Affordable vs. Coverage

A question was posed about the desire to save money, but also have adequate coverage on personal property and belongings.  I have lots of thoughts, and some of them are actually relevant to this topic, I hope.

The balancing act between a quote that includes the coverage you need at the affordability you want is always there.  It comes down to choices like; what deductible can you afford should a loss happen? and what amount of insurance will allow me to rebuy everything that I'll need going forward?
 
Here's a tip, find out the different deductible options for a renter's policy. Typically the lowest option offered would be $250.  From there, the options are typically $500 and $1,000.  (Anything higher than that for a renter's policy will only be covering a catastrophic loss since most everything else will be under the deductible.)  What are the savings per year from one level to the next because you'll want to figure out how many years you'll have to go loss-free to make up additional dollars needed to pay the higher deductible.  From $250 deductible to $500 there is probably a 10% difference in premium.  That could be anywhere from $30 - $60 in savings. You have $250 dollars to make up should you have a loss, so that's five years, at least to make up the difference.
 
The next question you should ask youself is whether or not you can afford a $500 or $1,000 deductible should you have a loss?  That can be quite a bit of "up-front" cash for some people.  It may be worth spending a little extra per month to avoid the big hit at the time of loss.
 
My advice has always been to take the highest deductible you can afford and realize the premium savings along the way.  Losses are infrequent enough that most people can go years without having a renter's or homeowner's claim.
 
As for the amount of insurance to buy, you can reduce premiums by lowering limits, but the cost benefit analysis of lowering your amounts isn't great.  On the liability side, I would never go below $300,000.  It's just not worth it and even $300,000 to $500,000 isn't what it used to be.  The cost savings are minimal between these levels anyway.  The property side is a bit different.  Most companies charge a minimum amount of premium regardless of personal property coverage limits which is typically $25,000.  If you need more than that, do a simple checklist of what in each room of your apartment or condo would absolutely need to be replaced and add it all up.
 
Insurance premiums and savings are all about risk. How much are you willing to lose in the event of a claim? The more risk you place on yourself, the less is on the insurance carrier and the less expensive the insurance will be. Ultimately the decision is up to you.  An insurance agent/broker, like myself, can work with you to help guide you along the way and should play a role, even if they aren't the final decision makers.
 
If you have any other questions give me a call, or click the new "Ask a Question" tab at the top of the page. I will respond to questions that come to me via email on the blog because if you have a question, there are sure to be others wondering the same thing.
 
Cheers.