Suze Orman's Take on Auto Insurance

Here's a piece dealing with car insurance that I found on Yahoo. It's written by Suze Orman who begins by saying:

In my opinion, minimum coverage is not good enough when it comes to car insurance.

In auto-insurance-speak, a typical minimum coverage policy might be expressed as 30/50/20. This means you have $30,000 worth of bodily injury coverage for each person, with a $50,000 limit per accident, and then $20,000 in coverage for property damage. I don’t care if that’s good enough to meet your state’s requirements. Your goal should be to truly protect yourself in the event of a serious accident. I recommend aiming for a policy with 250/500/100 coverage. What you want to avoid is having someone sue you and come after your personal assets—such as your home—to settle an insurance claim. Putting all your finances at risk to avoid paying a more expensive premium today is not the right approach. You want to truly be insured, not just “sorta” insured.

And a special note about the medical coverage options in auto insurance. I advise you to be extra cautious about turning down or skimping on this coverage just because you have a good health insurance policy. That may be great for you, but remember that you need to insure everyone who’s in your car.

It's good advice. This is no place to skimp. One accident could change your life (financially and otherwise) forever. Some more of Suze's advice includes:

If you are buying an expensive car, I’d also recommend seeing if your insurer offers “replacement cost” coverage.

At the other extreme, if you are driving around a good ol’ beater then you might be able to shave some dollars off of your premium by dropping the collision damage coverage altogether. If you figure you won’t be able to get more than a few thousand dollars for your car, then it probably doesn’t pay to have that coverage, especially when you factor in what the actual payout would be after the deductible.

I think the smart move is to opt for a higher deductible on your auto coverage. Go for $1,000 rather than $250 or $500. Keep in mind that the real reason for your car insurance is to make sure you have coverage in place if there is a serious accident involving personal injuries. You don’t need a low-deductible policy to cover fender benders. That’s the sort of expense that can be paid out-of-pocket.

I agree with her 100% and this is how we handle our car insurance. One thing to add: be sure you have an emergency fund that at least covers the $1,000 deductible so you won't need to go into debt to borrow in case there's an accident. This amount will also cover any fender-benders you need to pay yourself.

Comments

[jim]

I have huge coverage for liability and personal injury, with that respect I agree, but for comprehensive and collision insurance it is not as critical. The limit of your liability with those two insurances is the value of your car and for some that tradeoff is worth it.

[Steve]

Don't forget adding UM uninsured motorist coverage. If you are injured in an automobile accident and the at-fault person doesn't have sufficient coverage or no coverage at all you are without any compensation for your wage loss, out of pocket medical expenses, future medical expenses and pain and suffering. Its especially true here in Florida where our state doesn't even require people to carry BI liability coverage!

[John]

Get the lowest auto rates that will allow you to also get an umbrella policy.