Auto Insurance Coverage
Almost every state requires you to buy a minimum amount of liability
coverage. Chances are that you will need more liability insurance than
the state requires because accidents cost more than the minimum limits.
If you’re found legally responsible for bills that are more than your
insurance covers, you will have to pay the difference out of your own
pocket. These costs could wipe you out!
Many state laws require liability coverage, also known as “property
damage/bodily injury.” It can help cover expenses from damaging a
vehicle or injuring a person in an accident.
Collision insurance can help pay for damage to your car after an accident involving another vehicle.
You may want to talk to your agent or company representative about
purchasing higher liability limits to reflect your personal needs. You
may also consider purchasing an umbrella or excess liability policy.
These policies pay when your underlying coverages are exhausted.
Typically, these policies cost between $200 and $300 per year for a
million dollars in coverage. If you have your homeowners and auto
insurance with the same company, check out the cost of coverage with
this company first. If you have coverage with different companies, it
may be easier to buy it from your auto insurance company.
In addition to liability coverage, consider buying collision and
comprehensive coverage. You don't decide how much to buy. Your coverage
reflects the market value of your car and the cost of repairing it.
Decide on a deductible—the amount of money you pay on a claim before the
insurance company reimburses you. Typically, deductibles are $500 or
$1,000; the higher your deductible, the lower your premium.
If you are ever sued, your standard homeowners or auto policy
will provide you with some liability coverage, paying for judgements
against you and your attorney's fees, up to a limit set in the policy.
However, in our litigious society, you may want to have an extra layer
of liability protection. That's what a personal umbrella liability
policy provides.
An umbrella policy kicks in when you reach the limit on the underlying
liability coverage in a homeowners, renters, condo or auto policy. It
will also cover you for things such as libel and slander.
For about $150 to $300 per year you can buy a $1 million personal
umbrella liability policy. The next million will cost about $75, and $50
for every million after that.
Because the personal umbrella policy goes into effect after the
underlying coverage is exhausted, there are certain limits that usually
must be met in order to purchase this coverage. Most insurers will want
you to have about $250,000 of liability insurance on your auto policy
and $300,000 of liability insurance on your homeowners policy before
selling you an umbrella liability policy for $1 million of additional
coverage.
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