5 insurance must-haves

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The insurance landscape is shifting. The days of relying on policies to cover small-ticket items like parking lot fender dings or water damage to attic relics are over. Gone too, for the most part, is the era when patients could expect full medical coverage through insurance. Except for those in a group health insurance plan, claim filers often receive jumps in premiums or notifications of dropped coverage.

If insurance has changed into a tool you hesitate to use, why should you bother? Three reasons: you, your family and everything you own. It’s a means to protect yourself against catastrophic damage to your finances. Most people will need all of these five insurance policies at some time in their lives.

Do you need auto insurance?
Do you need it?
How much coverage?
Which policy?
Do you need it?
Even though all states have mandatory auto insurance laws, many drivers underinsure inadvertently. Often the required amount of insurance hasn’t been changed in years and is too low.

“It’s a quandary for the states,” says Olson, “because if they require high limits people might not be able to afford it.”

How much coverage?
One of the biggest problems, according to Olson, is liability limits that are too low. The standard 20/40/15 policies have been in place too long — this coverage provides $20,000 in bodily injury per person or $40,000 per accident and $15,000 for property damage. If you run a red light and cause someone permanent brain damage you would be responsible for much more than that in hospital costs alone, not to mention lost wages, pain and suffering.

Raising your level of liability coverage only costs incrementally more. You could bump up coverage by 10 times the amount and it wouldn’t even cost twice as much. This could be well worth the investment. “You want insurance for big expenses,” Olson says. “Your car has a maximum value. Your legal liability has no maximum limit.”

Check out auto insurance rates with Bankrate’s car insurance rate tool.

Which policy?
If you drive an older model car you may be able to scale down your insurance. Check the Kelly Blue Book value to see if it’s worth carrying collision protection. However, if you’re wealthy, buy an umbrella policy as well.

The example Olson draws is if you hit someone and the court awards the injured $800,000 but you only have a $300,000 limit on your auto insurance, normally you’d be out $500,000. But if you have a $1 million umbrella policy, you would be covered. The umbrella coverage might only cost you $200 and it would cover your house too, in case your dog got out and bit someone.

“You should procure your auto, home and umbrella all from the same company,” Olson advises. “Not only would you get a discount, there’s less chance of acrimonious disagreements between providers, with the insured caught in the middle.”

Olson suggests looking at “medical payment” or “personal injury protection” to arm yourself against the underinsured. And he highly recommends arming yourself with uninsured motorist coverage.

Make sure you are getting all of the premium reduction credits, often given for safety features on cars such as vehicle airbags, antitheft devices and antilock brakes, as well as same-insurer discounts for home and car, multi-car discounts, longevity/loyalty discounts, claims-free discount, etc. Availability of these discounts varies by insurer and state. Teenagers make insurance a lot more expensive, particularly young males, who on average have more accidents that tend to be more severe. So check out driver’s education or good-student discounts.