How much insurance is enough?

Q: "My insurance renewal is coming up. I am wondering how much insurance is enough. I have $300,000 limits now. Should I raise that?"

A: This is something you should discuss with your underwriter, but I do have some comments for you to consider. First of all, remember that "claims expenses" serve to diminish your limits. So, if you are sued, or if the insurance company has to hire defense counselor or an expert, their fees come out of that $300,000. Attorney’s fees and costs through a simple trial could easily be $50,000 or more. That means the amount available to pay a judgment or to settle would be only $250,000, or less. A judgment in excess of that amount would be your personal responsibility to pay. You have to consider the value of the properties you are appraising. If you appraise single family homes with a value of up to $150,000 ... your limits are probably fine. I got a new claim in the other day with an insured who also has $300,000 in limits. The appraisal in question is a single family, but the value is over $2 million. A simple mistake in an appraisal of that size could easily erase the entire limit, without even considering attorneys fees. After considering the type and value of properties you are appraising, think about the value of your potential mistake. If your error is worth 10% or 20% of your total average value you have enough coverage?

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