How Much Auto Insurance Should I Have?

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Insurance agents often hear the question, how much auto insurance should I have? Well, that depends what you must protect. Calculate your personal net worth and your vehicle's worth. Based on that information, you can determine how much auto insurance you need.

Liability Coverage

  • Liability insurance covers the damage to others that you're responsible for. Bodily injury and property damage fall under liability. Each state has its own liability insurance minimums for a car to be legally driven on its roads. But there are no state insurance maximums. Liability insurance protects your assets in case you are held liable for another person's medical or property damage expenses. Once your liability insurance is exhausted, you must pay for these costs out of pocket.

    For example, if you cause an accident and the other driver is injured, you might have to cover hospital costs. The expenses might total $30,000. If your bodily injury coverage is $15,000, you must pay the other $15,000. If you can't pay, the other party could sue. If you have a home or any substantial assets, most experts advise that you have bodily injury coverage of at least $100,000 a person and $300,000 per incident. Property damage should be at least $100,000 a vehicle.

Physical Damage Coverage

  • Physical damage coverage includes comprehensive and collision and covers damage that might occur where no one is at fault. These types of coverage are optional, but if you have a loan on the vehicle being insured, the finance company might require this coverage to protect its investment.

    Physical damage coverage gives you the option of choosing a deductible. A deductible is the amount of damage you will be responsible for. If your deductible is $250, you are choosing to be responsible for any damage up to that amount. The insurance company will pay for any damage after that amount has been reached. The higher your deductible, the lower your auto insurance premium. Most deductibles go to at least $1,000. Choose the lowest deductible you can afford. The deductible you choose should be an amount that you can pay easily.

    If your car is older than 10 years old, you might consider dropping the physical damage coverage. Insurance companies generally use the replacement value of your vehicle when determining claims payments. If your vehicle costs more to repair than to replace, the company would rather pay the replacement cost. On an older vehicle, this might not be very much. Many owners prefer to take on the cost of replacing or repairing these vehicles.

Medical Coverage

  • Depending on the state where you live, medical coverage might be available. Medical payments, personal injury protection and uninsured motorist coverage cover you and your passengers in an accident no matter who's at fault. Medical coverage is useful to people who have regular riders in their vehicles, including real estate agents or those in a carpool. For example, if you carpool to work and are in an accident, medical coverage would prevent your passengers from suing you for medical bills.

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