B uy too little insurance, and a mishap could drain away your savings. Buy too much, and you'll pay excessive premiums for years. But how much auto, homeowner's, life and disability insurance do you really need? Use these guidelines to figure it out...

AUTO INSURANCE

Most states require a certain amount of automotive coverage, but these legal minimums are well below the amount that drivers really should have. If you cause an accident in which other people are injured, the claims against you easily could run into the high six figures.

Rule of thumb: Have at least as much in liability coverage as you have in assets. Example: If you have $300,000 in savings and $400,000 equity in your home, carry at least $700,000, less if you have umbrella coverage. Residents of some states, such as Florida, Iowa and Texas, need not include a home in this calculation because state law protects the primary residence in the event of a lawsuit.

You can choose other components of auto insurance based on your circumstances. Examples: There's no need to pay for medical payment coverage if you have health insurance... you might not want collision or comprehensive if you drive a vehicle that is more than five years old. (Collision coverage might be required by a lender or lease agreement.)

HOMEOWNER'S INSURANCE

Homeowner's insurance protects your home and its contents against damage and theft. It also protects you financially if someone is injured on your property and sues you. Rule of thumb...

For property damage, the minimum amount of coverage you need is what it would cost to rebuild your home if it were destroyed. This figure might be substantially higher than the original cost of construction, particularly if the house is old or has had substantial renovations.

To estimate rebuilding costs, multiply your home's square footage by construction costs per square foot in your region -- your agent or a local real estate broker should be able to provide this figure. This yields only the construction costs for a typical home, not for features that make your home special, such as a chef's kitchen. For a more accurate figure, ask your insurance agent for a “true replacement cost estimate.” (Also ask your agent about flood insurance if you live in a flood-prone area.)

Liability. As with auto insurance, this component of homeowner's insurance should be at least equal to your assets, including savings and the equity in your home. Only reduce this figure if you have umbrella coverage (see below).

Umbrella Liability Insurance

Umbrella liability insurance protects you from lawsuits by supplementing liability coverage in homeowner's and auto insurance (as well as boat, vacation home and other liability coverage you may have). Generally, if your assets exceed $700,000, you should have an umbrella policy. Most insurance companies offer umbrella policies with coverage starting at $1 million. It is generally cheaper to buy through your home and auto insurer. Cost: About $180 per year. Each additional $1 million adds $70 or less to your annual premium. Once this coverage is in place, you can reduce liability coverage on your auto and homeowner's policies.

LIFE INSURANCE

Most people add up future expenses, subtract current savings, then buy enough insurance to make sure their expenses are covered -- but this could result in your family just scraping by. Instead, buy enough to keep your family comfortable and financially secure.

Rule of thumb: Multiply your annual salary by the number of years remaining until you expect to retire. Example: If you earn $100,000 per year and expect to work for 15 more years, buy $1.5 million in life insurance.

This quick calculation doesn't take into account future salary increases, but since your family would receive insurance benefits as a lump sum, they could invest it and use the profits to offset the effect of lost raises. (For a detailed life insurance needs estimate, use the “Income Replacement Method” tool on the Life Insurance Analysis Center Web site, www.underwriter.com.)

A nonworking spouse should have coverage to reflect his/her economic value to the household. Example: If you have children and child care would cost $300 a week, buy enough to cover the cost. Also: Some spouses each buy enough to pay off their mortgage. Go to insurance.yahoo.com to figure out the minimum your family needs.

Important: Once your mortgage is paid and the children are out of the house, you may no longer need life insurance if you have adequate savings.

Before you cash out or cancel a policy, find out if a life settlement company will buy it from you. To find one, ask an independent life insurance agent or a financial adviser. Some policies can fetch more than $100,000.

Long-term Disability

Select a policy that pays full benefits if you're unable to work in your chosen profession. Buy enough either privately or combined with an employer's policy to replace 60% of your income. The policy should pay benefits for five years -- or better yet, up to full retirement age, when you will be eligible for Social Security as well as retirement benefits.