How Much Coverage Do You Need?
Determining the right amount of insurance coverage can be challenging. Too little leaves you vulnerable, while too much means you’re paying for protection you don’t need. This guide will help you find the sweet spot.
1. Assess Your Assets
Start by calculating your total assets that need protection:
- Home value (for homeowners insurance)
- Vehicle value (for auto insurance)
- Personal belongings worth insuring
- Potential liability risks
2. Consider Your Liabilities
Your coverage should protect against what you could owe others:
- Mortgage balance
- Other debts
- Potential legal judgments
Coverage Calculator
Use this simple formula to estimate your minimum needed coverage:
Total Coverage Needed = (Assets + Liabilities) – Savings
This ensures you have enough to cover both what you own and what you owe.
3. Special Considerations
Certain situations may require additional coverage:
- High-risk occupations or hobbies
- Special collections or valuables
- Home-based businesses
- Rental properties
4. Review Regularly
Your coverage needs change over time. Re-evaluate whenever you:
- Buy a home or car
- Get married or have children
- Experience significant income changes
- Retire