So we really need to shop around and that's what I'm doing. Here are the four big things I learned from this exercise (and many years of writing about cars):
Watch out for minimum coverage.
States' legal minimums for insurance coverage should be considered just that – minimums. Jay Edelstein, a Philadelphia accidents attorney, strongly recommends policies with much higher limits. If you're held liable in a crash and only have the state minimum required coverage, you risk being held personally responsible for paying the other guy's damages.
If you don't have any liability coverage, you're responsible for paying for the pain, suffering, and other personal hardships and some economic damages, such as lost wages, that you cause, says Michael Reitman, a Clark, N.J. attorney who handles negligence cases. The insurer won't give you a lawyer or pay for one for you if you're sued. Your assets will be in jeopardy and you risk having your wages garnished if a judgment is entered against you. And, if you don't have coverage and someone hits you, you can't sue, says Reitman. I'm convinced!
Umbrella policies make good sense.
Umbrella insurance is a policy that increases your liability coverage – that is, what you'll owe someone else if you're responsible for injuring them or damaging their property. It covers more types of claims at a higher limit. Trustedchoice.com, a company that represents 140,000 independent insurance agents, says these policies can benefit anyone who drives, owns or rents a home and has assets to protect. Seeing that's almost anyone who has been saving money for a few years, it's something worth looking at. Of course, like any type of insurance, you need do a cost-benefit analysis to see if it's right for you. How much can you afford to spend each month and what do you stand to lose if you don't pony it up?
While you're pondering that, consider this: Nearly 15% of personal injury liability awards and settlements are $1 million or more. About 20% of people with high net worth don't have this coverage, Trusted Choice says. An average cost of about $380 per year – or about $32 a month – can get you $1 to 2 million worth of protection. Sold!
Collision coverage raises questions.
It may or may not make sense for you. Our hunk o'junk 2001 SUV – a third vehicle for my two-driver household – is on its way to any charity that might want it, most likely for parts. We haven't paid collision coverage on it for awhile, but I just realized (by actually looking at my policy!) that we've been paying what's known as comprehensive coverage, which covers non-crash things that could happen to my car. I don't care what happens to this car so just saved, well, a whopping $20 a year.
While skipping collision coverage for a car worth $3,000 or less may seem like a smart way to save money, the cost of replacing any vehicle you actually need after a total loss can prove overwhelming if you don't have collision coverage. (We wouldn't replace ours until our teen starts to drive.)
Uninsured and underinsured motorist coverage a must.
If you suffer a life-changing injury and can't go back to work after a crash caused by a driver without enough insurance, your life and future can hang in the balance, says Philadelphia lawyer Dean Weitzman. The only way you can be adequately and fairly compensated after such an event is to have the highest amount of UM and UIM that you can afford, he says. There's even a way to do that without spending more on your existing policy: Just increase your vehicle collision deductible.
"If you're going to take a chance, take the chance on the property damage," Weitzman wrote on the MyPhillyLawyer.com blog. "That's better than having the unknown risk of having life changing catastrophic injuries and not having the money to pay for care."