Working Out Your Own Number

Every page on this site eventually arrives at the same question: what could you pay above your limits? It is worth actually answering rather than circling. Here is the exercise, and it takes about ten minutes with a pen.

Step 1: what could you produce in a hurry?

Write down what you could realistically pay within a few weeks without it becoming a second emergency. Savings, and nothing you would have to sell your car or borrow against your home to reach. Be honest and be unimpressive — most people's number here is smaller than they would like to admit and that is fine.

Step 2: what could be reached over time?

A different list. Home equity. Investments outside retirement accounts. Future income. We are deliberately not going to tell you what is or is not reachable in a judgment, because that is a legal question that depends on your circumstances and on California law, and an attorney is the right person to answer it.

What matters for this exercise is simply: do you have things you would be badly hurt to lose? Yes or no.

Step 3: what are you exposed to?

Look at your declarations page. Write down your three liability limits. Then write down, beside each, the sentence "anything above this is mine."

That is the whole exposure. It is not a probability calculation and it does not need to be. It is a statement of where the coverage stops.

Step 4: read the two columns together

If step 1 and step 2 are both close to nothing: higher limits are protecting less than they would for someone else. Minimum coverage may genuinely be the correct decision, and being insured at the minimum is enormously better than not being insured. Carry it deliberately, keep it continuously, and revisit this when your circumstances change.

If step 2 has real things in it: your limits are what stands between an ordinary bad afternoon and those things. That does not mean you must buy more — it means the price of more is information you should have before deciding, and almost nobody asks for it.

If step 1 is meaningful but step 2 is not: you are in the middle, and the most efficient move is usually raising property damage first, since it is the limit most likely to be reached and typically the least costly to increase.

Step 5: get the actual price

Not an estimate. Ask your carrier, or ask us, what the next step up in limits costs on your policy. Write it down next to your current premium.

This is the step that changes decisions. In our office, the most common reaction when a caller hears the difference is surprise that it is smaller than they assumed. That is direction only — your own figure depends on your record, mileage, vehicle and carrier — but the assumption that higher limits are unaffordable is worth testing rather than accepting.

Step 6: decide, and write down when to revisit

Whatever you choose, note the date. Circumstances that should send you back to this worksheet: buying a home, a meaningful change in income or savings, a new driver in the household, or paying off a vehicle.

If you want the numbers for step 5, that is a two-minute conversation and we will give you the minimum and the step above it together, with no pressure toward either.