August 12, 2025
Protect your home, car, income, and assets with smart insurance choices. Learn five key coverage types to secure your financial future and peace of mind.
Understanding your insurance options can help protect your financial future. Let's break down five critical coverage types that may help safeguard your assets, income, and family, subject to policy terms and conditions.
Your home represents a significant investment. Homeowners insurance can help provide financial protection against unexpected damages caused by disasters (e.g., fire, hurricane, hail), theft, and accidents, subject to policy terms and exclusions. The coverage extends beyond just the structure itself.
What Standard Policies May Cover
A standard homeowners insurance policy typically includes four essential types of coverage: Coverage for the structure of the home, Coverage for personal belongings, Personal liability coverage, and Additional living expenses.
Your dwelling coverage may help protect the physical structure, while personal property coverage can safeguard your belongings. Personal liability coverage may become important when someone gets injured on your property.
Most mortgage lenders require homeowners insurance until your loan gets paid off. According to industry data, HO-3 insurance is among the most common types of home insurance policies. This "open peril" policy covers your home against many risks except specifically excluded ones.
Coverage Types Breakdown:
Illustrative Example
Consider a mortgage loan officer whose home suffers hail damage during a severe storm. Their HO-3 policy may cover roof repairs, temporary housing costs while contractors work, and replacing damaged personal items, subject to policy limits and deductibles. Without this protection, repair costs would come entirely out of pocket.
Key Exclusions to Remember
Standard policies typically don't cover floods, earthquakes, or maintenance issues. Homeowners insurance premiums vary based on many factors. Insurance companies consider factors when determining your rate, including your home's age, location, and construction materials.
Coverage is subject to policy terms, conditions, exclusions, and deductibles. Actual coverage may vary.
Most states require liability coverage. Understanding your options may help prevent financial hardship when accidents happen.
Essential Coverage Components
Collision can pay for damage to your car resulting from a collision with an object (e.g., a telephone pole, a guard rail, a mailbox), or as a result of flipping over. Comprehensive may cover damage to your car caused by disasters "other than collisions".
Liability insurance covers damage you cause to others. Collision coverage handles your vehicle damage from crashes. Comprehensive coverage may protect against non-collision events like theft, vandalism, or weather damage.
When You May Need Full Coverage
You should consider buying comprehensive and collision insurance if: You lease your vehicle or took out a loan to buy it. Your lender or leasing company likely requires you to carry collision and comprehensive coverage.
Cost Considerations (Based on Industry Averages):
Illustrative Industry Example
An auto loan specialist might finance vehicles daily. If their financed vehicle gets stolen from their driveway, comprehensive coverage may help replace the vehicle, subject to policy terms and actual cash value limits. Without it, they could still owe the loan balance while needing another vehicle.
Shopping Considerations
A common guideline suggests that if the cost of comprehensive and collision insurance exceeds 10% of your car's value, you might consider dropping them. However, consider your financial ability to replace the vehicle before dropping coverage.
Coverage is subject to policy terms, conditions, exclusions, and deductibles. Rates vary by location, driving record, and other factors.
Life insurance may help replace your income when you can't. Life insurance can help your loved ones if you lose your life, especially earlier than expected. Life insurance typically provides a death benefit, usually as a lump-sum payment, to your beneficiaries after you pass away.
Term vs Permanent Coverage
Term life insurance provides temporary protection during specific periods. Many people buy term life insurance for a length sufficient to cover their prime working years. That way, if they die early, they may help a surviving spouse or other beneficiary meet short-term financial needs like paying off a mortgage or supporting their kids through college.
Permanent life insurance may last your entire lifetime and can build cash value. Whole life insurance can offer coverage for your entire life, as long as you keep paying the premiums. It may also provide a specific rate of return on your cash value.
The Three Main Types:
Illustrative Mortgage Industry Application
A mortgage broker earning $80,000 annually might consider coverage to help replace their income stream. Based on industry examples, a 20-year term policy for substantial coverage might cost approximately $30 monthly for a healthy 40-year-old. This could help ensure their family can maintain their lifestyle and pay off their home if something happens, subject to policy terms.
Coverage Amount Guidelines
Term life offers affordable, time-limited coverage that may help with income replacement. Many financial experts suggest considering 5-10 times your annual income in coverage. Factor in outstanding debts, future expenses like college tuition, and your family's ongoing needs.
Universal vs Whole Life Comparison
The main differences between universal and whole life insurance often lie in flexibility and risk features. Whole life may offer more predictable premiums and death benefits. Universal life may allow you to adjust premiums and death benefits, subject to policy terms.
Life insurance benefits and features vary by policy. Coverage is subject to underwriting approval, policy terms, and conditions.
Most homeowners insurance does not cover flood damage. Only flood insurance may cover the cost of rebuilding after a flood. This separate policy can be important in many situations.
Understanding Flood Risk
Based on NFIP data, a significant portion of flood insurance claims come from outside high-risk flood areas. Flooding can happen anywhere water accumulates faster than it can drain away.
The National Flood Insurance Program (NFIP)
The National Flood Insurance Program (NFIP) is managed by FEMA and is delivered to the public by a network of more than 47 insurance companies. According to government data, there are millions of policyholders nationwide and the NFIP is described as the nation's largest single-line insurance program.
Coverage Details:
When Coverage May Be Required
Homes and businesses in high-risk flood areas with mortgages from government-backed lenders are typically required to have flood insurance. Even outside high-risk zones, coverage may make financial sense.
What May Qualify as a Flood
Generally, a flood is an excess of water on land that is normally dry, affecting two or more acres of land or two or more properties. To be eligible for coverage, the flooding typically must impact at least two properties or cover two acres.
Illustrative Real Estate Professional Example
A mortgage originator might learn about flood coverage during major weather events. Clients outside flood zones who suffer water damage when storm drains back up may receive claim payments if they have flood insurance. Those without such coverage could face complete out-of-pocket rebuilding costs.
Flood insurance coverage is subject to NFIP terms, conditions, and exclusions. Waiting periods may apply.
Umbrella insurance may provide extra liability insurance beyond what's on your existing policies. An umbrella policy may help pay what you owe if you're at fault for someone else's injuries or property damage, subject to policy terms.
How Umbrella Coverage May Work
When liability claims exceed your standard policy limits, umbrella insurance may provide additional coverage. For example, if you have bodily injury liability car insurance coverage with a $300,000 limit and cause an accident that results in $1 million of medical bills for other people, without umbrella insurance, you might be responsible for the excess $700,000.
What Umbrella Policies May Cover:
Cost and Coverage Amounts (Based on Industry Data)
Industry sources suggest umbrella insurance typically starts around $200 per year for $1 million of coverage. Based on market data, you may be able to add $1 million or more in extra liability coverage for approximately $150 to $300 a year.
Who May Benefit from Umbrella Coverage
You might consider umbrella insurance to help protect your assets and future income if you:
Illustrative Industry Application
A successful mortgage team leader with substantial net worth might face a lawsuit after their teenage son causes a serious accident. Their auto insurance may pay $300,000, but if medical bills total $800,000, their umbrella policy could potentially cover a portion of the remaining amount, subject to policy terms and limits.
Determining Coverage Needs
Consider calculating your total net worth including home equity, savings, investments, and future earnings potential. To help determine how much umbrella insurance coverage you might need, you could add up the value of your property, savings and investment accounts. Then, review the liability insurance you already have through your existing policies and consider whether additional umbrella coverage might help fill gaps.
Umbrella insurance coverage is subject to policy terms, conditions, exclusions, and underlying policy requirements.
Insurance may help protect your financial foundation. Each coverage type serves specific purposes in your overall protection strategy.
Suggested Priority Framework:
Getting Started
Work with licensed agents who understand your specific needs. To help get appropriate coverage at competitive prices, consider shopping around and getting multiple quotes. Always read through your policy documents carefully to understand what is and isn't covered so you can make informed decisions about additional coverage.
Remember that insurance needs may change as your life evolves. Consider reviewing your coverage annually to help ensure it still matches your current situation, assets, and responsibilities.
Key considerations for insurance decisions: Understand what you're seeking to protect, know what coverage actually includes, and consider buying sufficient coverage to help replace what you might lose without it, subject to policy terms and limits.
This article provides general information about insurance types and is not intended as specific advice. Insurance coverage, benefits, costs, and availability vary by insurer, location, and individual circumstances. Consult with licensed insurance professionals for guidance specific to your situation. All coverage is subject to policy terms, conditions, exclusions, and deductibles.
Hours of Operation
7 AM to 8 PM CDT
Closed
Closed
Call Us
833-487-2683
*Savings claim based upon averaging actual anonymized savings data for dwelling-only insurance rates paid (from July 2023 - June 2024) by customers of two of Covered’s largest mortgage industry partners across twenty-seven (27) US states. Bundles and non-dwelling insurance coverages were excluded.
† Net Promoter Score (“NPS”)® calculation averages post-purchase customer satisfaction surveys from 9/24/2024 - 2/28/2025. NPS® is a market research metric measuring customer satisfaction with a scoring calculation that incorporates both detractor and promoter customer feedback.
Quotes are presented solely for your convenience. Savings may vary. Rates are subject to change based upon the specific coverage you select and other factors that apply to your situation. CA License #0M81402, doing business as Cubbard Insurance Solutions in California.
