You are building a home, congratulations! You need it insured, so we insure it with a home policy, right? As it turns out, there are many types of policies for a home, and you need to have the proper one in order to be protected.

Builder’s Risk Insurance will cover a structure while it is either being built or renovated. This ensures that if something happens to the structure during construction you are protected and don’t lose everything that you have invested into the property during construction.

What is builders risk insurance?

Let’s talk about Builder’s Risk Insurance, what it is, how it protects you, and why it’s important to you as an insurance consumer. When you are building a new home, or even renovating an existing home/structure, many homeowners wrongly assume that a normal home insurance policy will cover their house while it’s being built or renovated, when in reality, a home under construction or renovation is generally not covered under a standard home insurance policy. You will want to protect the building materials and any existing structure while construction is ongoing. The way to insure the property is with a Builder’s Risk policy which protects your existing home and any improvements you make to it.

Example:  You purchase a home and want to do a full renovation of the home to update it and make customizations. The cost of the home before the renovations was $150,000; after renovations the value will increase to $300,000 after all updates are completed.  

• *Without Builder’s Risk Insurance* Insurance provider declines claim due to the home being vacant and under renovations. 
  
• *With Builder’s Risk Insurance and a deductible of $3,000* Insurance provider pays to rebuild the home up to the agreed value after renovations were to be completed: $297,000 after your deductible.  
  

Why do I need builders risk insurance?

You need Builder’s Risk Insurance to protect you in the event of a loss while a home is being built or renovated. During these times, homes can be especially prone to losses due to the nature of the work being done. If you take out a loan to build or renovate a home, the bank or mortgage company you acquired the loan from will require you to carry a Builder’s Risk policy. This ensures that if the home were to burn to the ground and everything was destroyed that you as the consumer won’t just walk away and abandon the project and not pay back the loan amount. Like any loan, banks want to make sure their investment is protected, and if something happens, they will get their money back. Having a Builder’s Risk policy also ensures that if the worst does happen, you don’t have to gamble with a large investment and you can rest assured that you will be able to recoup your losses. 

Here are a few examples of the types of losses that are generally covered under a Builder’s Risk Policy.  

• Fire 
  

• Lightning 
  
• Wind/Hail 
  
• Explosions 
  
• Theft 
  
• Vandalism 
  

• Acts of God, like Hurricanes (Flood and earthquake is generally excluded) 
  
  
  Why are builder's risk policies expensive?
  
  As I have said in earlier portions of this article, homes that are either under construction or going through major renovations can be prone to major losses. This can be due to several reasons 
  
• Easy access to materials for vandals/thieves 
  
• Wiring issues leading to a house fire or explosion 
  
• Distance to the Coast, or high-risk fire zones 
  
• Any number of things can happen to a home while it is under construction and because of this increased risk, insurance providers will charge a higher premium to cover their risk. 
  
  Let’s take our home that is being fully renovated as an example again. If you are renovating everything in the home including the wiring and plumbing, that means that there will probably not be anyone living in the home, and it will be vacant. Because the home is vacant, local teenagers decide to go into the home while it is being renovated and decide to steal $10,000 worth of lumber that is being used in the renovation. 
  
• *Without Builder’s Risk Insurance* Insurance provider declines claim due to the home being vacant and under renovations. 
  
• *With Builder’s Risk Insurance and a deductible of $3,000* Insurance provider pays $7,000 after your deductible to replace the stolen lumber.  
  
  How can I buy builders risk insurance?
  
  A Builder’s Risk Insurance policy can be purchased similarly to any other personal lines insurance policy. You will need to speak to a licensed agent and have them quote the policy for you. Many insurance carriers offer these types of policies in addition to their standard home insurance policies or dwelling policies. There are also Specialty Carriers that cater specifically to these types of policies and can be more competitive at times. Some builder’s risk policies can be paid on payment plans while others must be paid in full in advance and most are generally non-refundable in the event of a cancellation. This can be carrier specific, and it is always best practice to confirm with your agent/carrier how your specific policy works. 
  
  Resources : What does Builder’s Risk Insurance Cover? 
  
  
  The contents of this article are for informational purposes only. You should not act or refrain from acting based on this information without first consulting a Goosehead licensed agent at [email protected]. We disclaim all liability for actions taken or not taken by you based on the contents of this article which is provided "as is." Goosehead makes no representation that this content is error-free.
  

When planning on taking a vacation you have to plan for so many things. What am I going to pack? Who is going to take care of the pets? Making sure all your vacation plans are laid out nicely can be hard, but what about your auto insurance?

While a majority of people understand the importance of auto insurance when driving in their home state, a lot of my clients really had never stopped to question what happens when driving across state lines. Am I covered? What happens if I cause an accident? What if someone driving from another state hits me? There are countless situations to look at when it comes to how auto insurance works when driving across state lines, but first let’s cover the basics. 

How does my auto insurance protect me across state lines?

When it comes to the question of how your auto insurance protects you when driving across state lines there are a couple main questions I got from clients so let’s take some time to answer them. 

1. Am I Covered? 
   
   The first concern that you may have is simply: “is my insurance going to cover me if I travel to another state?” The beautiful thing about auto insurance is that it follows the vehicles covered on the policy. What that means for you is that if you have a California auto policy and get into an accident in the state of Louisiana your auto insurance coverage will cover you at the same limits it would in your home state. Let’s take a look at an example! 
   
   
2. Example: Tom is taking his family on a road trip to see the Grand Canyon. He currently has a Virginia auto policy with liability limits of $250,000/$500,000/$100,000. While driving through New Mexico he is involved in an accident that causes $65,000 worth of property damage. As stated above, he currently has property damage coverage of $100,000 on his Virginia auto policy, so in this instance his auto insurance would be able to fully cover the accident.  
   
   This is a great example of how carrying quality liability limits will protect you not only in your home state but will also provide protection for you and your family no matter where you may be traveling to!  
   
3. So what is different?
   
   The primary difference in auto insurance when traveling across state lines comes into play if you are currently carrying state minimum limits. This is another reason why I always recommend that my clients carry the highest liability limits that makes financial sense for their family.  With that being said let’s talk about how your auto insurance works if you are traveling across state lines with state minimum liability coverage.  The way I like to explain it to clients is that whenever you cross state lines, your auto insurance will immediately reflect the state minimum liability limits of that state if they are higher. If they are lower, you will maintain your current liability limits that you carry on your auto policy. Let’s take a look at an example! 
   
   Example: If you are traveling across the country and you currently are carrying the state minimum requirements of your home state of Ohio, you will find your policy to have current liability limits of $25000/$50000/$25000. If you are traveling through the state of Texas, your auto insurance limits will automatically increase to the Texas state minimums of $30000/$60000/$25000. If you were to have an accident that caused $27000 in bodily injury damage to one person, your auto insurance would still be able to cover because your limits match the Texas state minimums. 
   
   How does my auto insurance protect me out of the country?
   
   Now that we’ve talked about how your auto insurance works when crossing state lines, let’s take it one step further and take a look at travelling out of the country! As exciting as seeing Big Ben would be, you may wonder what happens if I have an accident while driving around the streets of London: after all, driving in the left lane can be a bit of an adjustment!
   
   Here is the thing about auto insurance outside of the United States. Typically, your current US auto policy will not cover you abroad, but have no fear, there is a solution! Upon arriving at your destination, if you choose to rent a car, the rental car carrier should offer you car insurance for that country for the duration of the trip. That way you don’t have to risk potentially having an accident with no coverage! One alternative option that you may be able to take advantage of is an endorsement on your auto policy that will provide limited coverage for driving in Mexico and Canada. This will vary by insurance carrier so it’s always best to consult your agent to see what options are available.
   
   Let’s wrap it up
   
   In short, I will always recommend that clients always first consult their agent prior to embarking on any journey. When it comes right down to it, if we are taking the appropriate precautions, your insurance will be there to cover you no matter where you are driving in the United States. So go travel, drive wherever your heart desires with the peace of mind that you are protected! 
   
   The contents of this article are for informational purposes only. You should not act or refrain from acting based on this information without first consulting a Goosehead licensed agent at [email protected]. We disclaim all liability for actions taken or not taken by you based on the contents of this article which is provided "as is." Goosehead makes no representation that this content is error-free.
   
   

Gap insurance coverage is an inexpensive endorsement that can be added to auto insurance policies. This Guaranteed Asset Protection may be your saving grace if you have a loan or lease on a new car. Continue reading to decide if this coverage is right for you.

What is Gap Coverage?

If your new car is totaled, Gap Coverage (aka Gap Insurance or Loan/Lease Payoff) pays the difference between the vehicle’s present value and the amount you still owe on the auto loan.  This coverage protects those who may owe more on their new car than it is now worth and is offered by many insurance companies. 

To best understand how this coverage works, let’s explore how vehicles are valued.  Buying a brand-new car is a euphoric experience (love that new car smell) but your car loses much of its value the moment you drive it off the lot.  The value of a new vehicle depreciates by about 20% in the first year of ownership. When assessing the value of a vehicle for an insurance claim, carriers will look at the depreciated value of the vehicle at the time of the loss.  This is called Actual Cash Value.  If your vehicle is totaled, the insurance payout will not be for the amount you originally spent when you purchased it.  Insurance only pays up to the current value of the car the day the claim took place.  This difference in value is what can create a Gap. 



Example: Let’s say you bought a brand-new car for $30,000 and you still owe $25,000 on the loan.  One day, suddenly, your car is gone.  It’s been stolen.  At this point in time, your car has depreciated and is now only worth $22,000.  This depreciated amount is the most the insurance company will pay your lender for the loss of the car.  How do you plan on paying the remaining $3,000 back to the lender?  If you have Gap Coverage included on your auto policy, then “my insurance company” is thankfully your answer.

Ready for the best part?  It may only cost you $20-$40 a year to include this coverage on your auto insurance policy.  You can also purchase Gap Insurance from your dealership, but that’s almost always more expensive.  To be eligible for this coverage with most insurance carriers, you must be the purchaser of a recent model year car (usually 0-2 years old).  You must also have comprehensive and collision coverage on your auto policy.   
 
Do I need Gap Coverage?

You need Gap Coverage if you do, or someday might, owe more on your loan/lease than what the car will be worth after depreciation.  If you’re in the process of buying a new car, this is something to strongly consider.  The tradeoff is $1-$3 a month for thousands of dollars of protection if your car is totaled or stolen (that’s less than 3 scoops of your favorite ice cream).

If you recently bought a new car, it’s worth checking if you’re currently upside-down on your loan (owe more than it’s now worth).  How much do you still owe on your loan?  What is your vehicle’s value today?  If there’s a negative difference, would you rather pay that gap amount out of pocket yourself or have insurance pay it for you?  Insurance Information Institute specifies it’s worth purchasing gap coverage if you: 

• Made less than a 20% down payment 
  

• Financed for 60 months or longer 
  
• Leased the vehicle (carrying gap insurance is generally required for a lease) 
  
• Purchased a vehicle that depreciates faster than the average 
  
• Rolled over negative equity from an old car loan into the new loan 

What if I purchased Gap Coverage through my dealership? 
If you already purchased Gap Coverage through your dealership, no worries!  I’d rather you have coverage than none at all.  However, there’s a fair chance you’re overpaying.  Depending on your contract, you may have an opportunity for a full or partial refund if you replace that coverage by using your auto insurance.  I would recommend first checking with your insurance agent to see if Gap Coverage is something you can add to your auto policy, and at what cost.  If that price is less than what you’re paying the dealership, call the dealership to discuss cancelling the remaining policy since you’ve found comparable coverage for less elsewhere.

Sources

• Kelley Blue Book 
  
• Insurance Information Institute 
  
• nerdwallet  
  

• Bankrate 
  

The contents of this article are for informational purposes only. You should not act or refrain from acting based on this information without first consulting a Goosehead licensed agent at [email protected]. We disclaim all liability for actions taken or not taken by you based on the contents of this article which is provided "as is." Goosehead makes no representation that this content is error-free.