Learning Center

How Much Insurance Do I Need?

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No two people have the same insurance needs. Family size, age, income and career are just some of the factors that go into determining how much and what kind of insurance you need.

To begin thinking about your insurance needs, use American Family's needs analysis tool, which takes into account your age and stage of life to help you visualize what your insurance needs may be.

Having an annual insurance review is a great way to make sure your coverage keeps up with your changes in life. When you're reviewing your insurance coverage, these questions can help you determine what, if any, changes you should consider in your insurance protection.

Have you changed marital status?

If you've recently gotten married, you may be wondering, "How much insurance do I need for my car?" Newlyweds often have two (or more) cars, different amounts of coverage and two different auto insurance companies. By putting all vehicles under one policy, you may qualify for a multi-car discount on your auto insurance.

If you're merging two households, you also need to update your homeowners insurance to reflect the changing total value of your possessions. As two single persons, you likely had two policies to cover two households. Now that your households are blended (and with any valuable additions received as wedding gifts), you only need one policy.

Homeowners insurance also provides liability coverage, which can help provide financial protection against covered liability claims and lawsuits brought by others for accidental bodily injury or damage to their property while in your home, if the damage was caused by your personal activities or by your children or pets (up to the policy limits).

If you've gotten divorced recently, you probably won't be sharing a car with your former spouse and have likely moved to a different residence. If this is the case, you'll need to set up separate auto and homeowners policies.

Have you renovated your home?

If you've made improvements to your home, such as adding a new room or expanding a kitchen or bathroom, you risk being underinsured if you don't report the enhancements to your insurance company. An increase in the value of your home may require increasing your homeowners insurance coverage limits.

Don't overlook structures outside of your home such as a gazebo, yard barn or hot tub. These could also impact your home's value and homeowners insurance needs.

Also keep in mind that if you purchase furniture, exercise equipment, electronics or other home furnishings, you may need to increase the amount of insurance you have on your personal possessions.

As your possessions grow, you may want to create a home inventory. An easy way to do this is with American Family's DreamVault, a free tool for computers and smartphones that allows you to itemize all of your possessions, along with descriptions, values and photos. Once you have a list of everything you own, you'll have a good idea of how much insurance you need.

Insurance tip: Another advantage of using DreamVault is that if you ever have a claim or need to report something stolen, the information is right at your fingertips and accessible any time from your computer or smartphone.

Do you have a home office?

Home office equipment such as computers, fax machines and copy machines are often not covered by home insurance policies; you'll need to obtain separate insurance. Also, if you see clients or customers in your home office, you need to make sure your liability insurance is sufficient for any loss you may be exposed to. Contact your local American Family insurance agent to make sure your home office is properly covered.

Do you have a second home?

If you're searching for a vacation home or a second home you might retire to, don't overlook the availability and cost of homeowners insurance before you purchase.

What makes a vacation home wonderful, whether it's on the water or a mountain retreat, can make it expensive to insure. If you already have a vacation home, don't skimp on the insurance. The risk of theft or disaster is just as significant in a second home as in your primary residence.

If your new property is close to the water, be sure to look into flood insurance. Damage to your home or belongings resulting from flooding is not covered under standard homeowners insurance policies; separate flood insurance is necessary.

Note: To determine if a building is in a flood zone, enter your address on the NFIP website.

Have you acquired expensive items such as jewelry, fine art or antiques?

A standard homeowners policy offers limited coverage for valuable items. If you've made purchases or received gifts that exceed these limits, you should supplement your policy with additional insurance to cover these valuables.

Are you renting a house or apartment?

If you're renting a home, your landlord is only responsible for the structure of the building, not your possessions. If you want to cover your personal possessions, you'll need renters insurance.

Like homeowners insurance, renters insurance also includes liability insurance, which covers your responsibility for damages or injuries you may cause (up to the policy limits).

The bottom line is, as you and your family change, so do your insurance. If you have any questions about your insurance or need to make a change in your coverage, contact your local American Family insurance agent.

These recommendations were developed using generally accepted safety standards. Compliance with these recommendations is not a guarantee that you will be in conformance with any building code, federal, state or local regulation regarding safety or fire. Compliance with these recommendations does not ensure the absolute safety of your occupation, business or residence. It is the property owner's duty to warn any tenants or occupants of the property of any safety hazards that may exist.

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