The Key to the Insurance Mystery – How Do You Match Up?


If I could have a quarter for each time someone said ‘It is just insurance’ or “just give me the minimum,” I’d be a very rich person.

Asking the customer how much they would like to pay each month is one of the biggest errors I have seen in insurance companies. We will keep the number low as we don’t want to have to pay more out of our own pockets. This creates a false impression with clients that they have more coverage than they actually have. It is better to ask “How much coverage do I need?” Then determine the cost and adjust accordingly.

Because of my passion for educating people about the importance of insurance, I entered the insurance industry. Consider Health Insurance. While everyone knows how important it is to have health coverage, not all people can afford it. However, there are alternatives for those who don’t have insurance. But when it comes to Auto/Home/Life/Business insurance, there are no alternatives if you do not have insurance, or even enough coverage. You could end up with thousands of dollars in debt if you don’t have enough insurance.

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It is a common misconception that you are responsible only for the limits of your insurance. This is false. It is your right to spend any amount that you think is beyond what your insurance covers. Your home, auto, income, etc. Now, you are at risk. Did you ever stop and think about the amount of coverage you have vs. what you own? Do you feel ready to take on more liability? That’s great! If you are not, it is worth reassessing the coverage you have. You should seriously consider contacting another agent if an Insurance Agent states that you only require basic/minimum coverage.

If you are able to understand the basics of insurance, it can be your friend. Insurance is about risk transfer. You want your auto policy, if you are involved in an accident, to pay the damages. This applies to your home, life, and business.

Let’s say, for instance, that you have minimum liability (in CA it’s 15/30/5) on the car. A minor accident results in you rear-ending a Toyota Camry. You are not injured and there is only $1000 in damage to their vehicle and $1000 on yours. Are you covered? You are covered for property damage up to $5000 after you pay your deductible.

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Let’s say you hit a BMW, and both cars suffer property damage exceeding $30,000. The BMW driver ends up in the hospital with approximately $20,000. $20,000. You’re still covered, right. It’s sort of. Your deductible will be paid, and your insurance will cover $15,000 for medical expenses and $5000 for property damage. Now you will be responsible for $4000+ to pay the medical bills, and $20,000 for property damage. You also have to consider the legal fees that may be incurred if you are sued. You could avoid all this if your liability coverage was higher (minimum 100/300/50), for a fraction of the annual cost. This will be covered in a separate article.

The same strategy applies to all types of insurance. So, how can I decide the right amount of coverage? It is really easy. First, I recommend speaking with an Insurance Agent to help you assess your needs. First, evaluate the types of insurance that you require to determine what type you need. Second, assess your assets to determine what your net worth is. This will tell you how much total liability you need. The third step is to insure the maximum amount of liability you can afford. The umbrella plan can be used to cover gaps between your auto/home/business insurance coverage and your assets.

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Some people don’t have the budget to cover the coverage they need. You can increase deductibles and drop optional coverages until your policy is more within your budget. This will allow you to keep coverage at an acceptable level. When all other options have exhausted, lowering liability should be considered a last resort.