How Much Coverage Do You Need? | ||
How Much Insurance Coverage Do You Need?In order to determine how much automobile coverage you need think about these three things - the year, make and model of your vehicle; where and how it is driven; and how many automotive assets you have to protect. Your Vehicle: You are required by law to have Liability coverage (Bodily Injury and Property Damage). There are minimum coverage amounts required by your state, and, if you are buying or leasing a vehicle, there may also be minimum amounts required by your insurance company and/or lien holder; the bank or finance company. To find out the required coverage and minimum amounts in your state, go to the "Choosing Your Coverage" section. On top of Liability Insurance, you may also want to acquire Comprehensive and Collision insurance... Collision covers any direct and accidental loss to your car and Comprehensive covers loss to your car from fire, theft, break-ins, vandalism and natural disasters. The added combination of Collision and Comprehensive coverage is generally the most expensive part of your auto insurance, generally costing about one-third of the total premium. If you own your car, most experts do recommend skipping Comprehensive and Collision if your car's value is less than $3,000. Where and How Your Car Is Driven: Given that the primary use of your car can affect your auto insurance rates the where, why and how far you drive are important factors when deciding how much coverage you need. If you live in a city or high-risk area, you should take this into account when deciding on your Comprehensive and Collision coverage... it's statistically known that theft and accidents rates are higher in densely populated areas not to mention that larger cities also tend to have more uninsured drivers. Research has also shown that the more you drive, the more likely you are to be in an accident. How Much You Have to Protect: The basic part of your insurance protection, which is also the one required by law in most states, is Liability coverage. A part of Liability coverage is Bodily Injury, which covers injuries to a person as a result of an accident. Within Liability coverage there is also Property Damage, which covers damage to or loss of someone else's property. While each state has minimum requirements, you also need to consider how much insurance coverage you need to protect your personal assets as well. If you don't have adequate coverage, and are sued, the court could order you to pay more than your limit of Liability coverage. You would then have to pay 'out of pocket' to cover the judgment amount ordered by the court. Because of this most experts recommend at least $100,000 per person and $300,000 per accident for Bodily Injury and at least $50,000 for Property Damage; but others insist that even those amounts might not be enough... the more assets you have, the more you need to protect. So, you might want to estimate your net worth and use that figure as a base for determining how much coverage you would need. Some things to think about to determine this figure are: the equity in your home and other property. the value of possessions such as automobiles and art. any savings or liquid investments you have. any non-IRA or employer provided pension or retirement benefits you have. The total value of all these things, plus an added amount for safety, is what most experts feel you would want your Liability coverage to protect - not just the minimum amount the state requires or even the generally recommended amounts if they are far lower than your net worth. This is where umbrella coverage can be very valuable. If you own a home, you might be able to get umbrella coverage that could provide up to $1 million in total coverage! To find out what coverage is required in your state, or to get more information about auto insurance coverage Click Here |
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