This might be the toughest question I have to answer when it comes to insuring a home. Why? Because the reality is that at the time you start a policy, unless you just built the home, you really have no definite way of knowing this number. So here is my take; When in doubt always make sure you feel comfortable. Here are some things to do;
1. As an agent I use any public data I can get my hands on. This is combined with what you tell me then I input it into the company provided home replacement cost estimator. Out comes your homes replacement cost and per company policy you have to have this as your minimum level of coverage.
Each year my family packs up and heads to Cape May New Jersey for a week of fun with my in-laws, my wife’s brother and sister as well as their families. Now this is something we have been doing for years and have not really given any thought to insuring. See your homeowners policy has some coverage for you as does your umbrella policy if you have one. Also, realistically you cannot insure everything in your life sometimes you just have to live and deal with what may come up.
How do you know? How do you know that the liability coverage you took because your agent said it is plenty really is plenty? YOU DO NOT neither do I. There are some silly sayings out there “rule of thumb”, “it’s what most people take”, “You don’t need more” REALLY?
When you hear this please hand your agent a dollar and ask them to buy you a lotto ticket. Because they can apparently predict the future. Most agents cannot predict the future, I am one of them. Instead, I try and make some logical decisions and use your dollars to purchase as much coverage as we can. An example;
That’s right you can get more coverage for less money. Now the problem with this is most of the companies push low rates mostly give you low coverage. Then when you shop you are actually not able to get better rates because you got duped into a low rate by taking low coverage.
A solidly caffeinated(made up word) drink from your local coffee shop is sometimes the same price as one month’s worth of much better coverage. That’s right for $3-$6 you can purchase $100,000 or more in coverage. So is the company that brings you in on lower rates even interested in protecting you and your family or just providing you a low rate for insurance.
Step 1.Remember why you have insurance, it is not for the little annoying thing that you can comfortably afford to fix. It is for the event that you need help paying to fix. Filing a claim because “I pay for insurance why shouldn’t I use it…” can get you in to trouble. **What is trouble? Trouble is having rates on the higher side of the market for at least three years**
Why not? When was the last time you changed companies? When was the last time you actually made your agent or broker actually earn their commission. Make them actually shop around, we are in a competitive market here in New York why not take advantage of it.
How do you start?
Pretty simple, two steps;
Start with a “baseline” of coverage that you are comfortable with having in place.
Talk to 3-5 companies to see where your rate compares.
That’s it. Worst case scenario you feel really good about your rate. Best case you save some money and maybe find a better agent.
I am aware of no way to ever say someone has too much insurance, the fact is you just never know. There is just one circumstance you can say you may be overinsured when it comes to a home. An insurance company is insuring the cost to rebuild your home. They are not covering your tax assessment nor are they covering the market value of the home or even what you think your home is worth.
2003 Volkswagen Jetta GL: So according to KBB.com the Good Trade-in Value is $1700 and Fair is $1125 so maybe I am around $1500. Now private party says $3225 and Fair is $2525, let’s keep being reasonable and say $2875 as the private party we won’t use retail because this car is not in excellent condition.
How about Edmunds? A little different process here comes up with $2734 as a trade in $3752 as a private party, same thing here retail seems a bit high.
So KBB average with my adjustments is $2187.50 and Edmunds is $3243 that is about a $1000 difference.