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A Practical Guide to:
Insurance
Insurance is, or should be, a fact of life for all of us. Having the right type of insurance can help you avoid financial ruin. Unfortunately, most of us learn about insurane through word of mouth, unless we are fortunate enough to have parents or a mentor who understands how insurance works to guide us. There are a couple of basic insurance facts that everyone needs to know:
Auto Insurance: Everyone who drives is legally required to carry auto insurance. This is the one type of insurance that is mandatory by law. Each state has minimum auto insurance limits that residents are required by law to carry if they drive. Although the minimum limits will vary from state to state, most states have 25/50/25 limits. What does this mean?
25/50/25 means that you, the driver have up $25,000 of liability protection for bodily injury to one person in an accident YOU cause, $50,000 of liability protection for bodily injury that you cause PER OCCURANCE, and $25,000 of protection for property damage that you cause. This is the basic liability auto insurance that you are required by law to carry.
Now, if you owe money on the vehicle, the lienholder—the company that you financed your vehicle through---can force you to carry full coverage on the vehicle. Full coverage includes basic liability plus coverage to fix YOUR car in the event of a collision or other accidents. Full coverage is collision coverage---self explanatory---and comprehensive coverage----everything other than collisions.
Home Insurance: If you own a home and have it financed, the mortgage company will force you to insure the house for at least as much as you owe on it. For obvious reasons, it is a good idea to insure your home to protect not only what you owe on it, but the equity and the contents as well.