While advice on paying as little for car insurance as possible are all over the Web, what isn’t readily available is reasonable and practical advice on how much is too much car insurance. And, more to the point, is there any such thing as being too well insured on your automotive policy?
Here are some points to consider.
- Consider the consequences – how much you stand to lose. – There’s no denying that you want to ensure you and your family are adequately covered in the case of an accident, either when you are found to be at-fault or when the other driver has no insurance or not enough insurance. If you only carry the bare minimum of liability coverage, just enough to meet your state’s requirements, you could lose everything – your house, your car, your savings. So, any consideration of how much insurance is too much insurance has to go well beyond your liability ceiling. Let’s say that you own a large house with fine furnishings, have substantial investments or other properties, and have teen drivers in the household. You’ll want to carry the maximum limits available from your auto insurance carrier. This is usually $250,000 per person/$500,000 per accident or $500,000 combined single limit. Consider buying an additional umbrella policy to cover anything exceeding your policy limits.
- No assets, no house, no dependants – no problem. – On the other hand, maybe you have few, if any, appreciable assets. You don’t own a house and you have no dependants. Your car may be old, too. You can waste a lot of money paying for collision insurance that you don’t need, as long as you have enough money to buy another clunker or replacement car if this one is totaled. And, since you don’t own anything to speak of, you really don’t need excessive amounts of liability coverage. But just doing the state minimums isn’t a wise move, either. They’re often too low and don’t cover anywhere close to what some accidents cost in the way of damages and injuries. Better to carry a little more, say $25,000 per person/$50,000 per accident. Keep in mind that without sufficient liability coverage, you could be putting your future earnings at risk in the case of a lawsuit that you lose brought by another party when you were found to be at-fault in the accident.
- In-Between – One final example is where you are somewhere in-between having virtually no assets and a lot to lose. What should you do here? How much is too much insurance to have in this particular case? Experts say that the smart choice is to carry $50,000 per person/$100,000 per accident. You might even want to bump that up to $100,00 per person/$300,000 per accident. Keep in mind here that if you lease or buy a car, the lender may require the 100/300 type of coverage, so it’s important to know the requirements.
Bottom line: Every person’s situation is unique. Weigh and balance what you’ve got going on in your life, what you stand to lose, and talk things over with your insurance agent. He or she is the most knowledgeable person to help you determine what will work best for your situation with respect to how much car insurance to carry.