How Much Auto Insurance Do You Need?

How Much Car Insurance Do You Need?
By Mark A. Doughty, Esq.   www.GoLaw.com

Most drivers think they have too much auto insurance.

Most drivers after involvement in an auto collision find out they had too little!

Don't get caught having too little auto insurance coverage.

ONE way to reduce your auto insurance premium is to increase the deductible on your collision coverage and reduce on your liability coverage. Sometimes this can make sense, but often it's not worth the extra risks. In California, the minimum coverages are
1.  Liability Coverage: $15,000 per person and $30,000 per accident
2. Property Damage: $5,000 per accident.  (California Insurance Code §11580.1b)

If you cannot afford liability insurance, you may be eligible for the California Low Cost Automobile Insurance Program. Additional information is available at www.aipso.com/lc or call 1-800-602-8861.

Carinsurance.com has an online calculator to help you evaluate this question based upon your personal family and financial situation (http://www.carinsurance.com/Coverage-Calculator.aspx) or talk to your insurance broker. I find there are sometimes lower prices through Independent Insurance Brokers who can shop 5 or 10 different companies vs. just one as in Farmers, State Farm or Allstate brokers. Contrary to TV ads, you “May Not” be in “GOOD HANDS” with a single company broker!

ProgressiveAgent.com has a wonderful 5 company comparison online that even shows you the competition when they are much lower. I used it when my 18 year old son had a new truck and I did not want him on my policy. It showed us a different company was 50% less for the same coverages!

Bodily Injury Liability
This coverage, which is required in most states, compensates the driver of the other car and its passengers in the event you get into an accident. It also covers the passengers in your car. The main consideration here is protecting your assets against lawsuits that arise from auto accidents. "But I'm a careful driver," you say. It doesn't matter. You can get sued even if the accident is not your fault.

Bodily injury liability is sold in standard increments that designate both how much coverage you have per person in an accident, with an additional limit per accident. For example, if you buy bodily injury worth $100,000/$300,000, each of the people you injured could be compensated $100,000, but only up to $300,000 per accident.

How much coverage you need is a function of what assets you have to protect. If you make $30,000 a year and rent your apartment, $50,000/$100,000 should suffice. But if you make more than $75,000 a year, own a house worth $150,000 and have $40,000 in mutual funds, you should consider at least $100,000/$300,000 of coverage. How much you'll pay to increase your bodily injury liability coverage depends on several factors, including your age, where you live, marital status and driving record. To increase Liability Coverage from $15,000/$30,000 and $5,000 to $100,000/$300,000 and $25,000 can be as low as $50 added annual premium.

One more option: If you have substantial assets, buy $300,000 in bodily injury on your auto policy and $300,000 – to $3,000,000 on the liability portion of your homeowners policy. Then spend another $150 to $300 for a $1 million umbrella policy, which covers you against all manner of liability claims. Should you want still more coverage, the cost for an additional $1 million in coverage is minimal: It's typically $75 to increase your coverage to $2 million, and then $50 for each million after that, according to the Insurance Information Institute.

Property Damage Liability
This coverage will pay for the repair and replacement of the other guy's car or property in the event of an accident. State-required minimums are as low as $5,000, but if you total somebody's Lexus, that won't begin to cover the damage.

You're better off with a minimum of $50,000 for each vehicle you own. And to be truly safe, you should have a total of $100,000 coverage.

Medical Payments Protection
DO NOT skimp on this one! Med Pay or PIP coverage pays for the medical and funeral costs associated with an accident for you and your family or any occupant of your vehicle regardless of whose fault it was. Some policies protect a named insured on your policy in another person’s vehicle or as a pedestrian.  Some people SKIP this but there are several good reasons to have this coverage.
1. Your occupants (friends or family) may not have health insurance
2. If the accident is the fault of the other driver and you collect on Med Pay, coverage is immediate and usually not subject to the same Pre-Approval requirements of Health Insurance
3. Even if you eventually collect from the other driver’s insurance you may not have to repay this amount to your insurance company.

Uninsured or Underinsured Motorist
This coverage pays for medical and funeral costs for you and your family in the event you get in an accident with either a hit-and-run driver or a driver who doesn't have enough auto insurance. Uninsured Motorist policies usually cover bicycle and pedestrian accidents, as well as a named insured on your policy in another person’s vehicle. On average, it costs less than $40 a year for $100,000 coverage annually. Given the prevalence of uninsured drivers nationally, this coverage is essential.  Studies show uninsured drivers in California can be from 15% - 29% of all cars on the road!

Collision and Comprehensive
Collision reimburses you for the cost of repairs or replacement of your car after an accident.  Comprehensive covers you in the event your car falls victim to a natural disaster, vandalism or theft. With either coverage, the lower the deductible you choose, the more the policy will cost you. I recommend that you always choose the highest deductible you can afford ($1,000-$5,000 is fine). In effect you save premium dollars by being Self Insured for the deductible amount.  If you have an older car, you might drop this coverage altogether.

Collision and comprehensive, which can account for 30% to 40% of your total premium, are cash-value coverages. That means if your car is damaged, the most you'll recoup is the cash value (See kbb.com and nada.com), which declines precipitously as your car ages. If you have cash in a savings account to repair or replace you car on a moments notice you might skip these coverages. However, if you eliminate the coverages, you'll have to foot the bill if the car is damaged, totaled or stolen.  If it caused by an insured driver it can take weeks or months for the driver’s company to pay out.

Optional coverages:
1. Rental-car reimbursement, which pays as little as $25 or so a day while your car is in the repair shop after a collision.
2. Towing coverage, can be as low as $10 annually. Compare that to the $60 annually to join an Auto Club like CSAA.
3. Full glass coverage, auto glass is expensive and an errant stone can ruin a $500 windshield in the blink of an eye.

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About the author: Mark A. Doughty has practiced personal injury and auto collision law in the Sacramento valley since 1980. For questions or representation see www.GoLaw.com or call 916-645-1917; 530-674-1440.

Sources:
1. http://www.GoLaw.com - My 33 Years of Auto Liability Law Practice in Sacramento Valley, California
2. http://www.smartmoney.com
3. http://www.carinsurance.com
4. http://www.dmv.ca.gov
5. http://www.carinsurance-california.com
6. http://articles.latimes.com
7. http://www.insurance.ca.gov

Contact us for your Sacramento accident lawyer today

At the Law Offices of Mark A. Doughty, you can contact us twenty-four hours a day, and we are available for evening or weekend appointments. If necessary, we will even visit you at home or in the hospital. We accept cases on a contingency fee basis, meaning that you pay no fees unless we obtain a recovery for you. For the convenience of our clients, we have Spanish and Punjabi interpreters available.

If you are injured, contact the Northern California Law Offices of Mark A. Doughty for an accident lawyer in the Sacramento Area.

For Yuba City, CA - call 530.674.1440 

For Sacramento, CA - call 916.979.1917 

For Lincoln, CA - call 916.645.1917 

Go to our website: GoLaw.com
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Filed under: Auto Insurance Tips
Topic: Automobile Accidents