When it comes to insurance, you want to be like Goldilocks and find coverage that is “just right” While also keeping your budget and financial situation in mind.
Often, we carry the bare minimum of insurance coverage to meet legal or job requirements. This can help cut down on the day-to-day cost of insurance by lowering premiums. But these gaps in coverage can create long-term financial pain–especially during a crisis. This can make tough situations even harder and impact your financial health going forward.
Let’s walk through the most common gaps in car, life, and other essential insurance categories and help you determine whether your coverage is “just right.”
Car Insurance Gaps to Watch For
There are approximately 16,500 car accidents per day in the United States. With numbers like that, it’s natural to want peace of mind knowing your car is fully protected. The right insurance should cover damage not only to other vehicles or property but also to your own car. To help you feel more secure, here are four common gaps in car insurance to be aware of:
Gap #1- Liability only Coverage:
If you have liability-only coverage, in a car accident where you are at fault, your insurance will only cover damage to the other vehicle. This means you will have to pay out of pocket for your own car repairs.
Fill the Gap:
Get comprehensive coverage on your car to cover damage to both your vehicle and others in an accident where you are at fault.
Gap #2 – No Uninsured/Underinsured Motorist Protection:
If you’re in a car accident, the at-fault driver’s insurance typically pays for the damage. But if the driver is uninsured, underinsured, or flees the scene, you may have to cover repair costs yourself, unless you have uninsured/underinsured motorist coverage.
Fill the Gap:
To fill this gap, you’ll want to add uninsured/underinsured motorist protection to your car insurance policy. This coverage is usually not expensive, and it gives you peace of mind knowing that no matter what happens or who is at fault, your car is covered.
Gap #3 – Low Liability Limits:
Liability coverage pays for damage and injuries if you cause an accident, but if your limits are too low, you could be sued and risk your finances.
Fill the Gap:
To fill the gap that low liability limits can create, raise your liability coverage. While each state has a minimum amount of liability coverage that must be carried, this amount might not be enough. Increasing your liability coverage beyond this amount will cost a bit more upfront, but it can save you a lot of headache later.
Gap #4 – Missing Extras:
Car ownership can bring extra costs. After an accident, you may need towing or a rental car—expenses not always covered by insurance.
If you have a loan and your car is totaled, insurance only pays the car’s current value, which may be less than what you owe, leaving you to cover the gap.
Fill the Gap:
It’s usually inexpensive to add towing coverage, rental car reimbursement, or gap insurance (which covers the difference between your car’s value and loan balance) to your policy. Adding them can save you stress and money.
Life Insurance Gaps To Watch For
Gap #1 – No life insurance at all:
Without coverage, your family could struggle with funeral costs, medical bills, or debt.
Fill the gap:
A term life insurance policy is affordable and provides coverage for a set number of years.
Gap #2 – Relying only on employer-provided life insurance:
Workplace policies are usually limited and don’t follow you if you change jobs.
Fill the gap:
Keep employer coverage, but add your own policy for lasting protection.
Gap #3 – Underestimating how much coverage you need:
Too little insurance may leave loved ones without enough support.
Fill the gap:
A simple guideline is 5–10 times your annual income. Choose the higher end if you have dependents or complex finances.
Gap #4 – Overlooking stay-at-home caregivers:
Their work—childcare, cooking, cleaning—would be costly to replace.
Fill the gap:
Estimate those expenses and get a policy to ensure your family can cover them.
Other Types of Insurance That Might Be Helpful
While life insurance and car insurance are two key areas where people are often uninsured, there are other types of coverage that might be helpful to you and your family. Here are some other policies you might want to look into.
- Renter’s Insurance: Your landlord’s insurance protects the building itself, but not your property inside it. A renter’s insurance policy will protect your property in the event of a fire, theft, or water damage. Often, you can get renter’s insurance for less than $20 a month, and the protection could save you thousands in damages.
- Disability Insurance: According to the Social Security Administration, 1 in 4 workers will become disabled in their lifetime. Whether you face a short-term disability or one that is more long-term, being out of work is tough on anyone’s finances. Getting disability insurance can help protect you should you become disabled. This kind of insurance replaces your income, or a portion of it, if you get hurt or are too ill to work. It is valuable coverage for single earners or households with little savings.
- Health Insurance Gap Coverage: If you have a high-deductible insurance plan, you can be left with big bills in the event that you need care. But you can get hospital indemnity insurance or accident insurance to help fill the gap. Hospital indemnity insurance is a supplemental insurance policy that helps fill the gap created by high-deductible health plans. It provides cash payouts to help with hospital stays. Similarly, accident insurance can help fill the gap left by your health insurance should you be injured in an accident.
- Burial or Final Expense Insurance: The average funeral costs between $7,000 and $12,000. You can get a small life insurance policy or a final expense policy of $5,000-$15,000 to help offset final expense costs.
- Identity Theft Insurance: Identity theft is becoming increasingly common, especially with criminals using AI tools to create convincing scams and steal personal information. Restoring your identity and credit can be stressful, time-consuming, and costly. Identity theft insurance (also called identity restoration coverage) can help cover these expenses. Before purchasing a separate policy, check your renters or homeowners insurance, you may be able to add this coverage for a small premium.
What You Can Do Today
- First, review your existing policies. Note what is covered and what isn’t, your premiums, and your coverage limits. Make a list for easy reference.
- Ask yourself: “If [X event] happened tomorrow, would my insurance actually protect me?” Think through different scenarios and see if your current coverage is enough.
- Whether you need to adjust your coverage or not, shop around for the best price for your policies. Bundling your coverage may give you a better rate.
Final Thoughts
It’s important to carefully review your insurance coverage. Gaps in coverage can hurt your finances and cause unnecessary stress. It’s important to remember that insurance isn’t just about risk–it’s about resilience.
While it may not be fun to consider your insurance policy, filling the right gaps now can protect your future, your loved ones, and your peace of mind.
💡Action Item: Take the first step today, spend 30 minutes reviewing the policies you already have with an eye out for any gaps.
