How much insurance do I need?

How Much Coverage is Enough – Auto

If you own a car, auto insurance is not just an option—it is a legal necessity. And you wouldn't want it any other way. If you are involved in an accident or have your car stolen, owning the right kind of auto insurance will help ease a difficult situation.

The following are types of coverages that will be incorporated into your policy. Which combination you need depends on your specific situation:

Liability pays for the damage that you cause others, if your car is involved in an auto accident. If additional personal liability insurance is necessary, (in the case that you have vast financial resources above and beyond what a liability policy would protect), you may need Personal Umbrella insurance.

Collision covers the damage to your car that is caused by someone else in the event of an accident. This type of coverage is necessary dependent on the value of the car.

Comprehensive coverage pays for your car if it is stolen or damaged in some way other than in a collision. Medical coverage provides for medical expenses to you and your passengers that are the result of an accident. The way you use your car may make a difference in the amount of medical coverage you need. For example, we might suggest more coverage for a parent who regularly takes a carload of kids to soccer practice than for a driver who expects to drive mostly alone.

How Much Coverage is Enough - Home

The cost to rebuild your home is its replacement value. This can be very different from the estimated market value or actual purchase price. In most cases, it costs more to rebuild the home you own than to buy a new one. This is an important insight into why your Dwelling limit is so important.

In deciding how much homeowners insurance is enough, Tom will work with you to estimate the replacement cost for your home and adjust your policy limits from time to time as needed.

It is critical that you provide us with accurate, updated information about your home and contents. If your dwelling limit accurately reflects your home's true replacement cost, some companies will pay more than the limit if a covered loss is greater than the limit on your policy.

Once a review of your home and possessions indicates you are properly insured, it's a good idea to reexamine your coverages and limits from time to time, especially whenever you make additions or improvements.

Be Sure You Have Enough Insurance

Here are some steps you can take to reduce the risk of being dangerously underinsured:

Call Tom if you have questions or concerns about the limits in your policy. Ask him to show you how those amounts were calculated. This will also give you an opportunity to make us aware of any overlooked information.

Read your policy. Certain property, such as jewelry, and certain perils, such as earthquake or flood, is better insured separately. Knowing what is covered and for how much will help you insure properly. If there is anything in your policy you don't understand, contact Tom and ask for an explanation.

At each annual renewal of your policy, you receive a new Policy Declarations page showing limits of coverage and optional coverages. Review this information. If you do any significant remodeling or add a family room, extra bedroom or bathroom, etc., make sure to tell Tom, so he can adjust your coverage limits to cover the improvements.

Consider carefully whether your policy provides all the protection you need. Does it provide coverage for extra costs resulting from building code changes? Does it automatically increase coverage limits annually to keep pace with inflation? Does it provide additional funds if the cost of rebuilding your home exceeds the policy limits?

Does your policy include replacement cost coverage for contents (clothing, furniture, appliances, and other personal property inside your home)? If not, you can add it by endorsement. The cost is small, the protection valuable. Replacement Cost Coverage pays for losses to your possessions at the cost of brand new items. Without this option, a covered loss to your personal possessions would be depreciated by their age and condition, reducing the size of your claim settlement.

If you have an art collection, antique furniture, jewelry, or other valuable possessions, talk to Tom about supplemental coverages, such as fine arts or scheduled property endorsements, to adequately protect your investment in these items. The cost is modest for the extra protection, and often the deductible is waived.

Consider whether you should have more coverage for personal property (contents) than your policy provides. Personal property coverage is usually 70% of the coverage limit for the structure. Your limit may be lower than 70%. Supplemental protection is available for a small additional premium. Prepare an inventory of personal property items, update it periodically, and keep it in a safe place outside your home, such as a safe deposit box at your bank. It will save you hours of time trying to list everything damaged or destroyed if you need to make a claim. It will also help ensure you don't forget some items. We can advise you on ways to simplify the job of preparing a personal property inventory such as videotaping each room with descriptive information on the sound track.

Besides making sure you have enough protection to cover possible damage to your own home and contents, you should also evaluate your exposure to liability risks. These result from damage to the property of another, or injury to a person, not a member of your household, for which you can be responsible. In recent years it's become common for homeowners to be sued for injuries or damages to others, even when there is no evidence of negligence by the homeowner. The reality today is if you have any appreciable assets, you are exposed to the risk of being sued. Even if you ultimately prevail in court, your legal fees and the months or years of worry and uncertainty can be a terrible burden on you and your family.

The Personal Liability coverage provided by your Homeowners Policy usually provides a limit of $100,000 or $300,000. We recommend increasing this protection with a personal umbrella policy. Not only will it increase your personal liability, but also your auto liability. Limits are available from $1 million to $10 million and beyond. The cost of this coverage is usually very reasonable.

How Much Coverage is Enough - Life

If someone will suffer financially if you die, chances are, you need life insurance. What type and how much life insurance you need is dependant on your personal and financial needs. Life insurance not only takes care of family at the death of a policy holder, there are several types of policies that can provide policy holders benefits while they are living!

Tom will assist you in determining what type and how much life insurance is appropriate for you.

You should consider life insurance if you have any of the following:

• a spouse
• dependent children
• a business
• someone who depends on you for support (an elderly parent or handicapped person)
• retirement savings that are not large enough to cover your family through retirement
• a sizable estate

Other important benefits of life insurance (other than providing for loved ones in case of a loss):

• The cash value earned and borrowed from a permanent life insurance policy can be used to help with large expenses, such as a college education or down payment on a home.
• The growth of a cash-value policy is tax-deferred -- you do not pay taxes on the cash value accumulation until you withdraw funds from the policy.
• Life insurance can be used to pay estate taxes

As Your Life Changes, So Should Your Policy

As new financial needs arise in your life, your life insurance coverage may need to change as well to adapt to cover your new needs. Such examples include:

• recent marriage
• new child or grandchild
• deteriorated health of yourself or your spouse
• a recent purchase of a new home
• planning for a child or grandchild's education
• concern about retirement income
• recent home refinance (last six months)
• you or your spouse recently received an inheritance

Additional information can be found at

The Life and Health Insurance Foundation for Education (LIFE)

LIFE is a non-profit organization designed to address the public's growing need for information and education on life, health, and disability insurance.

www.life-line.org

Insurance Information Institute

A non-profit group sponsored by the insurance industry to provide general information about insurance. This is an excellent resource for unbiased information. Order publications at the web site.

www.iii.org

Feel free to call or email Tom for more important insurance information.

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