Having the proper amount and types of insurance coverage is imperative in order to prevent costly disasters and misfortunes from ruining everything that you and your family have worked so hard to build. However, though most people understand that good insurance coverage is important, many people may still be confused or misinformed about how much insurance is needed. This brief article will highlight several of the most important things to consider when determining your insurance coverage needs.
Consider The Type Of Insurance
It stands to reason that the first place to start when trying to determine your required coverage amount is with the specific type of insurance you are examining. Naturally the needed amounts should reflect the item being covered. Different types of common insurance coverages include:
- Life insurance
- Health insurance
- Home Insurance
- Car Insurance
- Other asset/liability insurance
Depending on your circumstances, you may have a minimum insurance requirement. For example auto insurance is mandatory and new healthcare laws are also requiring this type of insurance. It is important to be aware of insurance laws and any minimum requirements. However, just because an amount or type is the minimum, that doesn’t necessarily mean that it will be enough to fully protect you. There are other things you must consider.
Consider Your Risks Factors
Naturally a big factor in determining how much insurance is needed is the degree of risk that you are exposed to. Your risk will be influenced by such things as your age, lifestyle, occupation, health, geographic area, and much more. However, not only is your risk defined in terms of potential threats, it also refers to the potential costliness of an incident. Obviously if your car is completely destroyed, it won’t be as expensive as if your house is completely destroyed.
Consider How the Potential Loss Would Impact Your Life
Another good way to determine how thoroughly you need to insure something is to consider how your life would be impacted in the event that something did happen. If one type of loss would be a devastating blow, whereas another would merely be a costly inconvenience, then obviously the more serious potential loss will require more complete insurance coverage than the lesser potential loss. When considering things like life insurance, it is important to factor in how your death or the death of your spouse, would impact the family, particularly dependents, financially. Thus a young couple with dependent kids would need more life insurance than an older couple with no one depending on them financially.
Consider Your Personal Budget
Ideally of course, the cost of insurance should not prevent you from having the coverage you need. However, the fact is that one’s personal budget does go along way toward determining how much insurance that person can get. For this reason you need to carefully calculate how the added insurance premiums will factor into your budget and whether or not this is an expense that you can easily shoulder or whether it might become a burden. If the insurance coverage does constitute a greater cost than your budget can absorb, then you will need to look at options such as reducing coverage, or perhaps cutting expenses in other areas so that the essential insurance can be afforded.
One of the best resources available to you, however, is your own insurance agent. Ideally your insurance agent should be a trusted individual with whom you can discuss your concerns openly and honestly. The insurance agent should be someone who will make recommendations that are based on your best interest and which take into account your unique circumstances. Here at Beaty Insurance we are always happy to assist our clients in this way.