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People have the wrong idea about how to buy insurance. They buy it in parts – a bit of home insurance today, some car insurance tomorrow, life insurance when fear strikes them and so on. They don't think about how much to buy, either – they get too much of one and too little of another. When the time comes to put in a large claim, their insurance fails them. Knowing how to buy insurance is an important part of any personal finance plan. Use these tips and fix your insurance situation this year. How to buy insurance for your car Most car owners are inadequately insured – only for $100,000 each car occupant. This amount may be inadequate for one’s medical bills alone, leave alone potential lawsuits. With 5 occupants in the car, these medical bills alone could run to $500,000. Car owners should be insured for a minimum of $1 million to cover every eventuality. It's sad that many people opt for inadequate coverage for fear of a large premium. It costs little in reality. You should call your insurance agent/company if your liability limits are unrealistically low. About one out of five drivers have no insurance. If you are in an accident, there is a chance that the other party will have nothing. Raising your uninsured motorist coverage, then, could make sense. Make room in your budget for these premium rises. Stop paying for comprehensive or collision coverage of your oldest car that you can replace on your own. Put money aside in a fund each month, instead. You could apply the lesson learned to other areas of insurance as well. Self-insuring is a good idea for small losses of every kind. Raise the liability limits on your boat, snowmobile, home and anything else. The lawsuit could appear from anywhere and you need adequate coverage all around. Homeowners insurance Katrina and Sandy are only two well-recognized names. We see many storms each year. A good homeowners insurance policy is essential protection against a storm or a fire. Flood insurance is important too, as Sandy victims found out. Standard homeowners insurance policies don't include flooding damage, though. Often, you can't even buy separate flooding insurance for extra payment. Look at the government's FloodSmart website for guidance. These policies cover for property damage and accept liability for all occupants and guests. They don't cover for people who arrive on business, though. If you telecommute, run a pottery class or freelance, your homeowners insurance policy will need updating with an incidental occupancy endorsement. If you work from home and have a messenger deliver documents from the company, your homeowners insurance won't cover any injury-related lawsuits from him without the endorsement. This costs under $50 a year. Make sure that you buy insurance worth at least $1 million for liabilities. It costs less than $250 a year – a tremendous value. Insuring your life The death of a parent is crushing to a child. It can be unbearable if there are financial complications as well. Why only buy life insurance for your family and not for yourself? Personal-finance experts suggest that buying insurance worth four times the yearly income of each parent could be adequate for a family of four. Buy term financial insurance if you are a small, young family. Remember to lock the price in for the next 25 years. The surviving parent could need additional money to hire a nanny, for psychological services for the children (to get over the loss) and so on. Many employers offer group life insurance. Their rates are higher than market rate, though. Sam Jones the author of this article recommends you visit the uSwitch home insurance website they even provide student house insurance comparisons.
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