Insurance FAQs

Core Insurance Concepts

  • What is a deductible? The amount you pay out-of-pocket before your insurance covers the remaining costs. Often, it is not collected up front, but subtracted from your total payout from the insurance company. (Ex: $3000 fire claim-$1000 deductible=$2000 payout.) However, some auto claims require you to pay the repair shop your deductible and the insurance carrier pays the repair shop the remaining amount.
  • What is a premium? The payment you make to keep your insurance policy active. The total premium amount includes any taxes and fees, and can be billed monthly, quarterly, biannually, or annually. Paying a premium in full will almost always result in a big discount.
  • Replacement Cost vs. Actual Cash Value (ACV): Replacement cost pays to replace an item with a new one of similar quality, while ACV pays the current value of the item, accounting for depreciation. Depreciation is just a fancy word for “wear and tear.” Note: Auto policies are always written on an actual cash value basis, but homeowners’ policies usually provide replacement cost.
  • What is an "Umbrella Policy"? A separate liability policy that provides extra protection beyond the limits of your standard auto or home insurance. Think of an actual umbrella that covers over and above the underlying coverage. When the limits of liability on the underlying policy have been exhausted, the umbrella liability coverage would apply. Note: The best candidates for an umbrella are people who have high assets, a higher risk of lawsuit due to their occupation (Landlords, Doctors, Public Figures) or people with extra liability factors. (Swimming pools, Recreational Vehicles, or Large/Higher Risk dogs.)

Auto Insurance FAQs

  • What is the difference between “Liability Only” coverage and “Full Coverage?” The main difference is that liability only covers the other person's expenses if you're at fault, while full coverage (a common industry term) also covers damage to your own vehicle. Liability is the bare minimum coverage that makes you legal to drive, and in the state of Texas, the minimum requirements for liability and property damage are $30,000/$60,000/$25000. This means that in an accident in which you are at fault, you have $30,000 as a limit per person and $60,000 per accident for bodily injury. The state minimum requirement for property damage (usually the other vehicle that you hit) is only $25,000. And liability applies to the other party’s bodily injury and property damage, not your own! Consider getting full coverage, which pays to repair or replace your car after an accident, regardless of who is at fault. Full coverage also protects your car against non-collision events like theft, vandalism, fire, or weather damage (e.g., hail or falling trees). Note: A bank or dealership will almost always require full coverage if you are financing a vehicle.
  • Does my insurance cover me if I drive a rental car? Usually, yes, but coverage is limited to the same levels as your personal policy. If your auto insurance policy has “liability only” coverage on all your vehicles, the rental car will not be covered for collision in an accident you cause. Note: If you have full coverage on any vehicles on your personal auto policy, this usually extends to the rental car, because the highest level of coverage will apply.
  • If someone else drives my car, are they covered? Generally, yes, if they have your permission to drive the vehicle (often called a "permissive driver"). It is a common practice to let your neighbor or friend drive your vehicle on a short errand once in awhile. If that person is driving your vehicle several times a week, or going long distances, they should be added to your policy.
  • What is Gap Insurance? It covers the "gap" between what you owe on a car loan and the car's actual market value if it is totaled. This coverage can often be purchased from the dealership or bank through which you finance. You can compare the costs through both the insurance company and the financial entity as to which will be less expensive.

Home & Property Insurance FAQs

  • How much coverage do I need? Many insurance carriers determine the amount for which they will insure your home. If you have flexibility in determining what limit of coverage, choose a figure that will reflect what it would cost to replace your home from the ground up if there were a total loss. (An event like a fire or hurricane that completely destroys your home.) This is called replacement cost. It is tough to nail down an exact number, but in the local Houston and surrounding areas, we see general replacement cost estimates at $150-$250 a square foot. Note: A luxury home with costly building materials will be higher than a home with builder’s grade materials. Ask your agent for help determining what replacement cost estimate is accurate for your specific home.
  • Is flood damage covered? No, standard homeowners policies typically do not cover floods; a separate flood policy is required. This fact really surprised and devastated people after Hurricane Harvey! 1 out of 4 people who flooded during that event did not have a flood insurance policy because they were not required to have one by the mortgage company. Note: In Houston, Webster, League City, Pearland, Alvin, and anywhere else in the Houston surrounding area, flood insurance is highly recommended, even if not required.
  • What is "Loss of Use" or "Additional Living Expenses"? This pays for temporary housing and food if your home becomes uninhabitable due to a covered disaster.
  • Does my home insurance cover my business? Standard personal liability protection in a home policy typically does not extend to business-related activities. If you are doing business related activities out of your home, please let your insurance agent know what type of activities. Certain carriers may exclude personal liability coverage if the business carries higher risk. (Day care or any sort of child care activities.) Businesses should carry their own General Liability and Professional Liability policies for protection.

Life & Health Insurance FAQs

  • Term vs. Whole Life Insurance: Term life covers you for a specific period (e.g., 20 years), while Whole life provides lifelong coverage and often includes a "cash value" component.
  • Who is a "Beneficiary"? The person or organization designated to receive the death benefit payout.
  • What is a pre-existing condition? A health issue you had before your new health insurance coverage started. Make sure you let your agent know about any conditions, because blood tests and pre screening is usually required for a life policy anyways. It is in your best interest to be honest and forthcoming about medical facts and prescriptions in order to get the most accurate premium amounts. Premiums can go up if certain facts are not disclosed.

Saving Money

  • How can I lower my premium? Common methods include:
    • Bundling: Combining home and auto policies with the same carrier.
    • Using a Brokerage: Shopping your policies with a broker gives you multiple options in order to find the best possible value. Sometimes, even the companies offering a bundle are not as competitive as going through two unrelated providers. The object is to find the lowest bottom line without sacrificing the best possible coverage.
    • Increasing Deductibles: Choosing a higher out-of-pocket cost for claims typically lowers monthly premiums. However, knowing your deductible amount and considering what you can afford is important. We often find that the savings might not be worth the risk. (Ex: Saving $200 a year is not worth taking $3000 more on the deductible.) Note: Evaluating deductible options is always a good practice, and ask your agent give you the actual dollar amounts rather than percentages.
    • Discounts: Asking about "Good Student," "Safe Driver," or "Paperless Billing" discounts. Probably the best discount is the “Paid in Full” one. Note: You can make your own escrow account by siphoning money into an account you do not touch, and using it to pay your home or auto insurance.