Many individuals who experience financial stress opt to save money by reducing their car and home insurance to the bare minimum coverage allowed at the state and federal levels. While many insurance companies recommend that you cover your car and your home, including all of the belongings inside of your home, with more than the bare minimum, pursuing the minimum coverage is perfectly legal. Doing so may help you save money, especially if you've got a good track record. Here's a guide on determining the minimum amount of coverage your state will usually require.

Auto Insurance

Even if your vehicle is not covered by your insurance, certain things must be. In every state except New Hampshire and Wisconsin, you must have some measure of liability insurance, which protects you in case your vehicle causes injury or property damage. The three things covered by liability insurance are personal injury for one person in the car, bodily injury for every individual hurt by an accident, and liability for damages to property that might occur in the case of an accident. Some states also require personal injury protection, known as PIP, to cover the cost of medical expenses and lost money due to the inability to work following an accident.

Home Insurance

Homeowner's insurance policies are often referred to as HO policies. The most basic plans cover homes against only 11 different circumstances, such as lightning and fire damage. The most basic insurance does not even protect against falling objects such as snow, ice or debris, nor does it protect against damage caused by outdated heating or electrical systems. Home insurance is intended to protect against damage to the structure of the home itself, the possessions within the home, additional living expenses if you must live elsewhere during repairs, and liability to others. While basic home insurance only covers the 11 situations listed in the policy, a stronger plan provides coverage against anything except what is expressly stated in the terms of the agreement.

Considerations

When determining how much insurance you "need," you may want to think practically instead of limiting yourself to the letter of the law. In the case of vehicles, you might want to consider insurance that covers your vehicle when the damage is caused by the other individual---if you do not, you risk paying for the damages even if the accident was not your fault. Pain and suffering damages may also be covered under insurance. Homeowners should consider whether to cover their additional assets against damage to the home, as well as the property contained within the structure. While it is more expensive, the cost to rebuild the structure itself may be worth an insurance investment.

Source:

Real Estate Journal

III.org

Edmunds