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Prudent Limits

GENERAL INSURANCE

1) HOMEOWNERS' OR RENTERS' COVERAGE

A. Dwelling -- A general rule of thumb is to insure approximately 75% of market value to maintain full coverage. Your particular situation may be different. Review annually! More than half of all homes are underinsured -- is yours one of these?

B. Personal property -- Homeowner's insurance typically includes a fixed amount for all personal property in the dwelling. Determine if your jewelry, art, silver, collectibles, and other personal property are insured for their actual replacement costs. You may want to have these items appraised and have your insurance agent "schedule" them to ensure full coverage.

C. Comprehensive personal liability, a.k.a. umbrella policy -- Unlimited potential loss. Most auto and homeowner's insurance policies include up to $300,000 of liability. Umbrella policies provide an additional layer of coverage over and above this amount.

D. Other structures -- Typically limited to 10% of home value. Is this sufficient to cover costs of swimming pools, garages, guest houses, etc?

2) AUTOMOBILES

A. Liability -- Many recommend at least $300,000 - which is frequently the base for an umbrella policy.

B. Deductibles -- May be practical to increase deductible amount and reduce premiums. Some companies offer $500 and $1,000 deductibles.

C. Property collision -- On older cars consider dropping this coverage if the cost is not worth the potential benefits.

D. General -- Check to see if your premiums are as low as they can be for your situation. Determine whether you have taken advantage of proper classifications: multi-car discounts, good student discounts, safe driving programs, alarms, air-bags, etc.

3) PERSONAL UMBRELLA COVERAGE -- $1,000,000 OR MORE

In view of the substantial court judgements, this coverage is essential to high-income earners or those with a significant net worth. Two- or three million-dollar policies are available.

4) MEDICAL COVERAGE

A. "Catastrophic" major medical Your insurance policy should include coverage for $1,000,000 or more.

B. Internal policy limits Be sure that any are in line with customary hospital and medical expenses in your area.

C. "Emergency" fund Small deductibles greatly increase premiums. Handling unexpected minor medical bills yourself would allow for a higher deductible and potential savings for you.

D. Stop-loss feature Your plan should have one, providing 100% coverage after some specific threshold of out-of-pocket expenses is reached.

E. Long-Term-Care Consider such a policy. Statistics show 43% of all people over age 65 will enter a nursing home.