How to Choose Auto and Homeowners Insurance

Today, we'll be discussing how to choose auto and homeowners insurance. Welcome to Money Talks. My name is Ken Wink from Summit Financial Consulting here in Southeastern Michigan. If you'd like more info about what you hear during our show today, give us a call 586-226-2100 or visit us online summitfc.net. While you're at the website, please check out that podcast page. We've got our past shows and you can actually subscribe on Apple podcasts, Spotify or Amazon music. So, uh, Before I introduced my co-host, Tony, I've got a surprise for him. I didn't tell him about this in the show prep, but today is officially our one-year anniversary of doing the podcast.

So I wasn't sure what to do.

So I've got happy birthday to you for the podcast, I guess. But then I've also got happy anniversary for you and I. Oh, okay.

Okay. So happy anniversary. That should be for the podcast. Happy birthday should be for me personally because yesterday was my birthday.

Oh, I am so good. I definitely did not know that.

When I saw the balloon come down, I'm like, oh, he knew it was my birthday. I didn't even tell him. That's what I meant to say. Yeah, yeah. No, it's the birthday of the show. I get it. That's interesting that the birthday of the show is just a day after my actual birthday. So my birthday is March 3rd. We're recording this on March 4th. Yesterday, I turned, should I admit it? Do you know what my birthday was? Have we talked about this?

I've gotten so many calls and text messages from our listeners asking how old you are. So, yeah, I doubt that.

I highly doubt that. I am 60 years old. Oh, my gosh. The big six. Oh, yeah, that's a big one, isn't it? And they passed 48 to me. I don't. Everybody tells me I seem younger and I always say it's my immaturity. It throws people off. Uh, but you're supposed to laugh at hair. You got hair that it looks like it's made out of silk, you know? Yeah. I, I, everybody says I do have, uh, I don't have a lot of gray hair yet, which is nice. And, um, you know, people go, how do you do it? And, you know, diet and exercise can two words, diet and exercise. Precisely. And everyone laughs when I say that because it's obvious I eat a lot of pizza. But no, I don't feel a day over 59, Ken.

That's good.

There you go. There you go. Well, hey, happy anniversary to our show. We've been doing this one year, and this is awesome. It's been a great year. I think the show's come a long way. It's much better if you go back and listen to one of those first shows. We were, you know, the struggle bus as you figure things out. But now we just get on here and we talk. You bring the information and I try to throw you off track once in a while, but you managed to stay on track. I love that.

Well, it's nice that your, you know, your back's doing so much better now because you don't have to carry me as much. You don't have to worry about your back.

Oh, geez. I should have a rim shot for that, right? Oh, man. Anyway. Anyway, yeah, well, this is awesome. It is a special show because we've been doing it one year and I didn't know you were going to do that. You brought balloons. So for our viewers that watch the show on YouTube, it's a video podcast as well as audio. You can watch the show. Um, what you might want to do. I mean, uh, you know, when people think of Ken Wink and Tony, sure. I think the first word that lookers, I think that's, that's the best word to describe us.

We're, we're lookers. Uh, uh, shouldn't have been money talk.

Should have just been lookers. Lookers talk about money stuff. Well, speaking of money stuff, and I don't want our listeners out there to turn the channel or stop watching the show when we tell you the topic, because I know you're going to have some great information that people need. And this is something we all have, and that's auto and homeowners insurance. And as adults... Those are two things you have. Even when you're in high school, probably your parents are covering it. But auto insurance, as we get older, becomes more important, and especially homeowners insurance or renter's insurance in some cases. But very, very important. And you're going to talk about how to choose auto and homeowners. And I'm interested in this one because I've always just kind of winged it and learned as I went. So for our listeners out there, there might be some great tips. I know you have some good tips for our listeners. So where do you want to go with this discussion, Ken?

Just a very, very quick summary of what insurance is. So in a way, insurance is sort of like a warranty. Right. Like that's the way I like to think about it. You know, you're not talking about a big screen TV, though. We're talking about your house and your car. Sure. You pay something and then if something breaks, you can possibly get it back. So, you know, it's not an investment account or a savings account. It's just what we would describe in the insurance industry as risk transfer. Sure. Yeah. So when we sit down with people, the most important question, believe it or not, is not what's the cheapest policy I can find. That is how most people shop for it. Yes. It is really important that you take a step back and say, how do I protect my financial life at the lowest reasonable cost? And if you... change your mindset that way. I feel like that sort of changes everything. It goes from a warranty instead of just a monthly bill that you hate with the heat of a thousand suns.

Yeah. A warranty might have a negative connotation for some people out there because maybe they've gotten roped into buying these warranties on electronics or something they buy in the store. They're always trying to sell you an extended warranty. Right. And a lot of times if you do it and then never need it, that leaves a bad taste in your mouth. So you're like next time. Nope, I don't want the extended warranty. Nope, I don't want it. But I've went through life and there are certain things you you have to ensure, like your home and your car. And there are other things where I've I've found the warranty is worth it. Like on when I buy my phone, my cell phone. I have an iPhone. Right. And Apple has an Apple care extended warranty. And I have used that. My kids have used that many times for broken screens and it's come in real handy. And I think it's more than paid for itself. But but with auto and home, you have to have them, number one.

Yeah, totally agree. And, you know, I personally have had good experiences with warranties over the years, but I agree with you. There's a lot of times where there's a salesperson just pushing something, but... Sure. And that's actually my first tip is it's actually really important who you talk to to get quotes from. So we typically recommend working with an independent agency who can shop multiple carriers. And this is... what I think is important. So obviously you wanna try to get the most coverage for the best price, but also if you call five, 10, 15, 20 different insurance companies looking for prices, in some cases they're pulling your credit, in some cases they're doing a soft pull of your credit, but if you work with an independent agency, they will just pull your credit once and then go out and check it out with all those different places. So depending upon who you're dealing with, when you're making those phone calls, there's a chance you can really beat up your credit in a short period of time, because that's one of the considerations with your credit is how many people are pulling your credit in a short period of time. So if you go on a shopping spree, it could actually hurt you. So that's one tip is using independent. Another tip is ask for discounts. You would be shocked, Tony, how much have you just asked for a discount? You can possibly get it. A lot of times the person who's selling you the insurance is not a fiduciary. They do not have to look out for your best interests. So if you seem like you're a choosy price cognitive shopper and say, hey, can you help me brainstorm? Are there any discounts? Are there any teacher discounts? Are there any veteran discounts? Are there any multi-policy discounts? Sometimes that stuff can really come up big.

Yeah. Well, my wife and I, with our home and auto insurance, we finally, after years, bundled it together and got saved a lot of money by doing that. And I know you hear that on ads. Some companies say if you bundle, you'll save money. But we really did. Because when we got our house, we went through just the mortgage company, the homeowner's insurance through our bank, just recommended, oh, here, we have a guy here inside our bank that did it. And they just kept raising the prices every year, and we were paying exponentially more than we had to be. I had to. And we're getting better coverage for a much lower rate. However, I think so. It is important. We call up. We just have learned to once a year. We call our insurance company until if we see the rates go up, especially we call them and say, hey. We can't pay this. This is too much. We're going to have to shop around. Is there anything you can do? And a lot of times they're like, oh yeah, you, are you still using this? Do you have this? Is this driver still not? And they'll say, you know, do you have good student discounts? If you have kids on your policies, right?

Yes. Those are all great tips. My first bundling experience was when I was right out of college and on my own, I had an auto policy and I had a renter's policy. I was in an apartment at the time. And then I called and asked, hey, how much would it cost for a liability umbrella? And because of the multi-policy bundling discount, I saved so much on my renters and my auto that I actually got the umbrella policy for free and saved even more money.

Wow. Yeah. Really awesome. Yeah. I'm embarrassed to tell you how much extra we were paying before we bundled and moved our homeowners from that current the company we were at. We should have done it a long time ago, but we just kind of people just, oh, yeah, that's it. That must be what it costs. Yeah.

I've run into people that got their homeowners insurance coverage through Costco, like a Costco discount. Oh, they change which companies they work with over time. But then people were bundling. They'd have their auto over here and then their homeowners. Right. And then they didn't reshop it as a group. And then they were shocked how much they were saving.

Oh, yeah. Yeah. You you pretty much have to bundle because there are some companies you get such a good deal. But again, it's not necessarily just about the price. Is that your point? You have to look at a lot of things. Right.

Right. Yeah. So this one really hits home for me because I've had a number of situations that have popped up with both my family and with clients. So when you look at your declaration page, you got to look at the liability coverage. And sometimes we'll see 25, 50 or 50, 100 or 100, 300, especially 100, 300. We see all the time. So a lot of people don't realize that could be wiped out from one ambulance ride. So liability coverage is what protects you if somebody sues you for anything. And most people in Michigan do not sue for only 50,000 or a hundred thousand dollars. They're suing for big bucks, you know, especially if you have money, uh, Attorneys are going to want to take that money as much as possible. So the first number in that equation, the 100, that's how much is covered if one person is suing you. And then the second number, the 300, that's how much protection of multiple people are suing you from one incident. So sometimes people will say, oh, I got $300,000. Well, that's if three people are suing you. But in most cases, it's only one person suing you. So now with $100,000 of coverage, if they sue you for a half a million bucks, you're on the hook for $400,000.

Yikes. Even with insurance. Yeah. So have you seen liability coverage above that? I mean, are there liability policies you can get at higher amounts, I assume?

Yes. Yeah. So we always want to take a look at your overall estate, see what is at risk and make sure that everything's protected. Sure. We do recommend liability umbrella policies. So that is a separate policy that typically starts at a million dollars of coverage. And that can just get tacked on. So that would like, I like to describe a liability umbrella as it's just like a regular umbrella. You know, you take it with you everywhere that you go, except rather than protecting you from the rain, it protects you from lawsuits with an extra million dollars of liability protection. So that shields you from lawsuits.

Oh, wow. Okay. Yeah, I hear umbrella policies, and I'll be honest, insurance is a weaker side for me. I'm pretty good with wealth planning and a lot of tax planning and social security maximization, other things we talk about on the show. But insurance is where... I don't have the knowledge that you have. And umbrella policy, I always get confused, you know, what does that mean? And so that really helps. And I think a lot of people, when you start talking about insurance, typically they, at least in my past, I would just shut it off. I'm like, I don't want to hear about insurance, you know? I got to have what I got to have on my car and house and whatever. Beyond that, please don't talk to me about insurance. And a lot of people think that way, but that can be a costly mistake and you should understand it and take the time. And what's great about you there is like you said, most insurance agents aren't fiduciaries, but you work both on the wealth management and fiduciary side and you can provide insurance and shop them around to various companies. You're not beholding to one company. Right.

Yeah. So just so everyone knows, I'm not an auto and homeowners insurance agent, but my brother is, my brother Jim, who you love dearly. I love Jim. Yeah. So we've got multiple agents in the office, and then we've got multiple brokerages that we work with that we can send people to to shop out with a lot of different companies. So, yeah, we'd be happy to quote out everyone's auto and homeowners insurance for no cost. Just give us a call at 586-226-2100. All right. Well, we should have had Jim on this show for this topic.

Oh, gosh, this would have been a great topic for Jim to come on and talk to us about.

Yeah, we're going to don't don't worry, listeners and viewers. We're going to get Jim on the show soon. We are next few weeks here. We are.

We need some eye candy. Yeah. People looking at you and I, that's not good. We'll get Jim on the show. Then we'll call the show Lookers. Yeah, exactly. Exactly. Okay. So liability is one of the most important things. And a lot of people don't know what that the 25 slash 50, the 50 slash 100, the 100 slash 300. That's important. And that's a clarification I wasn't aware of either. If you're being sued by multiple people, it's the second number.

Another huge one is uninsured motorist. So this one hits home for me and hits for clients. So my aunt was driving down an expressway in Grand Rapids, Michigan, and a drunk driver drove on the wrong side of the road, like went over the barrier and broke both of her legs. And he was a habitual drunk driver. He did not have auto insurance, so he didn't have any assets. There was nothing to take for all of her pain and suffering and surgeries and recovery and time missed from work. So what do you do in that situation? You use uninsured or underinsured motorist. So I see all the time people have, again, $50,000, $100,000, or $100,000, $300,000. So if one drunk driver injures you and you only get $50,000 out of the deal, that's not going to cover a lot. That should be at $250,000, $500,000, or even half a million, just so that if, God forbid, this happens to you, there's some very nice protection there so you can get some money for your pain and suffering.

Yeah. That's another one. I wish I'd had, I don't know if I even had uninsured motorists. I don't think I did. And if I did, it's even worse because I didn't utilize it, but I was rear ended at a stop sitting at a stop sign. I was rear ended by someone who did not have insurance or a driver's license or a valid driver's license. Oh boy. Yeah. And I'm like, well, what do I do? I don't know what to do.

Yeah. Yeah. If you would have called your so you call a police officer. Yep. And then you call your insurance company and say, hey, I'm I'm going to sue you insurance company and get money from my own company. But that's that's the way the process works.

Yeah, that's crazy. So, OK, uninsured motorists. What about property damage?

Yeah, so a lot of people don't think if your car malfunctions or you're trying to dodge an accident, so you start running into someone's property, the property damage clause is sometimes really important. This is another thing where people will skimp on it or make it really low, but if you did some damage, like... You read stories about commercial drivers driving into an embankment or an overpass, and then it costs millions of dollars to fix. Anything that you can possibly do damage with with a car, property damage coverage, is important. We'd recommend at least $100,000 of coverage, if not a quarter million or $500,000, just in case. It's really not expensive. So if you just want to be careful, you can throw that in there.

Yeah, that's smart. Okay, so that's basic. Those are a lot of things we've talked about. Liability, uninsured motorist, property damage. What else do we need to know about auto insurance?

A lot of people don't know the difference of comprehensive versus collision. So collision makes sense, right? It's if you hit a tree or a car or a light post or a pothole or something, but then comprehensive is theft, right? or weather or collisions with an, you know, an animal, a deer or something like that. A lot of people don't realize those are two separate things. Um, so if you have an older car, you could just get by with, um, in Michigan, what we call PLPD, personal liability and property damage. So that's, that's basically just liability coverage in case somebody sues you. Um, It's up to you. Do you want collision? Do you want comprehensive? And do you want or do you just want PLPD? So it's up to everyone on their own budget. But I just feel like it's good to explain what what the coverage is out there for. Because obviously, if you get your car stolen and you don't have comprehensive, you're out of luck.

Yeah, now I get comprehensive includes theft and weather, but I would think animal you have listed here under comprehensive animal collisions, but it's not counted as a collision. It's comprehensive. I would think hitting a deer on the highway would be counted as a collision, but it's not. That's funny. Um, that's interesting to me. Um, so yeah. And I, I, I basically understood that collision is different than comprehensive. They cover different things. They're separate. Um, a lot of people think I used to think this in my early days, I thought, well, if I get comprehensive, that covers everything, collision and everything. It's all within that. That's what comprehensive means. It just means it covers more. Right. It covers theft and weather. But collision is you can have them separately and they cover separate things as well.

Absolutely. Yeah. So if you're trying to save money, you can sort of pick and choose what you want to cover. And sure. Another way to save money is just look at your deductible. The general rule of thumb is the higher your premium, the lower your deductible. So if you've got a great emergency fund, you could consider raising up your deductible a decent amount, especially on your homeowners. Like you don't even really want to make homeowners insurance claims unless you absolutely have to, because they'll they'll beat you up. You know, your homeowners insurance claim, they're most likely going to raise your premium and they might raise it significantly. So why not what we would call self-insure a bit by raising up your deductible? And then if something minor happens, you just pay for it out of pocket.

Right. Right. Yeah. That's interesting. I know that we once a long time ago had my, we'd went grocery shopping and my wife set the bags on our steps and they're carpeted, right? Going up to the, we have an entryway and it goes up, it's a split level. And there was a, I don't know if it was, a bottle of Liquid Plumber or Tide. Oh my gosh. One of the two, it was, I think it was some kind of cleaner like liquid plumber or some kind of really strong cleaner. She set the paper bag down and I go, there's drops. And she'd went out to the car and came back and it had soaked and was running down and just completely was eating into the carpet and stained like four of the steps. And there's a huge spot. Well, they came out. We contacted Cub and told them and took pictures, foods, the place where we got it. And somebody had sliced brought in the bottle and it looked like somebody had sliced into the bottom of the box or something. Right. Or the side of the bottom, toward the bottom, the side of the box, and their insurance. I don't know our homeowners insurance and their insurance. They covered it. And it was attached to all of our living room carpet in the hall. It was one piece. So they replaced all our carpet, basically from the hallway, all the living room and going down the stairs.

Oh, well, that's a good story since we're on the topic of homeowners insurance. So you want to insure for the replacement cost. not the market value. And this is all the time we see people where they're saying, I'm getting a really good deal on my homeowners. I don't want to rock the boat at all. But you got to look at replacement costs rather than market value. And just because construction costs have risen so much, what is the point of having insurance if you can't afford to buy a home after yours burns down, you know, or to rebuild on the spot that you're at? Right. So a lot of people, they'll just get excited because it's so undervalued. And our team is quoting this stuff out. We'll look at old policies and say, like, you're underinsured by $500,000. Like, if you have a fire or a flood, you're only going to get a fraction of it. And I won't bore our listeners with the actual formulas. Oh, yeah. Say... If you're not insuring your home for whatever percentage of the construction costs you're covering, that is proportionally how much your payout is reduced by. So it's not like if you have $500,000 of coverage, you still might only get $300,000 because it's about the ratio. It's not about the dollars. Long story short, just make sure that you have an appropriate replacement cost for for your homeowners insurance policy on what it would cost to actually rebuild your home.

Ah, okay. So that is interesting when it comes to homeowners insurance and renters insurance is also important if people rent and don't own. But what about personal property coverage?

So, you know, this is the question we have to ask ourselves, how much would it cost to replace everything? And it's important to look at your policy and say, is it 50% coverage? Is it 70% coverage? Is it somewhere else? So usually what they'll say is whatever the value of the home is, maybe half of the value of the home is what it would cost to replace all your clothes and electronics and everything valuables, everything else.

You know, so it's worth taking a look at something like that.

But we just always say top tips are take a video of your home for proof that you owned all the stuff. And also double check if you've got expensive jewelry or firearms or art or collectibles. You got to talk to your homeowners insurance agent and see if there's a cap. A lot of times they'll have a policy that says we'll cover three items that are over a thousand dollars or five items that are over a thousand dollars. And if you've got a nice gun collection and they all get warped from the heat of a fire, you might be out of luck. So, again, what's the point of paying for this insurance if it's not going to actually replace the things that you want?

Yeah, yeah, that's a good way to look at it. So what are some other mistakes or things you think we need to know about here before we go?

Yeah, yeah, rounding up here. All the time we run into clients who say, well, my teen driver has not been added to the policy, so this is really nice because I'm saving some money. That is not what you want to do. You want to make sure that you disclose everyone that's a driver, what cars they're driving. I know it might cost more, but if a teen driver is excluded from your policy and then they get into any kind of an accident or get sued, the insurance company is is not going to stand up and say, even though you weren't paying for this, we'll take care of all the problems.

I said no insurance company ever. Right. I mean, yeah, yeah, yeah, exactly.

Well, what else? Just don't, again, we open the show with this. I'll close the show with this. Do not shop just for price. Shop for the coverage.

Yep. There you go. Shop for coverage. And you made the case for coverage and why you need it earlier in the show. That's great. Well, great show. A lot of helpful information. And if people have questions about this, I know your brother, Jim, would be more than happy to talk to them further. Absolutely. He's a wealth of knowledge in this field as well. So, Ken, great show. Let our listeners know how they can get a hold of you.

Give us a call at 586-226-2100 or visit our website, summitfc.net. We'd be happy to quote out any auto or homeowner's insurance. We'd be happy to look at your retirement income plan, 401(k)s. There's a lot going on in the world right now with the Iran conflict. We'd love to talk it over with you, give your portfolio a second set of eyes.

That sounds great. And you're offering a no charge, no obligation consultation as always. Again, what's that number? It's 586-226-2100. That's 586-226-2100. Ken, great show. Listeners and viewers, thanks for tuning in. That does it for today's episode of Money Talks with Summit Financial Consulting, LLC. Thank you for joining us for Money Talks. Don't head into retirement without a strategy that addresses both income and taxes. For more information, please contact Ken Wink at Summit Financial, working with people you trust. Call 586-226-2100 or visit SummitFC.net. Join us again soon for another episode of Money Talks.