Do You Have Enough Auto Insurance?

Do you have enough auto insurance coverage? Did you know that the minimum required amount of auto liability insurance in Maryland is woefully inadequate? Moreover, if you are in an accident caused by an uninsured or underinsured driver, you would look to your own insurer to make you whole for any losses you might suffer.

Such losses can be significant. For working age individuals, an automobile accident could result in you losing the ability to work. If that is the case, you will be dependent on an insurance recovery to provide you with the value of the wages you would lose by not being able to work and earn a living for the rest of your life.

Consequently, it is important that you review your automobile insurance bodily injury coverage. I generally recommend that working age people, and especially high earning workers, have at least $1,000,000 in coverage. And importantly, I advise that such high coverage limits apply for your uninsured motorists insurance. That way, if you are hit by an uninsured or underinsured driver, you could look to your own insurance company to make sure you are not impoverished if the accident results in an inability to work.

Also, if you are responsible for injury to a high earning individual and your insurance coverage is not sufficient to compensate that person for her lost wages, then your other assets may be at risk to pay for the injured party’s losses.

Often, one can obtain an increase in liability coverage with no premium increase if you also raise the deductible on your auto collision or comprehensive insurance coverage. Indeed, some advisers suggest that a higher deductible is desirable because, if you make a lot of small claims against your policy, the benefit of the claim will be minimal, but the resulting premium increase could be significant. With a higher deductible, $1,000 for example, you will assume the responsibility to pay for such loss, but you would get the benefit of reducing your premium. Such premium reduction may allow you to obtain higher liability coverage with no increase in overall premium.

Some insurers like GEICO advertise that they can save you money because they have less costly premiums than other insurers. However, GEICO generally will not write a policy with $1,000,000 liability coverage. Therefore, one must consider whether a cut-rate insurer is a good deal if it cannot provide you with the coverage you desire.

Also, while many people have umbrella insurance coverage, such coverage may not apply to uninsured motorist liability. If that is the case with your insurer, then you cannot rely on your umbrella insurance to cover a shortfall in liability coverage if you are hit and injured by an uninsured or underinsured driver.

It is prudent financial planning to review your automobile insurance policy to ensure that your coverage is adequate for your circumstances.