You own a home with a market value of $245,000. Of this amount, $30,000 is apportioned to the land and $215,000 is apportioned to the house. It is estimated that the house would cost $190,000 to rebuild. The personal property in your home is worth $70,000, including a $2,000 diamond ring and a $3,000 computer system. You also own a car worth $20,000. You live in a state where there is a high risk for earthquakes. You have $100,000 in savings and investments that could be drawn on in case of emergency. You currently have a standard HO-3 homeowner's policy with a $500 deductible, which insures your house for $245,000 and your personal belongings for $130,000, and you carry the minimum requirements of your state for car insurance. You have been advised to adjust your insurance coverage based on the large-loss principle.

According to the large-loss principal, you should:

Insure your property for the maximum amount available.

Insure only those risks that you cannot afford to cover using your own financial resources.

Insure your property for minimum amounts only.

Transfer all risks possible to insurance.