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Auto Insurance: State Minimum Requirements are Inadequate


As most of you know, auto insurance really comprises two different kinds of coverage: Collision coverage and personal liability coverage. Unless you’re still paying off a car loan, collision coverage is generally optional – and is the smaller of the two concerns.

Liability insurance, though, is generally mandatory. In areas where it isn’t mandatory, you have to post a bond demonstrating the financial capacity to make other drivers and pedestrians around you whole in case you are involved in an accident.

Different states have different minimum liability coverage. However, in all states, it’s wholly inadequate to cover the risk.

Let’s take a look at the numbers.

When you look at your policy information, you may see three numbers, separated by a “/” sign. For example, California has a 15/30/5 minimum policy.

The first number refers to bodily injury coverage per passenger. A California bare-minimum policy will cover up to $15,000 per injured passenger in medical bills, lost earnings, etc. The second number refers to the maximum bodily injury coverage per accident. So in this case, the policy will pay out a maximum of $30,000 per incident, no matter how many passengers you have. (If you have more than two passengers, regularly, you need more bodily injury coverage right there). And the third number refers to the maximum coverage for property damage – in this case, only $5,000.

That’s not much. Settlements and judgments on serious accidents – especially T-bones and rear-enders, in which people are injured, are routinely upwards of $50 to $100,000 and more.

That means if you are sued, and lose, you could be forced into bankruptcy – even with insurance!

So when your insurance agent tells you the minimums aren’t enough, he’s not just pulling your leg or trying to boost his commission.

Most professionals will recommend something closer to a 100/300/100 policy. That is, at least $100,000 in bodily injury coverage per person, $300,000 per accident, and $100,000 in property damage. But if you can’t afford the expanded coverage, it’s certainly better to pay for what you can afford than go without coverage altogether.

Pay out a little extra for coverage against uninsured drivers, as well. Especially if you aren’t on active duty or don’t have access to TRICARE. That’s probably an extra $5 per month for about $100,000 in coverage. You won’t miss it, and it will be the most important money you ever spent if you’re clobbered by an uninsured driver. And believe me, there are plenty of those on the road around military bases!

One last note: USAA has a terrific reputation for auto insurance. But keep them honest and make them earn your business by getting other price quotes! Navy Federal Credit Union has worked out a discount arrangement for its members with GEICO, and has come up with a very competitive alternative to USAA’s auto insurance plan. Here’s a link to the GEICO/Navy Federal quote engine.

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