Too Much? Too Little?
Right-Size Your Insurance
Cancelling an insurance policy or two may seem like a good way to enjoy short-term relief from a tight household budget. But it could cost you a fortune in the long run.
Maintain Your Safety Net
Many consumers are right-sizing their homeowner's, auto and life policies – finding ways to reduce costs and still maintain an adequate safety net. Nearly 30% of respondents in a recent Insurance Research Council survey reported shopping for lower rates when they normally would not have, and 15% said they had increased deductibles or reduced their amount of coverage.*
The size of your safety net should be relative to your circumstances. Right-sizing your safety net to match your circumstances may help you save money.
Life insurance is a must if you have dependents. One rule of thumb suggests you need coverage for five to seven times your annual take-home pay. But your needs may be less depending on other financial safety nets you might have, such as a pension/401(k), savings or other assets.
State laws vary on homeowner's insurance requirements. But if you have a mortgage, your lender probably requires you to insure your outstanding balance, at a minimum. Beyond the house itself, your policy may also cover your belongings and even temporary living expenses. You can decide how much those things are worth to you, but another part of the homeowner's policy may be priceless: liability. This covers lawsuits for bodily injury or property damage caused by anyone in your household (and sometimes pets). Liability also typically covers the cost of defending you in court and damages a court rules against you.
Auto insurance is required by law if you are an active driver. Getting caught driving without it could result in spending several times more on fines and legal fees than the money you'd save from cancelling your policy. Additionally, insurers regard those who drive without auto insurance as high-risk drivers, which means you may pay higher premiums when you try to buy it in the future.