Every insurance policy is governed by two numbers most people set without much thought: the deductible and the limit. Together they decide how much you pay before the insurer does, and how much the insurer will pay before you are on your own again. Choosing them deliberately is basic insurance literacy.
The deductible is what you pay out of pocket on a claim before coverage kicks in. A higher deductible lowers your premium, because you are absorbing more of the small losses yourself, and a lower deductible raises it. The right level depends on what you could comfortably cover from savings: taking a higher deductible you can afford is often a smart way to lower premiums, since insurance is best used for losses you could not absorb.
The limit is the most the policy will pay for a covered loss. Above it, the cost falls back on you. Underinsuring, setting a limit below what a full loss would cost to make you whole, is a common and dangerous economy, because it saves a little premium while leaving you exposed to the very catastrophe insurance exists to cover. This is where umbrella policies extend the ceiling on liability.
The sound approach is to insure heavily against what you cannot afford to lose, adequate limits, and self-insure the small, affordable losses through higher deductibles. Reversing that, low deductibles and thin limits, is the expensive and exposed combination many people default into.
Insure the catastrophe, absorb the nuisance.
This is general information, not personalized insurance advice. Coverage terms, definitions, and availability vary by policy and provider.