You’ve graduated college, gotten your own place, maybe have a car payment, and have started your career. Congratulations – you’re all grown up! Now that you’re out of Mom and Dad’s house, they’ve told you you’re on your own for your insurance. So, where do you start? Certainly there are plenty of insurance companies out there that will happily take your money, but what coverages do you need? What should you avoid? How much should all of this cost? Well, let’s start with some basics:
Car Insurance. Since Maryland’s public transportation system leaves little to be desired, we’re going to assume you have a car. The minimum limits required for Maryland are: Bodily Injury Liability Coverage: $30,000 minimum per person / $60,000 minimum per accident. Property Damage Liability Coverage: $15,000 minimum. Uninsured Motorist Bodily Injury Coverage: $30,000 minimum per person / $60,000 minimum per accident.
Is this enough insurance? Heck no. If you’re involved in a serious accident and cause bodily injury or property damage to someone or something else, this is barely going to cover their ambulance ride. A used Honda Accord costs around $20,000, and if you total it in an accident the difference is coming straight out of your pocket. Do you want to go into debt because you’re horribly under-insured, or would you rather the insurance company step in and cover you for pennies on the dollar?
Still making payments on your car? The company financing your new ride is going to require you to carry physical damage coverage for your car (comprehensive and collision coverage). This covers your car if you damage it, and deductibles typically range from $100 - $1,000. The higher your deductibles, the lower your premium.
Apartment/Condo/Homeowners Insurance. While you lived at home with Mom and Dad, your stuff was (probably) covered under their homeowners’ policy. Now that you’re on your own, it’s time to get one of the following:
- Renters Insurance: Covers your stuff and provides you with liability coverage. These policies are very inexpensive, and you can usually offset the costs of a renters policy by combining it with your personal auto policy. And don’t be fooled by Flo or Arron Rodgers – most of the insurance carriers out there will offer a multi-policy discount so bundle your coverages!
- Condo Insurance: Similar to a renters policy, but includes some additional coverage for improvements and betterments made to your condo unit. Double check your condo association’s master policy to find out if you’re on the hook for any loss assessment fees.
- Homeowners Insurance: Covers your dwelling, your stuff, “other structures” (sheds or detached garages), and provides liability insurance should one of your guests fall down the steps during your next Halloween party. The premiums can be taken out of an escrow account from your mortgage, and unless you paid for your house with cash, your mortgage company is going to require you to carry homeowners insurance. Flood and earthquake insurance are typically excluded in these policies.
- Personal Umbrella. This is an additional layer of liability insurance that extends over your car and homeowners policies. If you’re responsible for a really bad accident (think multi-car pile- up on 95 or a deck collapse at that Halloween party), this insurance extends over your existing policies as a CYA. An additional $1,000,000 in liability insurance typically runs between $150 - $250/year.
- Jewelry/floater policy. Provides coverage for higher-valued items like jewelry, firearms, and musical instruments that may have limited coverage under a standard renters or homeowners policy. Just got engaged? Make sure you get the rings covered for their full value.
- Flood. Remember how your homeowners/condo/renters policy won’t cover flood damage? You can obtain a separate flood policy to cover this cause of loss. A must have for Old Ellicott City residents and a requirement of your mortgage company if you live in a designated flood zone.
Insurance carriers provide preferred pricing for good behavior and a good claims history. But, there are some other ways you can keep your premiums down while keeping yourself adequately insured.
- Multi-policy discounts. Combine your renters/condo/homeowners policy with your auto policy. If you’re married, you and your wife should have your vehicles on the same policy to receive a multi-vehicle discount. Some carriers also offer a discount to married couples.
- Safeguard discounts. Burglar and fire alarms, sprinkler systems, and the distance to the nearest fire station all come into play when pricing your policy. The more safeguards preventing against a loss, the more advantageous it is for your premiums.
- Not living in the city. More people = more congestion. More congestion = higher likelihood of claims happening due to theft, vandalism, riots & civil commotion, older infrastructure, etc.
- Not living in the middle of nowhere. Less people = less fire stations and access to a public water supply. If you’re out in the country and your home catches on fire, it’s going to take the fire department a long time to reach you.
- Paid-in-full discount. More and more carriers are rewarding clients that pay their annual premiums up front vs. those that pay monthly or quarterly.
- Touch base with your insurance agent every few years. Life changes, and your insurance needs will change with it.
Matt Anderson is a Certified Insurance Counselor with the McFarlin Insurance Agency. He can be reached via email – firstname.lastname@example.org