Amount of Auto Insurance?

Do you have a recommendation for the amount of auto insurance? I have found that local insurers are either interested in being the least expensive (and therefore you are under-covered) or they are interested mainly in their commissions (and therefore you become over-insured). Can you help with some guidelines?

Answer:  With car insurance, you are carrying two key types of coverage: coverage on the vehicle for damage, and liabliity coverage for any harm you inflict on passengers or others.

In general, consider carrying at least $1 Million in liability coverage. If you are ever deemed "at fault" in an accident, you will need at least this much coverage if you are sued. In today's society, settlements are being driven higher and higher. The government stipulated minimums are not sufficient.

If you can afford it, consider upping your liability. Many insurers will give you an additional $1 Million worth of liability at a relatively small additional cost (and often at less additionally, than the first $1 Million in coverage will cost you.) This is a wise choice.

While we don't want to think about it, insurance is about risk. What's your risk in the case of a lawsuit? Generally, juries will stipulate a settlement that is no more than the insurance coverage of the defendant, especially when a bigger settlement would mean financial ruin. But you can't depend on that. That is why upping your liability can make good sense.

Having said that, you don't necessarily have to carry $10 Million in liability. Part of the issue with insurance is that you are 'playing the odds' and your insurance agent or broker will normally focus on the risks to you, in order to get you to buy more. So, if you are quite wealthy, you may want to carry $10 Million in liability to protect your assets. If you are the average, middle class person, then you can carry less.

As for the insurance coverage for your vehicle itself, this is much less clear. However, in general, you shouldn't carry collision insurance on a vehicle that is over 10 years old (unless it is an antique or collector's car). You also might want to consider the highest deductible possible, especially if you are a good driver. This can help reduce your costs.

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