This is one of the more difficult questions for us to answer because, as you can surmise, affordability of the coverage is a key consideration. We can tell you there is no universal or set coverage amount we recommend for auto or home. This is something to be discussed among family members and with a trusted representative (not captive to one insurance carrier).
Having said that, here are some guidelines:
1. Try to take more than the minimum of $15,000/$30,000 in bodily injury automobile liability protection if you own just about anything of value and certainly if you own a home, even with a big mortgage owed on it. If you can swing it, a generally advisable sum would be $100,000/$300,000 in bodily injury liability coverage. If you own multiple homes or high end cars without debt service, an even higher sum would be advisable. If you can afford to take out higher coverage limits, including an umbrella policy, take it. To take an umbrella, you will need to take out bodily injury liabiity insurance coverage limits higher than $100,000/$300,000. Different carriers have different rules in this regard, to allow you to be eligible to buy an umbrella policy. Umbrella policies are excess liability insurance policies that are triggered when the first layer of bodily injury liability coverage has been paid out.
2. If you don’t own a home, you should most definitely take out renter’s insurance to cover your personal property. The landlord’s liability policy will not cover damage to or loss of your personal property. This type of coverage is a great value [bargain!] but it is only available to renters, not owners.
3. If you own a home, your mortgage company will require you to have homeowner’s liability insurance in an amount adequate to rebuild or replace your home. Fair market value is usually not relevant here. It is not a matter of what your home is worth on the open market. The carrier isn’t planning to sell your home in its damaged condition, it is planning on reconstructing it and putting you back in the place you were before the fire or storm. Building labor and materials costs are what matter in determining how much coverage you should have.
The carrier is insuring the risk of having to rebuild or replace your home. Usually, the mortgage company will tell you what coverage you need to have. You will want to insure your home for your equity portion as well—not just in the amount of the mortgage (note) balance which remains.
In this scenario, we would need to advise you individually, as to whether it pays to take out coverage greater than the coverage you must have as a mortgagor (giving a mortgage interest to the mortgagee-bank). It may or may not make sense to insure in an amount above what is remaining on your mortgage (really your note to the mortgagee).
One important and clear tip we can give you: take out medical benefits coverage, commonly called “med-pay,” in the sum of $5,000 if possible. It may be that only $1,000 is available, but take $5,000 if your insurance carrier allows you to.
This coverage is cheap. It pays the medical bills of someone who trips and falls or otherwise gets hurt on your property, regardless of fault. It is smart to buy this coverage. Many people would not have hired us to sue for them had the homeowner taken out this optional med pay coverage, so their medical bills could be paid up to $5,000. It will pay for an injured person’s medical bills so long as they were hurt ON your premises and they don’t have to sue you to trigger this coverage. It is paid without regard to fault. It can appease someone and dissuade them from suing you.