A Personal Auto Policy (PAP) generally comes with five coverages included in the premium.
1. Auto Liability... protects you from claims other people make against you arising from auto accidents
2. Uninsured/Underinsured Motorists Liability (UIM)... protects you for claims you make against other drivers who do not have insurance or do not have enough insurance
3. Medical Payments... pays money to doctors and hospitals for your medical expenses arising out of auto accidents
4. Collision... pays for damage to your car arising out of auto accidents where you collide with another car or object, like a tree.
5. Comprehensive... pays for damage to your car arising out accidents that are other than collision, for example, flood, fire and theft.
When you ask, "How Much Auto Insurance Do I Need?", I'm assuming you mean #1, Auto Liability so I'll limit my answer to that coverage. In subsequent postings, I'll answer how much you need for the other coverages.
So, how much Auto Liability Insurance do you need?
It depends. If you just want to get on the road and be legal about it, in New Jersey, the minimum limit of insurance is $35,000 for each accident. You are also required to purchase Uninsured/Underinsured Motorists Liability and Medical Payments and they also have minimum limit requirements. Other states have similar minimum limit requirements and they are spelled out at each state's insurance department website.
Minimum limit policies will get you on the road, but they are not a smart use of your dollars. Consider an auto accident where you strike a Lawyer's Mercedes... his new Mercedes. Think $35,000 will take care of everything? I wouldn't bet on it. And if $35,000 is not enough, you'll pay personally for a long time.
Now, if your primary goal is adequate protection for you, your family and your assets, you need to take a step back. Liability claims against you arising out of the use of an auto is one area you should be concerned about. You should also be concerned about liability claims arising out of owning a home, operating a boat or a motorcycle or an RV. Liability claims can also arise from owning vacation property. You can trigger a claim. Your spouse can trigger a claim and your children can trigger a claim.
Considering all the people in your life who can trigger a claim and all the ways they can do it, How much is enough liability insurance? How much should you buy?
Answer: I don't know.
But I do know EVERY smart insurance consumer, concerned about "how much insurance is enough?" should purchase a $1 million Personal Umbrella Policy. A Personal Umbrella Policy is a secondary policy. Your auto policy, homeowner policy, boat policy, and so on are all primary policies. Each primary policy has its own limit of insurance. In the event of an accident (in the home, in the car or on the water), you have a primary policy to protect you. If the amount of primary insurance is not enough to pay a claim, the Personal Umbrella policy adds a million dollar cushion.
Is a Personal Umbrella policy expensive? No. A million dollar umbrella GENERALLY starts around $125. That's $125 for $1,000,000 of liability protection you can use over your auto insurance or your homeowner insurance or your boat insurance and so on and so on.
If there is a better deal in the insurance business, I'm not aware of it.
Now if you're sold on the idea that a Personal Umbrella Policy has merit, we need to return to your original question: "How much Auto Liability Insurance do I need?"
You need an amount of insurance that satisfies the minimum requirements of the Personal Umbrella Policy. For example, if your Personal Umbrella Policy requires you have a $300,000 Personal Auto Liability Limit, that's what you need to buy for your auto policy. If the requirement is $300,000 and you have $250,000, there will be a $50,000 gap in the event of a serious claim. Again, for example, you're responsible for a serious auto accident. It ends up costing $600,000. Your auto policy will pay $250,000, you'll have to pay $50,000 and then the umbrella will pay the remaining $300,000. So you can see, you need to buy the correct amount of auto and home insurance and the correct amount for any other primary policy so you don't have a gap in coverage.
Can you buy a Personal Umbrella Policy with a limit higher than $1 million? You can, but the higher the limit, the greater the scrutiny.
I hope I've answered your question, but if I haven't, feel free to call, fax or email me.
.JPG){kind=avatar}
1. Auto Liability... protects you from claims other people make against you arising from auto accidents
2. Uninsured/Underinsured Motorists Liability (UIM)... protects you for claims you make against other drivers who do not have insurance or do not have enough insurance
3. Medical Payments... pays money to doctors and hospitals for your medical expenses arising out of auto accidents
4. Collision... pays for damage to your car arising out of auto accidents where you collide with another car or object, like a tree.
5. Comprehensive... pays for damage to your car arising out accidents that are other than collision, for example, flood, fire and theft.
When you ask, "How Much Auto Insurance Do I Need?", I'm assuming you mean #1, Auto Liability so I'll limit my answer to that coverage. In subsequent postings, I'll answer how much you need for the other coverages.
So, how much Auto Liability Insurance do you need?
It depends. If you just want to get on the road and be legal about it, in New Jersey, the minimum limit of insurance is $35,000 for each accident. You are also required to purchase Uninsured/Underinsured Motorists Liability and Medical Payments and they also have minimum limit requirements. Other states have similar minimum limit requirements and they are spelled out at each state's insurance department website.
Minimum limit policies will get you on the road, but they are not a smart use of your dollars. Consider an auto accident where you strike a Lawyer's Mercedes... his new Mercedes. Think $35,000 will take care of everything? I wouldn't bet on it. And if $35,000 is not enough, you'll pay personally for a long time.
Now, if your primary goal is adequate protection for you, your family and your assets, you need to take a step back. Liability claims against you arising out of the use of an auto is one area you should be concerned about. You should also be concerned about liability claims arising out of owning a home, operating a boat or a motorcycle or an RV. Liability claims can also arise from owning vacation property. You can trigger a claim. Your spouse can trigger a claim and your children can trigger a claim.
Considering all the people in your life who can trigger a claim and all the ways they can do it, How much is enough liability insurance? How much should you buy?
Answer: I don't know.
But I do know EVERY smart insurance consumer, concerned about "how much insurance is enough?" should purchase a $1 million Personal Umbrella Policy. A Personal Umbrella Policy is a secondary policy. Your auto policy, homeowner policy, boat policy, and so on are all primary policies. Each primary policy has its own limit of insurance. In the event of an accident (in the home, in the car or on the water), you have a primary policy to protect you. If the amount of primary insurance is not enough to pay a claim, the Personal Umbrella policy adds a million dollar cushion.
Is a Personal Umbrella policy expensive? No. A million dollar umbrella GENERALLY starts around $125. That's $125 for $1,000,000 of liability protection you can use over your auto insurance or your homeowner insurance or your boat insurance and so on and so on.
If there is a better deal in the insurance business, I'm not aware of it.
Now if you're sold on the idea that a Personal Umbrella Policy has merit, we need to return to your original question: "How much Auto Liability Insurance do I need?"
You need an amount of insurance that satisfies the minimum requirements of the Personal Umbrella Policy. For example, if your Personal Umbrella Policy requires you have a $300,000 Personal Auto Liability Limit, that's what you need to buy for your auto policy. If the requirement is $300,000 and you have $250,000, there will be a $50,000 gap in the event of a serious claim. Again, for example, you're responsible for a serious auto accident. It ends up costing $600,000. Your auto policy will pay $250,000, you'll have to pay $50,000 and then the umbrella will pay the remaining $300,000. So you can see, you need to buy the correct amount of auto and home insurance and the correct amount for any other primary policy so you don't have a gap in coverage.
Can you buy a Personal Umbrella Policy with a limit higher than $1 million? You can, but the higher the limit, the greater the scrutiny.
I hope I've answered your question, but if I haven't, feel free to call, fax or email me.