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Q: I’m thinking of purchasing a renter’s insurance policy. What do I need to know?

A: Purchasing a renter’s insurance policy is a good idea, but the options can be confusing.
Image of a set of keys and a renters insurance policy on a desk

Renter’s insurance provides coverage against financial responsibility and liability in the event of an accident, theft or natural disaster. Premiums are fairly cheap and the payoff can be tremendous.

If this sounds like something you may want to consider, we have answered some of the questions you may have about renters insurance.

Should I choose replacement-cost coverage or actual cash-value coverage?

Replacement-cost coverage will fund the replacement purchase of a damaged or stolen object. This type of coverage will have pricier premiums, but is usually worth the extra expense. Actual cash-value coverage, on the other hand, has lower premiums, but offers only the cash value of the item at the time of the disaster.

How much coverage do I need?

Each policy will offer coverage to replace your possessions up to a certain limit. It’s best to take out a policy that will protect the full value of your belongings.

To determine how much coverage you need, take an inventory of your assets. If you’re choosing a replacement-cost plan, note how much it would cost to replace each item. If you’re going with a cash-value plan, note each item’s current worth. Tally up the total and choose a policy that provides sufficient coverage.

Are all disasters covered in renter’s insurance?

Most policies will cover damage caused by a wide range of circumstances including fire, theft, windstorms and more. However, most policies will not cover damage caused by floods and/or earthquakes. If you live in an area that is prone to such happenings, consider purchasing a separate flood or earthquake policy.

Should I choose a lower deductible?

Many people choose a policy with a lower deductible, but that is not always the smartest choice. A high-deductible policy will give you a lower monthly premium. The amount you save each month will likely offset the cost of the higher deductible if you need to file a claim.

Do I need a floater?

A floater (also known as a rider) will provide additional coverage for pricier items if they are lost or stolen. Most policies include a cap for replacing a specific kind of item, including expensive jewelry, furs, collectibles and costly sports equipment. If you own such items, you may want to add it to your policy.

What kind of liability coverage does my policy offer?

Your renter’s insurance will offer you liability protection against lawsuits for bodily injury or property damage caused by you, your family members or your pets. This coverage will pay for legal counsel in a court of law and medical coverage for anyone who gets injured on your property.

What is ALE?

Additional living expenses (ALE) refer to any extra expenses you may have, such as hotel bills and food costs, if your home is destroyed or unlivable because of a disaster covered in your policy.

If you are looking for more information on renters insurance or want to get a free quote, Craig, Alex or Deb with The Insurance Office can help you. Give them a call at (218) 828-1118 or learn more about what they offer as an Independent Insurance Agency

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Q: The many types of life insurance are overwhelming. How can I decide which is right for me?

A: The broad range of life insurance choices shouldn’t keep you from getting sufficient coverage. Here’s what you need to know about the most commonly purchased policies.
Image of magnifying glass over the words Life Insurance1. Term insurance

This basic form of life insurance is often the cheapest option for those under age 50. Term policies are drawn up for a certain amount of years, usually up to 10 years. They are renewable at the term’s end, but as the insured ages, the premiums will increase with each renewal.

There are several variations of term insurance.

First, in a level term policy, the annual premium will be locked at a set amount for up to 40 years, depending on the insured’s age. Next, a declining balance term policy is often used as a mortgage insurance. It’s created to match the amortization schedule of the insured’s mortgage principal. The premium is constant, but the face value, or the policy’s death payout, declines throughout the term. Once the mortgage balance is paid up, the policy expires. A third takeoff of term insurance is a return of premium term policy. This policy repays all your premium payments if you outlive your insurance’s term.

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.

2. Whole life insurance

Whole life insurance offers protection coupled with a cash value component. Premium payments are locked in at a level rate as long as the insured is consistent with payments. A portion of the premium goes toward increasing the policy’s cash value. As the cash value grows, the insured can borrow money against it, up to 90% of the policy’s entire cash value, tax-free. Remember, though, that outstanding loans will accrue interest, reduce the policy’s death benefit and increase the odds of a policy lapse.

3. Universal life insurance

Universal life policies offer high flexibility. Premiums can fluctuate or even be deferred within certain limits. Cash values can be withdrawn, though this directly decreases the death benefit. Face values can be modified as well.

4. Variable life insurance

Variable life insurance promises fixed premiums and investment options for the risk-takers. The policyholder’s cash value will be invested in the insured’s choice of stock, bond or money market portfolio. Cash values and death benefits will fluctuate along with the investments’ performance.

Death benefits generally have a floor, but cash values offer no guarantees; investing them means risking a significant loss. These policies usually have higher fees than universal life insurance. However, any cash value accumulation can grow tax-free.

5. Universal variable life insurance

This policy offers investment options, along with flexible premiums and the ability to modify face values.

If you have more questions about life insurance or other types of insurance reach out to our agents at The Insurance Office. 

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Q: I’m taking out a homeowners insurance policy on my new home. What do I need to know?

A: Homeowners insurance is designed to protect you and your family members from liability and cover your home, plus possessions, in the event of disaster or theft.

We have answered all your questions about homeowners insurance.

What kinds of plans are available for homeowners insurance?

Here are the most common types of homeowners insurance plans:

Image of a married couple with an insurance salesman.

HO-2 – A policy that only protects against 16 specified perils.

HO-3 – A broad policy that protects against all perils other than those excluded in the policy.

HO-5 – A premium policy that usually protects newer homes and covers all perils except the few excluded in the policy.

HO-6 – Insurance for co-ops/condominiums, which includes personal property coverage and liability coverage.

Each plan type will also include some extent of liability coverage.

Are all catastrophes covered by insurance?

Most policies will only cover events if they are sudden and accidental. Some natural disasters, like earthquakes and floods, require a separate policy for coverage.

Should I choose a plan with a lower deductible?

A lower deductible means your insurance coverage will kick in sooner, but you’ll also have a higher premium. When choosing a plan, find one offering a deductible you can comfortably afford along with the lowest possible premium.

Will my insurance cover all of my belongings?

Every policy will have a cap on payouts, and there are also sub-limits at play. For example, an insured dwelling that’s valued at $400,000 will typically have a 50% sub-limit. In case of a major catastrophe, the insured will only receive up to $200,000 in payouts.

Most policies will also have a replacement cap on specific items. If you own valuables, like pricey jewelry, firearms and artwork, consider purchasing a rider to separately cover these items.

Should I choose a replacement-cost plan or an actual cash-value plan?

A replacement-cost plan will pay for the full cost of replacing a damaged dwelling or your belongings up to a predetermined cap. An actual cash-value plan, on the other hand, will only offer payouts to cover what the damaged item was worth at the time of the disaster.

A replacement-cost plan offers more robust coverage, but the premiums can be a lot higher. The perfect plan for you depends on your financial standing, the value of your home and belongings, and the price you put on peace of mind.

Will all of my claims be honored?

For your claims to be honored, your property and home must be well-maintained. Be careful to take the necessary measures to ensure that your home is in excellent condition.

Should I use the insurance company my lender recommends?

You’re under no obligation to use the company your lender recommends. It’s best to get at least three different quotes before making a decision.

If you are looking for more information on homeowners insurance or want to get a free quote, Craig, Alex or Deb with The Insurance Office can help you. Give them a call at (218) 828-1118 or learn more about what they offer as an Independent Insurance Agency

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