Understanding Insurance: How much is enough?


By Terri Powers


A recent study by MSB Insurance indicates that “68% of homeowners are underinsured”.  The statistics for underinsured motorists, commercial insurance, health insurance and life insurance are equally compelling.  Yet many American’s feel they are over-insured.


“Underinsurance” is endemic and exposes insured’s property, business, finances and welfare depending on which policies are insufficient to cover a loss.  In most cases, boosting coverage to sufficient levels is neither difficult nor expensive. 


Spending an hour with your insurance agent annually to review your coverage and avoid being underinsured could be your most valuable appointment of the year.


A recent example really drives this home.


She was 17 and so was he - their families had been friends since they were kids.  Bill wanted to show-off his new sports car so he took Amanda for a spin in the country.  Within the hour they were both victims of a life-altering accident that had Amanda fighting to survive. 


Amanda’s policy carried personal injury protection (PIP), but that coverage was exhausted by the time she made it to the emergency room. Even though Bill had insurance, he didn’t have enough to pay the mountain of medical bills for Amanda. 


In this case, everyone lost.


Amanda’s parents were forced to sue their long time friends to help pay medical costs.  They won in court and Bill’s parents may be forced to sell their home to pay the judgment.  Their longtime friendship was destroyed.


This is a story that is played out far too frequently and can be avoided.  In this case, increased PIP coverage, higher uninsured motorist coverage, or an umbrella policy could have substantially eased this situation.


Like this auto insurance example, homeowners should know whether their home insurance is sufficient – whether their policy includes replacement cost or actual cash value for example.  In the event of a catastrophic event, like a fire, replacement cost will provide the necessary coverage to replace the items you lost while actual cash value generally covers you for the depreciated value of your loss.


In all cases it’s good to know where you stand and well worth an annual visit to review your policies with your insurance agent.  Truly, when it comes to insurance, “an ounce of prevention is worth a pound of cure.”  


Terri Powers, CIC, CPIA is President of Premier Choice Insurance Agency, Inc. in Oregon City and is licensed in Oregon, Washington, and Tennessee.