Are You Adequately Covered? Home, Auto, Health, and Life Insurance Recommendations

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To determine whether you have sufficient insurance coverage, you should look into what types of insurance you are required to have, consider how different policies match your coverage needs and budget and potentially seek guidance from professional financial advisors. While there are useful guidelines you can follow, every individual should pay attention to their specific circumstances when deciding how much coverage they need for homeowners insurance, auto insurance or any other kind of insurance policy.

Keep reading for more information that can help you determine if you have enough insurance including the basic insurance products you should consider buying and how much coverage experts often recommend purchasing.

Key Takeaways

  • Every individual has different insurance needs but you can figure out whether you have enough insurance by learning what coverage types you are required to have, seeing if your policy adequately covers all of the risks you face in your day-to-day life and taking professional guidance into account.
  • It’s recommended that you buy homeowners insurance with enough dwelling coverage to rebuild your home if necessary and between $300,000 and $500,000 in personal liability coverage.
  • Almost every state requires car insurance, although you should consider buying a policy with higher coverage limits than what your state requires.
  • Every American taxpayer is expected to maintain health insurance that matches the requirements set by the Affordable Care Act (ACA) but only a handful of states penalize you for not doing so.
  • You should consider buying between 10 and 30 times your salary in life insurance coverage depending on your age and what you want the death benefit to go toward.

What Types of Insurance Are There?

See below for an overview of the most important types of insurance that you may be required to maintain and should otherwise strongly consider buying.

Home Insurance

Homeowners insurance protects you in case your home, belongings and other property are damaged by a wide range of unexpected perils such as fire, hail, theft and vandalism. It can also shield you from lawsuits if you are held responsible for someone’s injury or damage to their property and support you if you need to temporarily move to a new home after a covered peril renders your primary residence uninhabitable.

Car Insurance

Your auto insurance policy primarily provides coverage for other people if you are at fault for a car accident that injures them or damages their property. However, you can also buy coverage types that will cover your own medical bills or property repairs along with optional add-ons that account for various other situations.

Health Insurance

Maintaining health insurance enables you to lower your health care costs by splitting them with your insurance company. After reaching your deductible for the year, your insurer will generally cover the majority of your medical expenses, while you will only have to pay a copay or coinsurance for each service you receive. In addition, some preventive services are completely free regardless of whether you’ve reached your deductible if you obtain your plan through the Health Insurance Marketplace and receive the services from an in-network provider.[1]

There are several ways to obtain major medical insurance coverage, both from private insurance carriers and public programs. You may also be able to purchase separate health plans that provide coverage for hearing, vision and dental care since these benefits are not always covered by ACA-compliant major medical insurance plans.

Life Insurance

When you buy life insurance, you can select beneficiaries who will receive a predetermined payout known as a death benefit if you die while your life insurance coverage is active. Life insurance can serve multiple purposes such as helping your loved ones cover specific expenses like your funeral or loan payments, replacing your income for your dependents if you die before retirement or simply leaving an inheritance for your family members. It can even pay off the rest of your mortgage if you buy enough life insurance.

Other Types of Insurance

There are several other types of coverage you may need to consider including subsets of the insurance products listed above. For example, you can purchase other types of residence insurance such as condo and renters insurance, vehicle insurance such as motorcycle, ATV, RV and boat insurance and supplemental health and income protection insurance such as accident, disability, critical illness, hospital indemnity and long-term care insurance.

Another major category of coverage is commercial insurance, which can include various kinds of property and casualty insurance designed for businesses. You may also want to consider umbrella insurance, which can provide extra liability coverage in case a claim exhausts the coverage limits of one of your underlying liability insurance policies. Finally, you could benefit from buying coverage types like travel, crop and pet insurance depending on your circumstances.

How Do I Know if I Have Enough Insurance Coverage?

In general, having enough insurance means having both the right coverage types and high enough coverage limits. However, the exact right amount of coverage can differ substantially from person to person. Continue reading for an overview of the information you need to take into account when evaluating your insurance needs.

Check Minimum Insurance Requirements

Multiple types of insurance are either required by law or could be mandatory depending on your circumstances, so the starting point for deciding whether you have enough insurance should be determining whether you are adhering to legal and situational requirements.

For example, car insurance is required by law in every state besides New Hampshire and Virginia, with each state government setting its own regulations regarding the amount and types of coverage drivers need.[2][3] Meanwhile, most businesses are legally required to maintain workers’ compensation and commercial auto insurance.[4][5]

state car insurance requirements

In addition, all American taxpayers are officially required to maintain ACA-compliant health insurance.[6] While this law has not been enforced at the federal level since 2019, it is still enforced in California, Massachusetts, New Jersey, Rhode Island and Washington, D.C.[7] Finally, state law doesn’t require you to get home insurance but your mortgage lender or homeowners association (HOA) may require it.[8]

Understand Your Insurance Policy Terms and Conditions

Next, you should pay attention to the details of the insurance policies you already have and the coverage types they include to figure out whether they are sufficient given your circumstances. For example, you generally aren’t required to have comprehensive insurance unless you finance your car, so your auto insurance policy might not include it if you have exclusively bought used cars and paid in cash. However, you may still opt to purchase comprehensive coverage if you live in an area with a high crime rate since it’s the only type of car insurance that covers car theft.

You may also want to look through your policies’ exclusions to see if you need additional coverage types to account for those exclusions. For example, homeowners insurance policies generally exclude coverage for flooding and earthquakes, so you may need to purchase separate policies to cover those perils if you live in a region that is prone to either of them.

Choose the Right Sum

Whether you’re buying a new policy or reassessing one of your policies that is up for renewal, you need to make sure you select sufficiently high coverage limits. For example, you may need to raise the coverage limits on your existing policies if they have not kept up with the rate of inflation.

In addition, you should reevaluate your coverage anytime you experience major life events that may alter your coverage needs.

For example, you may want to raise your personal property coverage limit after you get married since your policy may now need to cover both your belongings and your spouse’s belongings. Meanwhile, you could raise your auto liability coverage limits after adding a 16-year-old first-time driver to your policy to account for their increased risk of getting into a car accident compared to more experienced drivers.

Seek Professional Help

Finally, you can take advantage of resources prepared by insurance professionals to help you settle on the right amount of coverage. For example, it’s commonly recommended that you maintain enough dwelling insurance to completely rebuild your home if necessary and at least $300,000 to $500,000 in personal liability insurance.[9]

Other rules of thumb you may encounter in the insurance industry include purchasing 10 to 30 times your annual income in life insurance coverage and spending about 10% of your annual income on health insurance premiums.[10][11]

Of course, these general rules of thumb may not actually be the best fit for you depending on your situation. As a result, it can also be beneficial to consult with a financial advisor who may be able to provide you with specific guidance regarding the amount of coverage that makes the most sense for you.

Can I Have Too Much Insurance?

As you evaluate your active policies, you could realize that you have too much insurance. Examples of situations where you may be overinsured include the following:

  • You have more coverage than you need: If your coverage limits are too high, you’ll end up paying higher premiums for coverage you don’t actually need. For example, if you take a home inventory and learn that the total value of your belongings is $150,000, then you likely won’t need a home insurance policy with $200,000 worth of personal property coverage.
  • You have redundant coverage: In some cases, you could end up with more coverage than you need if your insurance policies overlap with each other. An example of this would be purchasing a windstorm insurance policy when your homeowners insurance already covers wind damage.
  • You no longer need a certain coverage type: Over time, your coverage needs will change and you may not need all of the coverage types you previously needed. For example, you shouldn’t maintain your gap insurance if you have finished paying off your auto loan or are close to paying it off.
  • You can’t afford the premiums: The purpose of insurance is generally to protect you from major financial losses, so it may be counterproductive to purchase a high amount of coverage if paying the premiums creates financial hardship for you. For example, it may not be worth securing a large death benefit to leave as an inheritance for your children if you can’t afford to meet their basic needs after paying your life insurance premiums each month.

What Does It Mean To Be Underinsured?

Conversely, you can also end up with too little insurance to adequately address the risks you face in your day-to-day life. You may be underinsured if you find yourself in the following situations:

  • You don’t have the right policies: If you are exposed to a major risk and don’t have any insurance coverage types that address that risk, you are likely underinsured. For example, if you live in a high-risk flood zone, then going without flood insurance could leave you underinsured.
  • Your coverage limits are too low: Even if you have the right coverage types, they may do you little good if their coverage limits aren’t high enough to adequately pay out claims related to the risks they cover. For example, new cars cost nearly $50,000 on average as of December 2023, so you likely won’t have enough auto insurance coverage if your policy only includes $10,000 worth of property damage liability coverage.[12]

If your coverage limits are too low, you may not be fully reimbursed for a covered claim even if the value of the claim is below your coverage limits. Many home insurers follow the 80% rule, which means they will only pay out a percentage of the total claim amount if your dwelling coverage limit is less than 80% of the cost of rebuilding your home.[13]

For example, if you have $120,000 worth of dwelling coverage but your home’s replacement cost value is $200,000, then your insurance company may only cover up to 60% of the damage whenever you file a homeowners insurance claim. As a result, even though $100,000 is less than your coverage limit, your insurance carrier would only pay you $60,000 minus your deductible for a $100,000 dwelling insurance claim.

Do I Have Enough Insurance if I Meet My State’s Minimum Requirements?

You may be underinsured even if you have as much car insurance as your state requires since state-mandated minimum coverage limits are fairly low. For this reason, you may want 100/300/100 liability insurance, which means your policy includes $100,000 in bodily injury liability coverage per person, $300,000 in bodily injury liability coverage per accident and $100,000 in property damage liability coverage per accident.[14]


What happens if I don’t carry enough insurance?

If you don’t follow your state’s insurance requirements, you could face fines, jail time and other legal penalties. Otherwise, you risk being on the hook for any expenses that aren’t covered by your policy or exceed your coverage limits if you don’t have enough insurance.

Is life insurance required?

Life insurance is not required, although you will likely benefit from it if you have dependents and don’t have enough money saved up to provide for all of their financial needs in case you suddenly die.

Do I have enough car insurance?

You need car insurance with at least the minimum coverage types and coverage limits required by your state and lender. However, it’s recommended that you buy a policy with 100/300/100 liability coverage limits and you may also want other coverage types that aren’t mandatory depending on your circumstances.[14]

Do I have enough health insurance?

You should have enough health insurance as long as your plan meets the ACA’s standards for qualifying health coverage. Examples of ACA-compliant coverage include job-based plans, Marketplace plans and government-sponsored programs like Medicare and Medicaid.

Do I have enough homeowners insurance?

Insurance experts advise that you need homeowners insurance with a dwelling coverage limit equal to your home’s replacement cost and up to $500,000 worth of personal liability coverage. You may also want enough personal property coverage to replace most or all of your belongings if necessary.[9]


  1. “Preventive Care Benefits for Adults.” Accessed Jan. 30, 2024.
  2. New Hampshire Insurance Department. “2022 Automobile Insurance Consumer Frequently Asked Questions,” Page 5. Accessed Jan. 30, 2024.
  3. Virginia Department of Motor Vehicles. “Insurance Requirements.” Accessed Jan. 30, 2024.
  4. National Federation of Independent Business. “Worker’s Compensation Laws – State by State Comparison.” Accessed Jan. 30, 2024.
  5. Nationwide. “Commercial Auto Liability Insurance.” Accessed Jan. 30, 2024.
  6. Internal Revenue Service. “Questions and Answers on the Individual Shared Responsibility Provision.” Accessed Jan. 30, 2024.
  7. GoodRx. “What Is the Affordable Care Act (Obamacare) Individual Mandate?” Accessed Jan. 30, 2024.
  8. Hippo Insurance. “HOA Insurance + Your Home Insurance Policy.” Accessed Jan. 30, 2024.
  9. Insurance Information Institute. “How Much Homeowners Insurance Do I Need?” Accessed Jan. 30, 2024.
  10. Guardian Life. “Is the Life Insurance You Have Through Work Enough?” Accessed Jan. 30, 2024.
  11. Mira Health. “How Much Should I Spend on Health Insurance in 2024?” Accessed Jan. 30, 2024.
  12. Kelley Blue Book B2B. “New-Vehicle Prices Down Record 2.4% Year Over Year.” Accessed Jan. 30, 2024.
  13. Liberty Mutual. “What Is the 80% Rule for Home Insurance?” Accessed Jan. 30, 2024.
  14. Oklahoma Insurance Department. “Auto Insurance: Common Myths,” Page 2. Accessed Jan. 30, 2024.

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