Getting the right amount of insurance coverage can be tricky. If you buy too much, you may be wasting money. But, buying too little may mean you won’t have adequate coverage if disaster strikes. Like most people, you buy what you think you can afford and hope for the best. If you need to evaluate your coverage, take a look at the signs of being underinsured or overinsured. You may need to make changes to your policy soon.
Signs of Being Underinsured
If you think you are underinsured, don’t worry. Most people are underinsured, for several reasons. Some want to spend as little as they can on something they may not use. Others are trying to save for retirement or another long-term goal. Whatever the reasons, being underinsured can be more costly in the long run.
Let’s look at the signs of being underinsured, and explore how you can remedy the situation.
➙ You only have group insurance
When it comes to life or disability insurance, group policies are great, but you may be underinsured. To make sure you have adequate coverage, it’s a good idea to also own a personal life or disability policy as well. A personal policy will provide a level of coverage not offered by group coverage.
➙ You haven’t reviewed your policy recently
How long has it been since you reviewed your insurance policies? Your needs change over time, so your policy may be outdated. For instance, have you recently had kids, bought a new car, or made home improvements? These changes could mean that you are underinsured. Take time to review your policy, or talk with an insurance agent to get expert advice on adding more coverage.
➙ Your deductible is too high
High deductibles are helpful when it comes to claims. It means less money you have to pay out of pocket every month. But, it also means you’ll have to pay more upfront before the benefits kick in. If your deductible is high on a home or auto policy, you may be underinsured. This is a good reason to contact your insurance agent and talk about updating your coverage.
Signs You May be Overinsured
Being overinsured means you’re paying for more coverage than the item or risk you are insuring. As your life progresses through stages, the amount of insurance you need can decrease based on several factors. The most common reason for being overinsured is the failure to review the policy often and adjust the coverage amounts.
For example, if your auto policy provides $100,000 coverage for a car with a market value of $36,000, you are overinsured. If your home has a market value of $280,000 but is insured for $300,000, it is overinsured.
➙ You have fewer debts or other obligations
This relates mostly to life or disability insurance. If you have paid off your house and other debts, or your kids are grown and on their own, you may not need as much insurance.
➙ Your auto insurance covers more than the car is worth
You are not legally required to carry comprehensive or collision insurance on a car that is paid off. Comprehensive covers damages caused by events other than collisions. For instance, if a tree falls on the car or it’s vandalized, you’re covered. Collision pays for damages to your vehicle caused by you or an uninsured driver. These types of coverages are only required by a lender and are not mandated by law. Also, this coverage is unnecessary if the car is not worth repairing.
➙ Your homeowners replacement cost is overestimated
Homeowners insurance covers how much it will cost to rebuild your home if it’s destroyed by fire or another covered event. If the actual cost to rebuild is less than what the policy provides, you may be overinsured. If you have replacement cost insurance, take inventory of your possessions and determine how much it would cost to replace the items. Next, compare the amount to what is stated in your homeowners policy.
How Much Insurance Do I Need?
How much insurance do I need? The answer is different for everyone. Having the right amount of insurance can help you save money that could be spent on other things. Would you like to save up for a memorable vacation? Or, have you got your eye on a snazzy new car? You can save more if you aren’t paying too much for insurance. So, talk to your agent about your policies to make sure you aren’t overpaying.
How much insurance you need is determined by several factor, including:
Auto Insurance: You’re required to buy the state’s minimum car insurance. But, these minimums may be inadequate. On average, the state minimum is considered okay, whereas $100,000 per person for bodily injury liability is considered good. However, $250,000 is even better.
For auto insurance, you need to buy enough liability to cover what you’d lose in a lawsuit against you after an accident. Also, you can get extra liability by purchasing an umbrella insurance policy.
Homeowners Insurance: The price you paid or owe on your home may be more or less than the cost to rebuild. If your coverage is based on your mortgage, it could be inadequate.
You’ll also want to consider the value of your personal possessions within the home. It’s a good idea to have a detailed inventory of these items in the event of a loss.
Other factors to consider for homeowners insurance are additional living expenses and liability coverage. The additional living expenses feature will pay for temporary housing if our home is uninhabitable after a fire or other event. Liability insurance covers you against lawsuits for bodily injuries sustained by other people while on your property.
Get the Right Insurance Coverage With Sandifer Insurance Agency
Before you purchase home and auto or other types of insurance, talk to us at Sandifer Insurance Agency. If you have specific coverage needs, we can find an affordable premium for you.
As a family-owned business, Sandifer takes pride in continuing the high standards in customer service established by our founder 40 years ago.
We won’t just sell you an insurance policy, we’ll provide the peace of mind that comes from working with trusted professionals. Contact us at our Cheraw, SC location today and let’s talk about your insurance needs.
Sources:
iii.org/ – How Much Homeowners Insurance Do I Need?
usnews.com/ – How Much Car Insurance Do I Need?