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This really is the million dollar question, isn’t it? Many people ask me, “Eric, how much insurance do I need to buy!?” I tell them “It depends!” The person then sighs and says, “Well, that sure doesn’t help me.”…It’s not supposed to!
To put it bluntly, insurance is designed to protect your assets. How many assets do you own? Would you care to lose all of those assets? This is why people buy insurance in the first place. What is it that you want to protect? Is it a business? A car? Your investment portfolio? Loss of rental income? A cell phone? A building?
Calculating the amount of coverage you need is difficult, if not next to impossible to determine. This is because there are hundreds of changing variables integrated into daily life that affect your assets and how much they actually need to be insured by. This is why you buy liability and/or property insurance in the first place! Construction costs, defense costs, damage estimates, court decisions, city ordinances, inflation, etc. These all affect how much insurance you need to buy.
A helpful tip, is to try and create a worst case scenario for the assets you own, meaning if all of what you own is now taken away from you, how much would that be? Once you have a rough number, run it past your insurance agent. Don’t be afraid to add a ‘buffer’ limit to that amount. Example, if you think $1,250,000 is a solid number, add an extra $250,000 on top of that. Sometimes, adding this extra limit of coverage is not only cheap but can be a life-saver!
Your agent is not supposed to be the decision maker in this process, but rather a helpful guide in pointing you in the right direction. If you feel the need to, get a second or third opinion on the limit, it couldn’t hurt!
Eric Tedmus – CLCS, is owner and CEO of Tedmus Insurance Services, located in Walnut Creek California. He can be reached toll free at (800) 903 5752 or by email at eric@tedmusinsurance.com
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