Making sure your insurance will cover the most for the least

Any list of a family's necessities would likely include food, clothing, shelter, a car, savings, and education. Insurance, however, would probably not be very high on that list, if it was remembered at all. Yet just as shelter is necessary for protection from the elements, insurance is a necessary protection for that shelter and all the other items on the list.

For many people, there are two basic problems with buying insurance: It's unpleasant to think about having to have it, and there are so many types of coverage that it's hard to know which ones to buy.

Making things even harder is the fact that policy provisions and premiums have changed dramatically in recent years; new policies have been invented; and regulations by some states have changed the kinds of products that are available and the premiums that can be charged. Because of this, you should review your insurance needs every two or three years, whether or not your family's size or home changes.

Life insurance. Of all the types of insurance, life insurance is usually the one people have the longest - beginning when they are small children. Many parents buy small life insurance policies for their children as soon as they are eligible, usually when they are a few months old, but sometimes earlier.

But it is adults who have the best chance to benefit from the improvements in insurance. Competition has pushed premium rates down sharply over the past few years, and even some whole-life policies are paying a respectable return, in the 11 to 12 percent range, compared with a 5 or 6 percent standard just a couple of years ago.

The competition has been fiercest in the term-insurance arena. The ''buy term , invest the difference'' strategy has spread rapidly, and the insurance industry has responded with rates that make this route more attractive. A man in his mid-30s who does not smoke, for instance, should have little trouble finding might cost 10 times as much.

Depending on your income, $100,000 might seem like a lot of insurance, but that is the most common level of term insurance available. Besides, even that may not be enough. Experts' opinions about how much insurance is enough vary widely.

One rule - most often heard from insurance companies - is that the main breadwinner should have five times their gross annual salary in life insurance.

This may be true for a man who is the sole support for his wife and children and who doesn't have much of an estate to pass on. But if you do have an estate, particularly a house - with mortgage insurance, if there is a mortgage on it - you may not need as much insurance. Also, if both the husband and wife have full-time jobs and both have group term insurance from their employers - typically two times salary - then very little insurance will be needed.

Of the three main types of life insurance - term, whole, and universal (which combines some features of the other two) - term is still considered the most efficient, particularly for young families. This is the time when maximum coverage is needed, and with term, that coverage can be purchased cheaply, freeing money for the other things a young family needs, like the down paymment on a home, a new car, or child-care expenses.

Homeowner's insurance. If there is any type of insurance people tend to buy and forget, this is it. But it should also be reviewed and updated periodically.

''Generally people will tend to insure their home for whatever they owe on it ,'' says Marion Elsass, manager of fire insurance sales at Nationwide. ''But the owed amount should not be a guideline.'' Doing this, he notes, protects the bank , but not yourself.

The most common rule of thumb says a home should be insured for 80 to 90 percent of its replacement value, depending on the value of the land. The emphasis here is on ''replacement,'' not selling price. A house may go for $90, 000 on the marketplace, but cost $100,000 or more to replace. That $90,000 includes the land, but you do not need to insure that. Thus, an appraisal should give separate figures for the land and the building.

Most insurance companies, Mr. Elsass says, have some kind of updating provisions in their policies. Customers can either get this provision as an extra or they can go to a company that puts it in all policies. Whatever, you should have it, to cover the increased value of your home caused by inflation.

As for contents, most policies cover them for up to half the value of the house. So if your policy covers a $100,000 replacement cost, it may also provide

To find out, a household inventory of all your clothes, furniture, television sets, stereos, artwork, tools, appliances, and other housewares should be done, with photographs taken of everything. The pictures should then be put in a safe deposit box.

With many homeowners, liability is one of the greatest areas of concern, particularly with more lawsuits being filed and damage awards going up.

There is a fairly simple way to deal with this, however. If you have your homeowner's and car insurance with the same company and already have the maximum amount of liability - usually $300,000 - on them, you can get $1 million of umbrella protection on both for $75 to $130 extra a year. This protects guests in your home, salespeople, and others who might be hurt on your property. It also covers injuries from your car, as well as the more unusual circumstance, such as a golf ball hitting someone in the head, or a skier in the family running into another person on the slopes.

Auto insurance. Like homeowner's insurance, liability is an important concern. That $1 million of umbrella coverage may be even more comforting here, especially if you have teen-age drivers.

The most common type of auto insurance is collision coverage, to pay for repairing the dented fender, broken headlight, or crumpled bumper. Because so many collision claims are filed, this is the costliest coverage. But it can be reduced. How much damage can you afford to pay for out of your own pocket? If you can afford a higher ''deductible,'' the lower your premiums will be.

If you have a $100 deductible, you pay the first $100 of any claim, and the insurance company pays the rest. Many people have raised this to $200, some to $ 500. And if insurance is supposed to protect against losses you can't afford, there is no sense in having a low deductible if you can afford to repair the damage yourself.