Question 1

How much auto insurance coverage do I need?

Accepted Answer

At minimum, you need to meet your state's liability requirements. However, financial experts recommend liability coverage that at least matches your total net worth. If you have $300,000 in assets, you should carry at least $300,000 in bodily injury liability to protect against lawsuits that could seize those assets.

Question 2

When should I drop collision and comprehensive coverage?

Accepted Answer

Consider dropping collision and comprehensive when your vehicle's market value drops below $5,000, or when the annual premium for these coverages exceeds 10% of your car's value. If your car is worth $3,000 and collision costs $400/year, the coverage may not be worthwhile since you could pay out of pocket for a replacement.

Question 3

What is uninsured motorist coverage and do I need it?

Accepted Answer

Uninsured/underinsured motorist (UM/UIM) coverage pays for your injuries and damages when the at-fault driver has no insurance or not enough. About 13% of drivers nationally are uninsured. This coverage is required in about 20 states and strongly recommended everywhere else, especially if you have significant assets or medical expenses to protect.

Question 4

What is PIP coverage and is it required in my state?

Accepted Answer

Personal Injury Protection (PIP) covers medical expenses, lost wages, and other costs for you and your passengers regardless of who caused the accident. PIP is required in no-fault states like Florida, Michigan, New York, and about a dozen others. Even where optional, PIP can be valuable if you don't have health insurance.

Question 5

How does an umbrella policy work with auto insurance?

Accepted Answer

An umbrella policy provides additional liability coverage beyond your auto (and home) insurance limits. For example, if you have $300,000 in auto liability and a $1 million umbrella, you effectively have $1.3 million in protection. Umbrella policies are relatively inexpensive ($200-$400/year for $1M) and recommended for anyone with significant assets.

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