Auto Insurance Priority: Protect Yourself First, Then Your Car
By Allison Bisbey Colter
Special to USInsurance.com
Most people think about their car when getting auto insurance; you should just as much about protecting yourself in case someone sues you for an accident.
Jack Hungelmann, an insurance agent and author of "Insurance for Dummies," recommends spending the most money on the kind of liability that could hurt you the most: personal injury. He believes most people should have coverage of $1 million.
That may sound like a lot, but if you hit someone who earns $100,000 a year, putting that person out of work for five or 10 years or forcing him or her to change jobs, you could be sued for medical charges and lost wages.
Liability coverage of $1 million is usually sold as an umbrella policy covering your home and car. If you don't want to pay for that much coverage, Hungelmann recommends getting at least $500,000 of coverage for each. The incremental cost of getting $1 million of coverage a year vs. $100,000 is somewhat cheap, perhaps $100 or $150 of yearly premium.
If you don't have that kind of money, skimp on other kinds of auto coverage, such as damage to the car itself, and apply savings toward personal liability coverage. For example, take a higher deductible – the amount you pay upfront before your coverage kicks in -- then use resulting savings on personal liability.
"The worst kind of auto insurance has a low deductible and limited liability," Hungelmann says. "You're spending the same amount of money as someone with better coverage, but you're [doing a worse job of] allocating your dollars."
Some Auto Insurance Background
According to the Insurance Information Institute, an industry trade group, there are to six kinds of coverage in your insurance, each of which is priced separately.
Personal injury protection covers the treatment of injuries to you and your passengers. It may include lost wages as well as medical expenses.
Bodily injury covers damage that you as the driver or policyholder cause someone else. It covers you when you are driving your car and when you are driving someone else's car with their permission.
Property damage liability pays for damage you or another driver cause to someone else's car or anything else you hit.
Collision coverage pays for damage to your car as the result of a collision with another car.
Comprehensive coverage reimburses you for loss due to theft or damage caused by something other than a collision with another car such as a natural disaster or a run-in with a deer.
Uninsured and underinsured motorist coverage reimburses you or another designated driver who is hit by an uninsured driver or a hit-and-run driver.
Insurance Guide
Auto Insurance
Home Insurance
Life Insurance
Renters Insurance