Deciding your Coverage Needs

We’re all looking to save some money these days, and one way some people are looking to lower their bills is by reducing (or eliminating) their auto insurance coverage. No matter how bad things get, I can’t endorse eliminating your car insurance. Not only is it illegal, it’s likely to make a bad situation even worse. Every state requires some kind of minimum insurance, but the level of required protection varies widely from state to state. So how do you know what you need? Well, there are a few things to keep in mind when trying to decide what coverage you do need.

There are several parts to the common car insurance policy that you need to understand in order to decide.

The first part is Bodily Injury Liability. This is the first number or numbers listed on most policies, and is often written as a series of numbers, like 25/50/10. Those numbers represent (in thousands of dollars):

• Bodily injury liability for one person in an accident

• Bodily injury liability for all people injured in an accident

• Property damage liability for one accident

State minimums range widely, but you should really consider adding more than the minimum here. Low limits often don’t cover the medical expenses of those injured in accidents, resulting in lawsuits that could take away your assets or even your home. The difference in premium between $25,000/$50,000/$10,000 coverage and $100,000/$300,000/$100,000 is often much smaller than you’d think, but can save you huge problems in a crash.

The second part is Personal Injury Protection. This will cover your medical bills (and death benefit) in case of an accident. If you don’t have good (or any) health insurance, this can mean the difference between a pile of debt or a healthy recovery after an injury. We always like to say it won’t happen to us, but if it does, you’ll be glad you had it.

The final part of your auto insurance coverage is comprehensive and collision. Collision will cover repair expense to the car in the case that you hit something; say a fire hydrant or a curb, while comprehensive coverage insures damage to your car from things like theft, fire, or a tree falling on your car in a storm. While it’s very important to have this coverage if you have a more expensive car (and its often required for a lease), drivers of older cars with lower values may not need this at all.

So take a look at your policy and decide what you need. You might be overpaying, but you also might be undercovered.