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How much auto insurance coverage do I need?

You buy insurance to protect yourself and your family from loss to your person or property. You also buy insurance to protect you and your family from loss that you or a family member may cause to others. Essentially, you are protecting your vehicle and your assets.

In determining the amount of liability coverage you need, you must first consider the minimum amount required by your state. However, this amount is usually not sufficient. Most importantly, you need to consider the value of your vehicle and your net worth.

There are two types of liability coverage: bodily injury and property damage. Bodily injury liability insurance covers the medical and legal costs for an accident when you are at fault. If you do not have enough liability coverage and you are found legally responsible, you will have to pay the difference out of your own pocket. Therefore, it is important to assess your needs and get the right amount of coverage that will protect you and your family. It is a good idea to ask about the next level of coverage. Many times you can get much more coverage for very little cost.

In addition to liability coverage, consider buying collision and comprehensive coverage. Collision coverage covers your vehicle when your vehicle hits or is hit by another vehicle or object. It also covers you in the event your vehicle rolls over. Comprehensive covers your vehicle for incidents other than collision. The amount of your comprehensive coverage is based on the market value of your vehicle and the cost of repairing it.

You may also consider purchasing an umbrella policy. An umbrella policy will supplement your coverage and provide additional protection. These policies pay when your underlying coverages are exhausted. Depending on your insurance company, you can add from $1M-$5M additional coverage.

Last Modified: Tuesday 23rd February 2010

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