Reviewing Your Auto Policy For Common Mistakes
Your auto insurance policy is one of the types of insurance that you are most likely to use. With that in mind, it’s important to make sure your policy is up to snuff! Here are some of the most common mistakes I see when reviewing auto policies.
1 – Too low a bodily injury liability limit. If you are at fault, this can help pay for medical expenses, lost income, and pain & suffering for the other person, as well as legal fees if you are sued. In Virginia, the minimum required by law is $25,000 per person/$50,000 per accident. While that might be the minimum, that does not mean that is the right amount for you. If you have a net worth substantially more than that, it is critical that these limits are higher. An “umbrella” policy may be necessary as well.
2 – Too low a property damage liability limit. If you are found at fault, this type of coverage pays for the other persons vehicle damage. Again, it’s not uncommon for state minimums to be very low. In Virginia, it is $20,000. If you have this amount of coverage and cause more than $20,000 in damage, you will have to pay out of pocket. It’s not uncommon for me to pull up to a stop light and see every car around me worth more than that – some substantially more! Most insurers will allow you to raise these limits to $100,000 or more, which I recommend.
3 – Too small a deductible. When requesting quotes for auto policies, it’s normal for the insurer to quote lower deductibles of $250 or $500 since the majority of their insured might not be able to afford a larger one in the event of an accident. However, if you are a safe driver and have adequate cash reserves, raising this deductible to $1,000 or so can help lower your monthly premiums.
4 – Adding extra coverages you don’t need! The idea of towing coverage, income loss protection, roadside assistance, and more might seem appealing. But consider the costs and whether or not you already have that coverage through other types of insurance or benefits for other memberships like your credit card, AAA, AARP, and others.
Thank you for reading,
Alex
This blog post is not advice. Please read disclaimers.