Addressing Common Personal Insurance Gaps

Insurance policies work together to shield you from the financial fallout of accidents, disasters and unexpected events—but only if there are no gaps in the coverage. Here’s how to identify and fix the gaps in your home, auto, life and umbrella policies before they end up costing you more money. Our goal is to help you strengthen your insurance coverage and ensure you’re well-prepared for any situation.

Home insurance

Also known as homeowners insurance, this type of policy can be rife with coverage gaps if you’re not careful and don’t work with a qualified insurance agent. Be particularly mindful of the following possible gaps:

• Natural disaster exclusions—Certain natural disasters are often explicitly excluded from standard home insurance policies. For example, flood insurance is typically purchased separately. Homeowners in certain parts of the country may also need coverage for earthquakes and windstorms.

• Coming up short of the 80% rule—Insurance companies typically enforce this rule, which states that homeowners must retain enough coverage to pay for at least 80% of the estimated cost of a complete rebuild of their home. Failing to do this could lead to lower payouts following covered losses.

• Neglecting scheduled property coverage—Home insurance typically includes some coverage for personal possessions, but limits are often insufficient for those with significant valuables, like fine art and jewelry. Additional coverage options, such as scheduled property coverage, may be necessary to ensure policyholders can recoup losses involving treasured items.

Auto insurance

Auto coverage is one of the most commonly purchased types of insurance, but it can also be easily misunderstood. Read on to raise your awareness of these possible missteps:

• Fulfilling only minimum requirements—Although most states require drivers to have certain types of insurance, like third-party liability coverage, meeting these basic requirements may not be enough. For instance, many states don’t mandate collision coverage, which is essential for covering the costs of repairing or replacing your car if it’s damaged in an accident.

• Lacking gap coverage—Gap coverage can be critical in offsetting losses if you’ve financed your vehicle. If your car is totaled or stolen and you still owe more on your loan than the vehicle’s current value, this coverage can make up the difference and limit out-of-pocket losses.

Life insurance

Life insurance is often set once and forgotten—but a policy that made sense five years ago may leave real gaps today. Keep your coverage up to date by considering these possible gaps:

• Relying on group life insurance coverage—Life insurance through your employer can be a great benefit, but it shouldn’t be your only coverage. Group life insurance is usually linked to your job, so if you leave or retire, you could lose that coverage.

• Insufficient limits—As your circumstances change, you may need to adjust your life insurance policies. For example, having a child or adding a dependent usually increases your expected expenses. Without updating your life insurance, the payout might not be enough to support your family.

Personal umbrella insurance

Umbrella insurance is often the most underused policy available—it’s inexpensive relative to the protection it adds when other policies max out. Here are two instances where it can help fill the gaps:

• Inadequate auto insurance—Even if you’ve fulfilled your auto insurance policy’s minimum liability coverage requirements, severe accidents could have greater costs. If several people are severely injured, many vehicles are damaged or losses otherwise amount to a sum greater than your auto coverage can handle, personal umbrella insurance can offer additional aid and limit out-of-pocket losses.

• Insufficient home insurance—Certain accidents and other incidents at your home could be exceptionally costly. For instance, if your home has attractive nuisances, such as a swimming pool, or you regularly host large gatherings, accidents affecting multiple guests or inflicting significant injuries could quickly exhaust the liability coverage limits in your home insurance policy. Without umbrella coverage, you’d be saddled with paying the remainder out of pocket.

How to avoid coverage gaps

With these common coverage gaps in mind, here’s how to strengthen your insurance portfolio:

1. Appraise your belongings. An effective way to ensure you’re adequately covered is by being current on the value of what you’re insuring. Save receipts and document the condition of your possessions. Consider enlisting the assistance of professionals to appraise certain items, such as fine art and jewelry.

2. Assess liability risks. Whether considering home, renters, auto or umbrella coverage, certain policyholders may need to manage greater liability risk levels. For example, if you have children or pets, you may want to retain more coverage in your home insurance policy. Similarly, additional financial security may be advisable if you have a teen driver listed on your policy.

3. Consider recent life events. When your circumstances change, you should revisit your insurance policies. Getting married, having a child, buying a home or car, or moving should all trigger this process. Neglecting to account for life events in your insurance portfolio could lead to you being underinsured and your policies’ limits being incapable of covering losses.

4. Understand endorsements and options. Familiarize yourself with all the features and enhancements that might be available. While a standard home insurance policy may be sufficient most of the time, specific exclusions, such as for floods and hurricanes, could mean the difference between weathering a financial storm alone or being buoyed by financial aid.

5. Enlist assistance. The knowledge and experience of a qualified insurance agent are important as you seek to purchase or reassess the components of your personal insurance.

Get the insurance coverage you need

In the wake of an accident, damage to your home or other incident involving financial losses, the last thing you want to hear is that your insurance isn’t capable of what you expected. Coverage gaps can quickly lead to unexpected expenses, potentially incurring far-reaching financial consequences that might upend your entire life.

If it’s been a while since you’ve reviewed your policies, a conversation with a Mountain America Insurance advisor is a good place to start—they can help you spot gaps before they become expensive surprises.

Information provided by our partners at Leavitt Group

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