etc.) may be worth more than you think, and renters insurance can help you pay to replace belongings that are damaged or stolen. Renters insurance also typically includes coverage for property damage, or if a guest is accidentally hurt, or if your pet bites someone.
Worried about how much renters insurance costs and if it’s worth it? Usually, renters insurance is much less expensive than homeowners insurance, so you may want to at least check the price before passing on coverage.
💡 Quick Tip: Next time you review your budget, consider making room for additional insurance coverage. Think of it as an investment that can help protect you from a major financial loss.
The Takeaway
It can be frustrating and stressful to learn that you can’t get the insurance coverage you need for your home and belongings, or that you’re losing the coverage you thought you could count on. But just because one company won’t offer you a policy doesn’t mean you don’t have other options. You may have to spend a little extra time searching for the right policy, though, or get a little help finding the appropriate amount of coverage at an affordable price.
When the unexpected happens, it’s good to know you have a plan to protect your loved ones and your finances. SoFi has teamed up with some of the best insurance companies in the industry to provide members with fast, easy, and reliable insurance.
Find affordable auto, life, homeowners, and renters insurance with SoFi Protect.
FAQ
Is homeowners insurance required to buy a home?
While homeowners insurance isn’t required by state or federal laws, if you’re financing the home, your mortgage lender will likely require that you have a certain amount of coverage.
Is renters insurance required?
Renters insurance isn’t required by law, but your landlord or property management company may require that you purchase a renters policy.
How much renters insurance do I need?
To determine how much renters insurance you should purchase, you may want to do a quick inventory of what you own, including clothing, jewelry, electronics, artwork, furniture, etc. Then, using receipts if you have them, estimate how much it’s all worth.
How much homeowners insurance do I need?
If you’re financing your home, your mortgage lender will likely require a certain amount of insurance coverage. But you may want to purchase additional coverage based on your assets and the types of protection you want. Your insurance company can help you determine the appropriate amount of coverage.
Photo credit: iStock/svetikd
Insurance not available in all states.
Experian is a registered service mark of Experian Personal Insurance Agency, Inc.
Social Finance, LLC ("SoFi") is compensated by Experian for each customer who purchases a policy through Experian from the site.
Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
By SoFi |
Family Finances, Insurance |
Comments Off on Which Insurance Types Do You Really Need? Here Are 6 to Consider
These days, you can insure almost anything. Did you know, for example, that Julia Roberts has insurance for her teeth, and before Daniel Craig filmed a James Bond movie, he insured his entire body? While you probably don’t need to insure any of your body parts for millions of dollars, you might find yourself wondering when you should buy life insurance, or whether renter’s insurance is really necessary.
To help you decide on the right type and amount of coverage, we’ve broken down which kinds of insurance you will most likely need (other than health insurance, of course).
1. Life insurance
Life insurance is about more than just financing your funeral. It also allows your family to keep paying the bills if something happens to you.
People often think they don’t need life insurance if they don’t have dependents. But if you have debt such as student loans that someone has co-signed, your life insurance can be used to pay off your loans.
It’s common for employers to offer life insurance as part of their benefits package, but it’s worth noting that the life insurance your employer offers may not be enough, especially if you have dependents. Ideally, your life insurance payout should be enough to invest and yield returns that could replace your income annually. For example, if you assume that you’ll get a 5% return on the money you invest, you would need $1 million in coverage to replace a $50,000 income.
Here’s an overview of some of the most common life insurance options you might consider.
Term Life Insurance
Term life insurance is the simplest and most common form of life insurance. It covers your life for a specific period of time, and pays only if your death occurs during the term. This timeframe is typically anywhere from one to thirty years, the longer the term the higher the premium. Term life insurance can be more affordable than other types of life insurance.
💡 Quick Tip: Term life insurance coverage can range from $100K to $8 million. As your life changes, you can increase or decrease your coverage.
Whole Life Insurance
Whole life insurance covers you for your entire life. If you make consistent payments toward your policy, you’ll build a cash reserve for your family upon your death.
Universal Life Insurance
In exchange for premiums, universal life insurance can provide coverage for as long as the policyholder is alive, and some policies also accrue cash value. When the policyholder dies, their beneficiaries typically receive a tax-free death benefit in the amount specified by the policy.
Indexed Universal Life Insurance
Indexed universal life insurance (IUL) gives policyholders the option to put money towards either a fixed account or an equity index account. Index accounts with universal life policies often include well-known indexes and can be a good option if you’d like to accumulate tax-deferred cash as well as maintain a set amount of money in a fixed account.
2. Disability Income Insurance
Disability income insurance, also referred to as disability insurance, replaces a portion of your salary if you become disabled. Some employers don’t offer disability insurance, but even if yours does, you may want to consider a supplementary policy to top up the amount that you receive.
Depending on the policy, disability insurance kicks in when you become partially, completely, temporarily, or permanently disabled. Keep in mind that there is often a waiting period before benefits start, which could range from one month to a year, depending on your policy and whether you have short-term or long-term disability insurance. The longer the waiting period on your policy, the cheaper your premiums often are.
If you have to take a job that pays less because of a disability, some policies may pay you part of the difference.
Note that disability insurance is expensive, often between 1% and 3% of your salary, and many organizations offer it as a benefit. If you’re evaluating offers between two employers, it’s worth factoring in how valuable this type of insurance is to you.
3. Long-Term Care Insurance
If you’re considering a nursing home, day care, home health aide, or other type of long-term care, be prepared to pay. A Genworth survey found that the average price of a private room in a nursing home is $9,034 a month. A typical assisted living facility charges around $4,500 a month, while a home health aide runs $5,148 a month.
To ensure you can foot the bill, the American Association for Long-Term Care Insurance recommends buying a policy in your mid-50s to qualify for the best premiums. Benefits kick in when someone isn’t able to take care of everyday activities or suffers from severe cognitive impairments. Policies vary by the specific level of impairment, the type of services provided, and the length of time the covered person lives after becoming impaired.
Depending on your policy, your benefits may not start until up to 90 days after impairment, and some may require that you receive paid care in the meantime.
If you own or lease a car, car insurance is a must. But there are different kinds to consider.
Collision and comprehensive insurance will cover damage to your car and can help replace it if it’s been stolen.
Liability insurance covers you if you get sued after causing an accident. There are three maximum liability limits you can get in a car insurance policy: bodily injury per person in a given accident, bodily injury for all injuries in a given accident, and personal property damage in a given accident. Each state requires different insurance minimums by law.
However, you may want higher limits than the minimum. You may be able to save money on collision and comprehensive coverage by getting a higher deductible of $500 or $1,000. If you drive a car that’s worth less than $1,000, you may want to consider dropping collision and comprehensive, though you’ll still need liability.
💡 Quick Tip: Saving money on your fixed costs isn’t always easy. One exception is auto insurance. Shopping around for a better deal really can pay off.
5. Homeowners or Renter’s Insurance
Homeowners insurance covers damages to your home or theft of personal possessions. It also includes liability insurance to cover accidents that happen on your property. However, it excludes things like floods, earthquakes, and the (hopefully unlikely) event of war.
You should have at least enough insurance to cover the replacement value of your home and possessions. This usually means getting guaranteed (or extended) replacement cost coverage. That’s different from actual cash value coverage, which covers you for the current value of your possessions.
If you’re renting instead of buying, renter’s insurance is similar, but only covers your possessions and personal liability for damages. It’s worth having in case you leave the water on and accidentally flood your kitchen. The minimum deductible for tenant or homeowner’s insurance is usually $500, but according to the Insurance Information Institute, raising the deductible could save you money.
One important element for both of these is liability insurance. This helps protect you against lawsuits, and covers things like people slipping and falling on your property. One hundred thousand dollars of liability coverage is a fairly standard amount.
Umbrella coverage is essentially extra liability insurance, and most importantly, it protects you and your assets in the event of a lawsuit. It covers you beyond the limits of your car or home liability coverage. For example, umbrella coverage will protect you from libel, slander and false imprisonment.
Often it is more economical to get an umbrella policy rather than getting excess home or car liability coverage. It’s a good idea to coordinate car, home, and liability coverages. After all, you wouldn’t typically have a $100,000 deductible on your umbrella policy if your car and homeowner’s insurance have $100,000 of coverage.
The first $1 million in umbrella coverage typically costs about $150 to $300 a year, which is often less than what most people would pay for additional coverage in that amount. As your income grows and you accumulate assets, you may want to consider raising the limit.
The Takeaway
Insurance can offer peace of mind and a degree of financial security. But the type and amount of coverage you need will depend on a number of factors, including your lifestyle, health, budget, and financial goals.
When the unexpected happens, it’s good to know you have a plan to protect your loved ones and your finances. SoFi has teamed up with some of the best insurance companies in the industry to provide members with fast, easy, and reliable insurance.
Find affordable auto, life, homeowners, and renters insurance with SoFi Protect.
Photo credit: iStock/urbazon
Insurance not available in all states.
Experian is a registered service mark of Experian Personal Insurance Agency, Inc.
Social Finance, LLC ("SoFi") is compensated by Experian for each customer who purchases a policy through Experian from the site.
Coverage and pricing is subject to eligibility and underwriting criteria.
Ladder Insurance Services, LLC (CA license # OK22568; AR license # 3000140372) distributes term life insurance products issued by multiple insurers- for further details see ladderlife.com. All insurance products are governed by the terms set forth in the applicable insurance policy. Each insurer has financial responsibility for its own products.
Ladder, SoFi and SoFi Agency are separate, independent entities and are not responsible for the financial condition, business, or legal obligations of the other, Social Finance, LLC (SoFi) and Social Finance Life Insurance Agency, LLC (SoFi Agency) do not issue, underwrite insurance or pay claims under Ladder Life™ policies. SoFi is compensated by Ladder for each issued term life policy.
SoFi Agency and its affiliates do not guarantee the services of any insurance company.
All services from Ladder Insurance Services, LLC are their own. Once you reach Ladder, SoFi is not involved and has no control over the products or services involved. The Ladder service is limited to documents and does not provide legal advice. Individual circumstances are unique and using documents provided is not a substitute for obtaining legal advice.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Congrats, new driver: Hitting the open road on your own can mean freedom and just plain fun. But remember that safety comes first — and part of driving safely is having sufficient car insurance coverage.
The world of auto insurance can be confusing, especially for new drivers, who also often face the challenge of higher insurance premiums. Still, there are ways to save money on insurance, both right off the bat and as you spend more time behind the wheel.
Here’s what new drivers need to know about auto insurance.
Car Insurance: The Basics
First things first: What is auto insurance, how does it work and why do you need it?
Car insurance pays out money for car repairs, medical bills, and other expenses in the event you get in an accident. Liability insurance, which pays out money to the other driver when you’re found at fault, is legally required in most states.
The amount of auto insurance you need depends on the law in the state where you live as well as your own risk tolerance level. But keep in mind that even minor auto accidents can be very costly, which makes auto insurance a necessity.
Unfortunately, auto insurance can be more expensive for new drivers — but again, take heart. There are still ways to ensure you get the best possible rate.
Factors That Affect Car Insurance Price
Car insurance prices are affected by far more than just a driver’s experience level, though that’s certainly an important part of the equation. Here are some other factors that insurers will take into account when drawing up your quote:
• Driver’s age
• Driver’s gender
• Driver’s marital status
• Driver’s history of accidents and damage
• Driver’s credit score
• The primary location the vehicle is kept and driven in
• The vehicle’s make, model, and age
Although there are some general rules that hold true — for instance, that people with lower credit scores or worse driving records end up with higher premiums — the way some of these factors are used is less than transparent.
For example, a 2023 study by QuoteWizard found that women actually pay higher insurance costs than men on average in many parts of America. This is despite the Insurance Information Institute’s claim that women tend to have fewer accidents than men and therefore pay less for insurance.
While there’s no easy way to predict what your rates will look like without getting a custom quote, new drivers will likely need to prepare for higher insurance premiums. This makes sense. After all, the insurance company is trying to hedge its bets that you won’t get in an accident (and therefore need an expensive claim paid out), and they don’t have a driving record to rely on while they make their best guesses.
Discover real-time vehicle values with Auto Tracker.¹
Now you can instantly monitor vehicle prices in this unprecedented market—to help you make smart money moves.
Although the classic image of a new driver might be an eager teenager with their brand-new license and the family’s hand-me-down car, there are other people who fit the description, too. Drivers considered “new” include:
• Teenagers with new driver’s licenses
• Adults without a driving record
• People with a gap in their driving history or car insurance coverage
• Immigrants to the United States, whose driving records might not transfer over from their country of origin
Being a new driver doesn’t change how much insurance you’re required to purchase by state law. But as mentioned, it can affect your price — so let’s take a closer look into solutions for each type of driver.
Car Insurance for Teens
Teens — or, in many cases, teens’ parents — face some of the highest insurance costs out there because, let’s face it: youthful abandon and lack of experience can lead to accidents. There are some moves you can make to minimize the costs, including:
• Staying on a parent’s policy: Staying on a parent’s policy as long as they’re living under the same roof can keep costs relatively low for teenage drivers. However, parents should still expect their policy cost to double.
• Looking for discounts for good grades or defensive driving classes: Teens may also be able to score good student discounts by maintaining above-average grades in school, or get a discount if they attend and complete an approved defensive driving class.
• Maintaining a good driving record: For all drivers, an accident-free driving history goes a long way toward lowering insurance costs over time. Of course, practicing care and vigilance on the road is always of paramount importance. But given how high the cost of teenagers’ insurance policies can be, there’s even more incentive.
Even if you have a robust driving history in your home country, if you immigrate to the United States, it’s unlikely to transfer over. This means you could face elevated insurance prices for the first few years you’re a U.S. driver.
The first step to attaining U.S. car insurance in most states is to acquire a U.S. driver’s license, which on its own can be difficult without the proper paperwork. However, certain states do offer driving privileges to unauthorized immigrants. You may need to provide documentation, such as a foreign passport or birth certificate, and the resultant license is not valid as federal identification.
Once you’re ready to shop for car insurance, consider obtaining several quotes to see which company can offer the basic auto insurance coverage you need for the least amount of money.
Car Insurance for Adults Without a Driving Record
Maybe it’s been a long time since you’ve driven — or you’ve never driven at all.
Without a solid, recent driving history, car insurance companies will still consider you a new driver, which can push costs up. Same goes for having a gap in car insurance coverage. (There may be exceptions to this rule if your driving gap was due to military deployment status, so be sure to check with your prospective insurer.)
Shopping around for the best quote and maintaining as clean a driving record as possible going forward will help your case considerably. If you’re confident in your driving ability and you’ve built up the savings to afford it if an accident does occur, choosing a higher deductible could also help you save money on monthly premiums.
3 Ways to Save on Car Insurance for New Drivers
Along with the tips we’ve included in the sections above, there are some universal suggestions that can help most new drivers — and, in fact, most drivers, period — lower their car insurance costs.
Choose Your Car Wisely
Certain cars are more expensive to insure than others, including flashy models that are likely to get stolen (or tempt their drivers into three-digit speeds). You can find lists of the cheapest cars to insure online, but generally speaking, slightly older, more modest vehicles are the least expensive to keep insured.
Improve Your Credit History
It’s incredible how many parts of our lives credit history touches — and car insurance is no exception. While your quote is drawn up based on many factors, as mentioned above, your credit history is definitely part of it. Besides, maintaining good credit behavior is highly likely to help you elsewhere, too.
Bundle Up
Many insurance companies offer discounts to people who “bundle” coverage or purchase more than one type of insurance from the same company. So if you’re required to have renter’s insurance or have home insurance, see if buying them all from the same provider might save you some dough.
The Takeaway
The price of car insurance is impacted by several factors, including the driver’s age, gender, marital status, credit score, and history of accidents and damage. Just as important is their experience level. Newer drivers and drivers with large gaps in car insurance coverage often end up paying higher premiums — at least at first. However, there are ways to potentially lower costs, including driving a more modest vehicle, bundling coverage, and improving your credit score.
Whether you’re a first-time driver or a seasoned pro, shopping around for insurance in your area can help you figure out how much coverage you really need and what your premium might be. SoFi’s online auto insurance comparison tool lets you see quotes from a network of insurance providers within minutes, saving you time and hassle.
Compare quotes from top car insurance carriers.
Photo credit: iStock/SolStock
Insurance not available in all states.
Gabi is a registered service mark of Gabi Personal Insurance Agency, Inc.
SoFi is compensated by Gabi for each customer who completes an application through the SoFi-Gabi partnership.
Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
