It’s a sad fact that auto insurance is a boring subject. The only reason we tolerate it is that all but three states in the union have passed laws requiring us to have it. Were it not for that, we would all just let it die. So the eternal question we ask each other when we have nothing better to do is, “How much is enough?” Every state with a compulsory system starts off with a statutory minimum. This is the amount of liability insurance we must carry if we are to be lawful on the public roads. Failure to have this insurance in place results in a fine for the first offense. Repeat offenders face the risk of jail time with some states prepared to confiscate the vehicle and send it to the crusher. So, if the state sets the floor, is that enough, or should we all top up?
Take Florida as a case in point. It requires local drivers to carry two policies, both in the sum of $10,000, for personal injuries and damage to property. Have you seen how fast the cost of medical treatment has been rising? Even everyday drugs are expensive. But the moment you set foot inside a hospital, the bill starts escalating faster than a Hummer burns up gas. And what about the cost of repairs in a body shop? How much will $10,000 buy if two other vehicles are involved in the same traffic accident? Now let’s go to Maine. Here the minimum is to carry $50,000 for one person injured. If two or more are injured, they share $100,000 to (hopefully) cover their medical expenses. The minimum for property damage is $25,000. These are slightly more realistic figures but, when you add in all the possible claims for consequential and incidental losses, both sets of numbers are inadequate.
If you were to ask an agent for one of the
auto insurance companies, he or she would tell you that you can’t have too much insurance. Since agents earn a commission on the sale of policies, this is not a surprising opinion. So it comes down to a simple rule. If you have a choice, you don’t need to top up your minimum liability policy if you don’t have assets to protect. Let’s say you live in a rental apartment with few items of furniture and no savings in the bank. If you get involved in a traffic accident, there’s no point in chasing you for money. But should you own an expensive house, have a portfolio of investments and enjoy a good lifestyle, you’re worth suing. It’s therefore in your interests to buy additional collision, comprehensive and uninsured/underinsured cover. As a final thought, you may not have a choice because lenders of auto loans always insist on full insurance.
