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Written by Doug Cohen
Avoiding Costly Mistakes on Car Insurance
Liability insurance is required coverage in almost every single state. And most drivers are smart enough to know their license depends on carrying this state-mandated protection. But how much do we really know about choosing coverage limits for bodily injury and property damage liability coverage? Many drivers make mistakes when setting up the liability insurance which can prove costly later.
"After an accident, minimum liability limits are often found to be inadequate," car insurance expert Doug Cohen says. "Even worse, had the driver taken time to compare car insurance liability prices at higher levels, they would have found that for a few more dollars per month, they could have purchased double the liability coverage."
At accident time, bodily injury liability insurance pays those potentially high medical bills of the people you hit so you won't have to, assuming your "per person" limits are high enough. Everyone knows a trip to the doctor is costly, even in the most routine cases.
And what about property damage liability insurance? Can drivers safely carry lower limits on this coverage as long as they meet state requirements? According to Cohen, this is also a common mistake. The money you save today on lower premiums could easily be eaten up by the money you spend tomorrow after the accident.
"This is the one coverage you will always need when you hit another car. There may or may not be bodily injury, but there will always be property damage to the other car," Cohen says. He also points out a "secret" about property damage liability insurance. “For reasons unknown to me, this is one of the cheapest insurance coverages you can buy. I recommend people jack this number up as high as possible, to $100,000 or more if you can afford it, because it may only cost $12 more, and if you cream someone's brand new Mercedes-Benz SL600 -- MSRP $134,025 -- you're going to need it."
State law requires minimum coverage for liability protection, but it doesn’t require you to carry enough insurance to keep you out of bankruptcy court. Don’t make the mistake of carrying the minimum without counting the potential costs of an accident. Even a minor fender-bender can cost hundreds, even into the thousands of dollars to repair bumpers, fenders, engine parts, tail lights, and repaint. Do you have enough coverage to protect your bank account from the damage an accident may do to it?
One way to insure adequate coverage is to have a conversation with your insurance agent and ask what coverage levels are appropriate in your area. A good agent will tell you to examine the level of risk where you live, the amount of time you spend behind the wheel, and the average claim for a medium-to-severe car accident. These factors will tell you a great deal about how much liability coverage to carry to be better prepared for an accident. As Cohen points out, additional property damage coverage can cost as little as an extra $12-$20 more per month; the protection you get in return is well worth the investment.
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