Tuesday, Sep 19, 2023

How Much Insurance Do I Need? A Guide for Individuals

Insurance advertising presents a range of deals and rates for your car, your life insurance, and more. Those ads are helpful in terms of showing who offers what types of insurance, but advertising can’t help you make smart decisions about what coverage to buy and how much coverage to buy.

But, advertising is not a reliable guide for deciding how much life insurance, car insurance, or homeowner’s insurance you need to carry. Before you select an insurance company in Peoria AZ take a few minutes to consider how much of each insurance coverage makes sense for you and your family.

Life Insurance

Several factors determine how much life insurance a person should buy. An acronym, DIME, summarizes the variables you need to think about. An old rule of thumb is that you should multiply your income by 10 to figure out how much life insurance to buy. If your income before taxes is $60,000 a year, then you need $600,000. This is a ballpark figure, which may not be enough to cover final expenses, college for your kids, and certain debts.

Auto Insurance

For auto insurance, you need to carry more than the state minimum. The minimum legal coverage can easily leave you massive bills after a serious accident. You can find yourself forced to pay medical bills that aren’t covered by insurance. To avoid the risk of a major financial loss, buy liability coverage equal to your net worth, which is the value of your assets minus the value of debts. If you have $400,000 in assets and owe $100,000 then you want at least $300,000 in bodily injury liability coverage.

Homeowners Insurance

If you are financing a home purchase you will probably have to buy homeowners insurance, which means most Americans have to have it. Don’t just buy the minimum that the lender requires. As a general rule, you want to determine the cost of rebuilding that home and buy that amount of insurance.