If you haven’t reviewed your auto or homeowner’s policies lately, you might be facing the same problem Goldilocks did in the popular children’s fairy tale. She found the bears’ items to be too big, too small, too something. You might have too much insurance for some of your possessions and too little for others. Each year, consumers waste about $18 billion in insurance by buying duplicate coverage or expensive and sometimes unnecessary insurance—they’re overinsured. And unfortunately, thousands of homeowners have found themselves underinsured when a fire or earthquake damages their homes.

To keep yourself from being underinsured or overinsured, you should review your homeowner’s and auto insurance policies periodically. A little research will determine what's just right for you and your family. The Insurance Information Network of California has the following guidelines:

WAYS YOU MAY BE OVERINSURED

Buying Collision Insurance on Older or Rented Cars

Sometimes buying collision insurance on cars worth less than $1,000 can be a waste of money. If you add up for one year how much you spend on your premium for collision insurance plus the deductible, you may actually be spending more on insurance than what the car is worth. If you make a claim, you would not substantially exceed annual cost and deductible amounts. You can also save money by declining the extra collision coverage offered when you rent a car. Your auto insurance policy may already cover you.

Buying Medical Payments Insurance Under Your Auto Policy

If you already have good medical and disability insurance under your health insurance plan, you may not want to buy medical payments insurance. You could save about 10% in premium costs.

Basing Home Insurance on the Current Market Value vs. the Cost to Replace It

If you base your insurance on the current market value of your home, you could be overinsured. The cost to replace your home is a more accurate figure in determining how much insurance you should buy. For example, if your home is in an upscale neighborhood, a large part of the selling price is due to the neighborhood rather than to the house itself. Therefore you may be paying for more coverage than you actually need.

WAYS YOU CAN BE UNDERINSURED

Basing Home Insurance on the Current Market Value vs. the Cost to Replace It

As mentioned before, base your homeowner’s insurance on the cost to replace it, not the current market value. If the selling price of your home is lower than it was when you first bought it and you base your insurance on the current price, you may be underinsured.

Not Having Enough Insurance on the Contents of Your Home

Take an inventory of all your possessions. This list will adequately reflect how much coverage you will need to replace all the contents in your home. Now compare this figure with the amount of coverage listed on your current homeowner’s policy. Chances are, you may be underinsured. If you have any valuable items such as artwork, jewelry, antiques or collectibles, but don’t have additional coverage for them in the form of “floaters,” you may also be underinsured. Many insurance companies will only pay a certain dollar amount for these items that may be considerably less than what they are actually worth.

Also, when purchasing insurance for the contents of your home, consider whether you need actual cash value or replacement cost coverage. Remember that replacement cost coverage of your contents means that your possessions are replaced without any depreciation due to age or wear and tear. Actual cash value means that the replacement of your possessions is assessed on the cost to replace them minus depreciation for age and wear and tear.

Current Insurance Policy Does Not Reflect Recent Improvements to the Home, Increases in Inflation and New Building Codes

You could be underinsured if you have not reported any recent improvements to your home, such as an additional room or remodeled kitchen, to your agent. Make sure that your policy also includes increases in inflation and costs for current building codes.

Renters Assume That They Are Covered Under Their Landlord’s Insurance Policy

Wrong! Your landlord’s policy only covers the building. You are responsible for getting insurance for your possessions, not your landlord.

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