5 dirt-cheap types of insurance
Anyone who has received a claim check to pay for a destroyed home or car knows that insurance is a bargain. But some forms of coverage are even better deals than others.
In fact, some types of insurance cost just a few dollars a month in premium costs, but can save you hundreds — or even thousands — of dollars in the wake of a loss.
Following are five dirt-cheap insurance bargains, with typical monthly premium amounts derived from statistics provided by the Insurance Information Institute III).
1. Renters insurance: $16 a month
Renters insurance typically costs less than $200 annually for an actual cash value policy, which replaces your valuables at their depreciated rate. If you’re a renter who’s unsure about the need for a policy, prepare a home inventory that lists all your valuables, such as expensive clothes and electronics, jewelry, collectibles, bicycles, and antique furniture.
You may be surprised at what you find, says Janet Patrick, spokeswoman for the Illinois Insurance Association.
“Most people own more personal belongings than they realize,” she says. “A tenant’s belongings can be damaged or destroyed by fire, tornado, theft and more. Replacing these items is expensive.”
Renters insurance also offers liability protection in case a guest is injured on your property, Patrick says. Examples of such injuries may include a guest who slips and falls on a patch of ice outside your rented home, or a guest bitten by your pet.
Don’t make the mistake of thinking your landlord’s policy will cover you, Patrick says. “Tenants without renters insurance are on their own, and must pay out of pocket should a loss occur,” she says.
2. Umbrella liability insurance: $13 to $25 a month
Umbrella coverage can be a wise choice to protect your assets, which could be at risk if you’re sued by someone you’ve injured either physically or financially.
Typically, an auto insurance, renters insurance or home insurance policy provides between $250,000 and $300,000 of liability protection. But damages can far exceed those amounts.
For example, a Texas jury returned a $7 million verdict against the owners of two dogs that attacked and killed a 10-year-old boy in 2009.
An umbrella policy provides additional protection above those amounts that can help you pay for judgments and attorneys’ fees in the wake of a lawsuit.
“The amount of umbrella liability coverage usually ranges from $1 million to $10 million and covers broad types of liability,” says Michael Barry, III spokesman.
He adds that coverage is usually very inexpensive. The first $1 million in coverage typically costs between $150 and $300 per year.
“The second million costs about $75, and subsequent increments of $1 million cost about $50 per year,” Barry says.
3. Flood insurance: Starts at $10 a month
Every year, massive flooding strikes unlucky communities in the United States, causing devastating damage to homes in the storm’s path.
Ninety percent of all natural disasters in the United States involve some flooding, according to the III.
And you do not have to live next to an ocean, river or lake to be at risk. Twenty percent of flood claims are paid to people who live in low- to moderate-risk zones, according to the National Flood Insurance Program SNFIP), which provides coverage in the U.S.
Homeowners insurance and renters insurance don’t cover flood damage, so a separate flood policy is necessary to protect you.
“All homeowners should consider buying flood insurance,” Patrick advises.
Coverage is available at up to $250,000 for the structure of the home and $100,000 for personal possessions. Remember, there is a 30-day waiting period before a flood insurance policy goes into effect, so you should buy this insurance long before a storm is on the horizon.
4. Sewer- and drain-backup insurance: $3 to $4 a month
When rain pours down in the spring and summer, the water can overwhelm sewer systems. Raw sewage may back up into your home if this happens.
Such a backup can damage your home and its electrical system. Sewage also can ruin personal possessions, and it presents a breeding ground for disease.
Typically, neither home insurance policies nor flood insurance policies cover this type of damage. Fortunately, you can buy coverage either in the form of an endorsement to your homeowners or flood policy, or as a separate stand-alone policy.
The cost usually is around $40 to $50 annually, making such coverage a wise investment, says Carole Walker, executive director of the Rocky Mountain Insurance Information Association.
“All homeowners should consider whether they can afford not to purchase a sewer backup endorsement,” she says.
If you’re still on the fence, consider that the nation’s aging sewer lines are resulting in more backups. The Environmental Protection Agency says there are anywhere between 23,000 to 75,000 sanitary sewer overflows in the United States each year.
5. Gap insurance: $2 a month
New cars lose an average of 20 percent of their value during the first year you own them, according to III.
That stings, but it can become a real financial problem if you get into an accident soon after buying the car.
“Standard auto insurance policies pay the vehicle’s current market value,” Barry says.
That means that if you pay $20,000 for a new car and it’s totaled 12 months later, your insurer will give you a check for the depreciated value — which would be $16,000, on average.
Any gap between that $16,000 and what’s left on your car loan would be your responsibility.
However, adding gap insurance to your auto policy can protect you from such a bill and can cost as little as $20 a year.
Barry says drivers should consider gap coverage if they:
- Make a down payment equal to less than 20 percent of the vehicle’s market value.
- Finance the purchase over a period of 60 months or longer.
- Lease a vehicle.
- Purchase a vehicle model with a history of depreciating quickly.
- Roll over negative equity from an old car loan into the new loan.
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