Personal Finance

Does a little insurance really go a long way?

For some reason, I love talking insurance. OK, full disclosure: My husband is an insurance man, so I’m pretty close to the topic. Yes, you need insurance and not just for your car (although the car insurance you have is worth evaluating on a regular basis). And you probably need more coverage than you think.

A lot of people believe anything beyond the bare minimum coverage is unnecessary. Many mistakenly believe their policy will just magically take care of everything should it be needed. They don’t realize what can happen when a huge gap exists between, say, what your policy gives you for a totaled car and what it costs to buy a new one (including sales and property tax).

Today, I want to discuss protecting your largest purchases (i.e. home and vehicle) and the questions you should ask an insurance provider to ensure you aren’t underinsured.

We’ll leave health, dental, life and disability insurance for another week.

What is my coverage for property damage and bodily injury?

Say you have an auto policy with only state minimum requirements. You’re covered for property damage up to $10,000 and bodily injury per person up to $25,000 or $50,000 per accident. Think how many cars you drove by this morning that are worth more than 10 grand. Now think about a recent hospital bill. Would $25,000 or $50,000 cover it? I’ve heard horrible stories of wages being garnished and homes being lost, all because people were underinsured.



coverage to be better protected in today’s world should be closer to $100,000 bodily injury, $300,000 per accident and $100,000 property damage (abbreviated 100/300/100). This provides coverage if you hit the new Mercedes C class or up to 100 grand in hospital bills for a person or $300,000 per accident. Do I have “replacement cost” for personal property and the dwelling on my homeowner’s policy?

Say a tree falls and destroys your backyard deck. If you only have “actual value” coverage, you may receive only half of what it costs to build a new deck. With “replacement cost” protection, however, you can rebuild for only the cost of your deductible.

Do I have water back-up coverage?

For a small upcharge, you can usually add this to a homeowner’s policy, which protects you in case a sump pump fails and soaks your finished basement. It will also protect you in case one of our summer storms results in back-up water, which knowing our recent weather is very possible. Without this “rider” on a policy, you’re on your own for the refinish.

What about jewelry, musical instruments, firearms, antiques or artwork?

Homeowner’s policies have a maximum payout on any such items without appraisals. Because these often increase in value each year, ask your agent if the total value of yours falls within the max. If not, get appraisals and some additional coverage. You can do this with a renter’s policy, too.

When I was growing up, my parents were frugal beyond belief. For instance, they always bought the cheapest shampoos and I hated it. But I’m grateful for their pennywise ways, and that some of that frugality rubbed off on me. I have no idea what sort of coverage levels they had on their insurance polices.