We buy insurance to protect us from life’s unexpected events. Whether it’s insurance for your home, car, business or health, finding the right balance of coverage and cost can sometimes be confusing. But how do you know how much insurance is enough, or if you have too much? A good place to start is to be realistic about the value of what you are insuring, so you know the amount your insurance needs to pay out to replace it. The considerations are different for each type of insurance. So let’s discuss each one separately.
Car Insurance
No one likes to pay for car insurance because it seems like such a large expense relative to a car’s cost. But the majority of the cost of car insurance pays for the liability coverage for you and your passengers. In Michigan, you have a choice of how much personal injury protection (PIP) coverage you choose to pay for. Your decision should be based on the potential impact that an accident would have on you and your family, rather than what your monthly premiums will cost. We recommend that you keep the unlimited PIP option since medical costs from an accident can quickly exceed your coverage limits if you opt for less.
Life insurance
The purpose of life insurance is to help your family manage without you and your income in the event of your death. Many people don’t like to think about life insurance because the possibility of early death seems remote. In fact, it is more likely for people to be under-insured when it comes to life insurance. To find the right balance, think about your earning potential now and in the future. Your life insurance policy should provide for the replacement of that income over the next 20 years, but not substantially more.
Home Insurance
Home insurance can cover a wide variety of situations ranging from natural disasters to fire, theft and many other scenarios. Your home insurance needs to cover the home’s value, especially if you have a mortgage, to avoid being left paying a balance on that mortgage, even if the home is no longer livable. With rising costs of home repairs, increasing climate-related storms and insurance providers reducing available coverage, homeowners are also more likely to be under-insured than the reverse. The key here is to be aware of the risks associated with the location, age and condition of your home. Pay for a homeowners’ policy that covers as many of those risks as possible. For example, if you live in an area prone to basement flooding, make sure your policy covers it.
The question of how much insurance you should have really comes down to a question of knowing the value of what you are insuring. Your insurance should adequately cover the costs of your lifestyle, your health, your home and, business and everything else you value. Having less insurance may mean hardships in the future. However, over-insuring may mean that you are simply paying more than you need to. Call us today to find out more and to discuss all of your car, home, life, health and business insurance needs.
