Do you understand when and how much insurance you need?
The purpose of insurance is to reduce financial uncertainty of loss by exchanging smaller payments, called “premiums,” for the financial assumption of the larger risk. The risk is covered by a pool of funds created by many contributors.
In the USA, nobody is required to have insurance. That said, most residents have some form of insurance to protect assets, mitigate losses or fulfill obligatory requirements of agreements. It acts as a safety net. Let’s understand some common types of insurance in Texas and beyond.
Insurance prices vary depending on the amount the policy purchaser is willing to pay as a deductible – an upfront out-of-pocket expense to access the policy funds. A policy costs less per month with a higher deductible and vice versa.
Many privileges necessitate insurance as a condition. A privilege is not a “right,” a legal entitlement. Privileges are special rights granted to a specific person. It can be limited or completely withdrawn when conditions aren’t met. Some privileges include mortgage loans, property leases or operating a motor vehicle on a public road.
Types of Insurance
Health insurance is often the first protection encountered for anyone born in a hospital. It mitigates expenses related to healthcare. It’s a prudent investment against catastrophic events or severe health emergencies.
Hospital stays can cost multiple thousands of dollars. Without insurance, the patient is required to repay this full amount and can have life changing consequences.
Automobile insurance – specifically auto liability insurance is required to operate a motor vehicle on public roads in Texas. There is a loophole for wealthy people because Texas law specifically states, “State law requires people who drive in Texas to pay for accidents they cause.”
According to the Texas Department of Insurance (TDI), “In Texas, you must have at least $30,000 in liability coverage for each injured person, up to a total of $60,000 per accident, and $25,000 for property damage per accident. This basic coverage is called 30/60/25.”
Instead of holding reserves specifically for this purpose, most Texans get auto liability insurance to pay for repairs and replacement of the other person’s property as well as medical expenses.
Comprehensive auto insurance affords these same protections to the vehicle that caused damage, no-fault collisions or hit-and-run incidents. The owner can get repairs and medical treatments.
Renters are often compelled to get insurance in exchange for the ability to live on a specific property. The policy covered personal property (including theft), loss of use and personal liability (injury claims and legal costs) of the tenant. Landlords have different additional policies.
Home insurance “pays to repair or replace your house and personal property if they’re damaged or destroyed by an event covered by your policy,” according to TDI.
Have an insurance agent pull a CLUE report during the Option Period to ensure home buyers get what’s expected.
Title insurance protects real property owners against challenges to ownership of real estate. It’s vital for most transactions in Texas. We’ll cover this in more detail soon.
Flood insurance is a separate policy. It’s an addition to home insurance. It covers the structure up to $250,000 resulting from a flood. Personal belongings will need to be on yet another policy up to $100,000. Flood insurance is required by lenders in areas that have a 1% annual chance of flooding. It may be required by the government to occupy structures in a designated flood zone.
Other vehicle insurance can be applied to boats, motorcycles, RVs, etc. If it moves, it can and probably should be insured for liability and/or theft.
Business insurance mitigates risks. If there’s a risk of loss, there’s probably an insurance for it. Policies can cover anything from paper cuts to nuclear disasters. Talk with an insurance agent to tailor a policy to the business’ needs.
General liability insurance loosely covers “everything else.” It covers legal expenses, damages and settlements. It’s most often seen in business policies, but individuals can also purchase this protection.
Life insurance is often the most important insurance because it allows policy owners to still care for their families - especially after they can’t be there.
Special thanks to John Powell of The Powell Agency for his help with this Information Of Value. His team is available at 469-850-0860, john@tpantx.com or at thepowellagencyntx.com.
Please view or download the whole Information Of Value booklet or my other books for free at this link.
I’ve Got Your Six!
Mark M. Hancock, GRI, MRP, AHWD
REALTOR, New Build certified
214-862-7212
DFWmark.com
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