Insurance is essential for our lives, providing financial protection and peace of mind in the case of unforeseen events. However, with so many different types of insurance available, it can be challenging to know which policies are right for you. In this article, we'll answer some of the most frequently asked questions about insurance to help you make informed decisions about your coverage. Whether you're new to insurance or have been a policyholder for years, learn more about how insurance works and what you need to know to protect yourself and your loved ones.

1. “What auto insurance coverage do I need? What is the difference between Liability, Comprehensive, and Collision coverage?”

Auto Insurance Coverage has three main components: liability, comprehensive, and collision. Liability insurance is required by Texas law and covers damages and injuries you may cause to others in an accident. Comprehensive insurance covers damages to your vehicle that are not caused by a collision, such as theft, fire, or weather damage. Collision insurance covers damages to your vehicle caused by a collision, regardless of who is at fault. In other words, liability insurance covers damages and injuries to others, while comprehensive and collision insurance covers damages to your vehicle. It's vital to carefully consider your coverage options and limits to select the policies that best meet your needs and budget.

2. “What is a Deductible? Why is my Deductible so high?”

Deductibles are critical to insurance policies, including home, auto, and health insurance. A deductible is the amount the policyholder is responsible for paying out-of-pocket before the insurance policy takes effect. For example, if you have a $500 deductible on your auto insurance policy and are involved in an accident that causes $2,000 in damages, you would be responsible for paying the first $500, while your insurer would cover the remaining $1,500.

The size of the deductible can vary depending on the policy and the insurance provider, and generally, a higher deductible will result in lower premiums. However, it's essential to carefully consider your deductible when selecting a policy, as a higher deductible could mean more out-of-pocket expenses in the event of a claim. Additionally, the way deductibles work can vary by policy type. For example, with health insurance, deductibles are calculated annually; for home and auto insurance, deductibles are often on a per-claim basis.

3. “I haven’t had a claim in ___ years; why are the rates on my renewal so high?”

There are many factors to consider that are affecting insurers and causing them to increase your renewal premium amount:

• Inflation, labor expenses, supply chain issues, and advanced technology raise the cost of repairing homes and repairing or replacing vehicles.
• New laws and regulations, such as higher coverage requirements, impact insurers' costs and necessitate rate adjustments.
• Litigation costs have significantly contributed to the increase in insurance premiums, particularly in the auto insurance industry.
• Natural Disasters have become more frequent and severe, leading to higher insurance claims for property damage. Storms hitting other states or parts of our state impact total losses, even if our area avoids hurricanes.
• Insurance fraud, including staged accidents and identity theft, has increased insurers' expenses and contributed to premium increases.
• The rise in distracted driving due to smartphones correlates with more accidents and insurance claims.
• While technology improves safety, it also raises repair costs and introduces new risks like cybersecurity threats.

These factors collectively contribute to the notable increase in insurance rates, reflecting insurers' need to cover rising costs and mitigate risks.



4. “What is Uninsured/Under Insured Motorist Coverage? Do I even need that?”

Underinsured motorist and uninsured motorist coverage are essential components of auto insurance that provide financial protection in case of accidents involving drivers who do not have sufficient insurance coverage. Uninsured motorist coverage pays for damages and injuries you sustain in an accident caused by an uninsured driver; similarly, underinsured motorist coverage pays for damages and injuries that exceed the other driver's insurance coverage. These policies help ensure you are not left with significant out-of-pocket expenses in case of an accident caused by another driver who is not adequately covered. It's important to carefully evaluate your coverage needs and consult your insurance agent to determine your best coverage options.

5. “What is Actual Cash Value? What is Replacement Cost? I have a 20-year warranty for my roof, why am I on ACV?”

When discussing home insurance and specifically the roof that protects your home from the elements, Replacement Cost and Actual Cash Value are two terms that can be confusing. Replacement Cost refers to the amount of money it would take to replace a damaged or destroyed roof with a new one of similar kind and quality. On the other hand, Actual Cash Value refers to the roof's current value minus depreciation and wear and tear. Replacement Cost is typically used for newer roofs (<10 years old), while Actual Cash Value is used for older roofs (>10 years old). The calculation of Replacement Cost considers the cost of materials, labor, and other expenses needed to replace the roof. Actual Cash Value is calculated by subtracting the depreciation from the original value of the roof. Understanding the difference between these two types of coverage is critical, as it can affect your compensation in the event of a loss.

6. “What is Umbrella Insurance? Why would I need an additional policy?”

Umbrella policies are supplemental insurance policies that provide extra liability coverage beyond the limits of the insurance policies associated with your home or auto policies. They can help protect you from financial loss in a lawsuit or other unforeseen event that exceeds the limits of your existing coverage. This policy can provide an additional layer of protection against potential lawsuits and other claims that could otherwise result in significant financial loss. It's important to carefully evaluate your coverage needs and consult your insurance agent to determine your best coverage options.

7. “Do I really need flood insurance?”

Flood insurance is an essential coverage that protects your home in the event of a flood. It is particularly crucial for homeowners who live in high-risk flood zones. Flood insurance is not usually included in standard home insurance policies; in some areas, lenders mandate you have it. Flood zones are areas that FEMA has designated as prone to flooding based on historical data and trend analysis; if your home is located in one of these areas, you may be required to have flood insurance. The cost of flood insurance varies depending on the location of your home, the level of risk, and the amount of coverage you need. It is always better to be safe than sorry when it comes to flood insurance, as flood damage can be costly and devastating.