Let's say you have a $1000 deductible against structural damage to your home and $500 deductible for collision on your car. One day when you are leaving for work, you step on your brake, but your foot slips, and you hit the gas. You smash through your garage door. The repair bill for the door is $999.99. Your badly dented fender costs $1600.

The repair on your house is under your deductible, and you must pay the first $500 on your car repair. That means you must come up with $1499.99. Can you afford that? Often people gamble on the odds that nothing bad will happen to them. Then they actually have a loss and face the prospect of paying out of their own pockets. Naturally, they are devastated.

Surprisingly, the additional premium for a lower deductible or for special coverage, when spread out over six months or a year, can be a pittance. With auto insurance, many people balk at buying ERS coverage (towing). But it only costs a few dollars per month. If you are ever stranded on a freeway and must call a tow truck, you will realize that ERS is a bargain.

As for limits of coverage, this, too, can be a tricky area. Sadly, many people think just having a policy means their insurance company will take care of them, no matter what. In fact, the limit that your see on your declarations page is all your carrier will pay. Period. No matter what you think you should get.

For example, let's say your homeowners limit for liability coverage is $25,000. That is the total amount your carrier will pay per occurrence (each individual incident). Now let's say your pit bull attacks your postman. Surgical repair for the postman's posterior costs $10,000. Plus, he wants $50,000 for pain and suffering. That means you're on the hook for $35,000. Your carrier can't bail you out because $25,000 is the limit you bought. Limits of coverage are doubly tricky with auto liability because of the high costs of medical bills and the extreme demands that injured parties make.