Auto Insurance
As an example, if your policy has a $100,000/$300,000 bodily injury coverage limit, this means that the maximum your insurer will pay out per accident is $100,000 per person involved, up to $300,000 for the whole claim. So if you’re at fault, and there are four people who have suffered injuries, and the damage exceeds that $300,000 figure, the fourth person may be out of luck and seek damages from you directly.
Collision coverage is insurance for your own vehicle. If you have a cheap old car you can afford to replace, you may be able to save by skipping this coverage. Don’t skimp on liability coverage though, as this is insurance for another person’s vehicle, if you’re in an accident and their car is damaged.
You may be able to tack on roadside assistance to your auto policy for a little more money, and this can absolutely be worth it. If you break down on the road, the cost of towing your car to a shop can be covered.
Homeowners Insurance
Ideally, you should aim to have at least 80% coverage for your home. So if your home is worth $400,000, you should have at least $320,000 worth of coverage. Your home’s value will change over time, so revisit your coverage annually to ensure you have enough in case the worst happens. Your homeowners insurance includes other components, like liability coverage (in case someone gets hurt on your property).
One important form of coverage to have is flood insurance, which is separate from your regular homeowners insurance and may be required depending on where you live. Confusingly, your regular insurance will likely cover some forms of water damage, but not those from a weather event, such as hurricane-related flooding. But if a pipe bursts in your basement, it may cover the cost of those repairs.
It’s also important to have the right kinds of coverage for the risks you face in your area. For example, if you live in a part of the country prone to tornadoes, be sure you have enough coverage for this. And don’t think you can get by without insurance if you have a condo or just rent your home. Condo insurance will cover the part of your building that you own, and renters insurance is strongly recommended for renters, because your landlord’s homeowners policy won’t pay to replace your belongings in the event of a fire, natural disaster, or a break-in.
Umbrella Insurance
If you have questions about different types of insurance and whether you have enough, get in touch with your CERTIFIED FINANCIAL PLANNER™. They can evaluate your existing coverage and advise you about whether anything needs to be adjusted.