Property Assessment

You're paying how much for your home and auto insurance? here's your big chance to cut those premiums down to size.

LET'S START WITH AUTO INSURANCE. Coverage for your car breaks down into four categories: liability, for bodily injury and property damage; uninsured motorist coverage, to pay your bills in case you're nailed by one of the one in five people who drive without insurance; collision and comprehensive, to protect your car if it's damaged or vandalized; and medical and personal injury coverage.

Forty-six states require liability coverage, and it's a good idea to have as much as you can afford. Say you're trolling the parking lot of the A&P and nick a Mercedes on its bumper, bruising the driver's elbow. Your liability insurance will pay for any damage you inflict on other people in an accident, so this Mercedes driver is likely to go away happy. But if you don't have enough coverage, the person you injure can come after your house to pay for his aches ? and you can rack up thousands of dollars in legal fees trying to defend yourself.

Robert Tashbook of Mountain View, Calif., is single and doesn't own a home, but he still carries $500,000 in auto-liability coverage ? to protect the stock options he holds in the dot-com where he works as a systems-performance manager. "I could run into a classic car, or I could hit somebody's bicycle and cause them to have heart trouble," says Tashbook. The legal battle that could come out of that "is what kills you if you're not covered."

On your auto policy, you usually set separate limits for injury and property liability. Most insurance consultants recommend that you buy at least $300,000 per accident in bodily-injury coverage, but you should up the amount to match the value of your assets. Playing it safe like Tashbook, with a $500,000 limit, will cost you less than $50 extra.

Thinking about skimping on your uninsured motorist coverage? Then stay away from the mall. Right now, there are about 25 million drivers who have no auto insurance at all, and not one of them is likely to pay you a dime if he crumples your minivan in front of the multiplex. Making matters worse, some drivers who have insurance carry only the minimum amount of coverage required by state law. In a major accident, their coverage will run out long before your bills do. California, home of the $40,000 convertible, requires drivers to have only $5,000 in property-damage liability. And at least 13 states require only $15,000 or less per individual in bodily-injury liability protection. Considering that the median jury award in a vehicular liability case in 1998 was $20,725 ? meaning half the awards were even higher-there's a good chance you'll be out a bundle even if you're involved in only a minor accident. Fortunately, uninsured motorist coverage won't bankrupt you. Insurance consultants say you need $500,000 in bodily-injury and damage coverage, which costs $75 to $150 a year.

The biggest chunk of your auto premium, anywhere from 30% to 50%, is to protect your car if it's damaged. You usually aren't required by law to carry collision and comprehensive coverage, but with any new car, it's really a must. The lender of your auto loan may require it. Experts say that collision protection should cover at least the book value of your vehicle. But as your car ages, and its value decreases below $1,500, the C&C portion of your premium may cost you more than the car is worth. If you own such a clunker, you can slash your premiums in half by dropping C&C protection and footing any repair bills yourself.

The final part of your auto coverage is personal-injury protection. This coverage pays the medical bills for you and your passengers if you're injured in a crash. If you don't have medical insurance, you should take personal-injury coverage. But even if you do have medical coverage, insurance experts recommend carrying the maximum amount of personal-injury protection allowed by state law, usually between $50,000 and $150,000, to foot the medical bills of your passengers. The day you run into a ditch with someone in the passenger seat isn't the time to discover who figures in their family lineage, like that uncle, the personal-injury attorney.

When it comes to homeowner's insurance, you need a policy that will replace your home and your possessions, down to the last theme-park tchotchke, and provide liability coverage if someone gets hurt on your property. To protect your home and possessions, go for replacement-cost coverage, which pays you the policy's face value ? the amount of money it would cost to rebuild your home if it were totally destroyed. (The alternative is cash-value coverage, which pays you the loss of the value of your property, minus depreciation.)

It's crucial that you know how much it would cost to replace your home before you shop for coverage. To estimate the replacement cost, calculate how many square feet are in your house and multiply that figure by the local construction cost per square foot for homes that are similar to yours. Some insurance Web sites, like InsWeb, offer free cost calculators.

Whatever you do, don't underestimate the value of your belongings. The maximum coverage you can get for your possessions on most policies equals 75% of the replacement cost of your house. That's usually enough for most folks, but if your Aunt Pauline's sable coat is nesting comfortably in your closet, you may need to pay extra to insure it. The same may be true for art, antiques, jewelry and your personal computer, which are each insured for no more than $5,000 on most policies. You can buy additional coverage on these heirlooms for relatively little; most insurers charge 25 cents to $1.50 for every additional $100 of protection.

Your homeowner's policy typically includes between $100,000 and $300,000 of liability coverage, which can come in especially handy if you have children. Let's say your teenage daughter accidentally knocks someone silly at the ice-skating rink; your homeowner's coverage will pay the victim's medical expenses and foot your legal bills should the mishap spill over into court. But if you own a car and a home, you should invest in umbrella coverage, which provides at least $1 million in additional liability protection beyond what you have with your auto and home policies. Umbrella policies cover you and your family in virtually any wrongdoing, from libel and slander accusations to charges stemming from a playground fight. (One person who has benefited from an umbrella liability policy: President Clinton, who used his coverage to pay part of his settlement in the Paula Jones ruckus.)

Now that you know what type and how much coverage you need, it's time to find a deal. Most insurance is sold through three channels: national carriers such as State Farm and Allstate, independent agents and direct sellers, who let you buy policies by phone and over the Net. When you're shopping for auto insurance, it's best to begin on the Net (see table below). Sites such as InsWeb and Insurance.com can provide a bounty of quotes from small insurers such as Amica and giants like Nationwide. You should also visit www.independentagent.com to get the names of brokers in your area. These agents can help you compare quotes from several large insurers, including Travelers and the Hartford Group.

Once you have found an auto insurer and a quote, it's time to contact the national carriers and direct sellers to see if they come up with a better deal. It's best to call the direct sellers first, including Geico and Progressive, since these carriers can often lowball their competitors by keeping their commissions down. The Big Three national firms, State Farm, Allstate and Farmers, may match your lower premium to keep you from signing up with one of their rivals.

The Net won't be as much help in finding a deal on homeowner's coverage. One thing you can do online is visit your state insurance department site to see which carrier has the lowest premium in your area. (Find a link at www.naic.org.) You should also ask the carrier that coughed up the lowest auto premium for a volume discount, typically 5% to 15%, to underwrite your homeowner's coverage as well. If your auto carrier doesn't offer a price break, go back to your independent agent and have him search for the lowest premiums. Then repeat the calls to the national carriers. Unfortunately, you won't find volume discounts with all of the direct sellers: Geico sells homeowner's policies only from a handful of other insurers and none of its own; and Progressive sells the policies only in Arizona and Michigan.

— By Matthew Heimer