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Do You Need More Car Insurance?

Some drivers make the short-sighted decision to purchase the minimum amount of auto insurance protection required by law and nothing more. The result is millions of dangerously underinsured drivers out on the road. Is your car underinsured? Read on to find out.

Liability Exposure

Are you wondering why you should be concerned if your car is not covered for the legal limit? If you had an accident for which you were legally responsible and were sued by another party, all of your assets would be in jeopardy unless you had adequate auto insurance liability protection. To determine how much auto insurance liability coverage you need, you'll need to estimate your net worth. Your net worth includes your investments, savings, bonds, retirement accounts, your home, and any other items of value you own. If your net worth is next to nothing, you would probably not be in a bad position if you purchased the bare minimum liability protection. However, if your net worth exceeds the legal minimum in your state, you should purchase enough car insurance liability coverage to protect all of your assets. You can also supplement your auto liability coverage with an umbrella liability insurance policy.

Collision and Comprehensive

Collision and comprehensive are two portions of auto insurance coverage where most people are actually over-insured. On the other hand, if your car has a decent amount of cash value, are you sure you're not underinsured? There is a very simple way to check. Add up your collision and comprehensive premiums for the year and multiply them by ten. If your vehicle is worth less than that figure, it makes more financial sense to drop your coverage. On the other hand, if you have a brand new car that you're still paying off, you do not want to risk being underinsured.Tree with shadow

Uninsured and Underinsured Motorist Coverage

As convoluted as it may sound, you are underinsured if you do not carry uninsured/underinsured motorist coverage on your auto insurance policy. This coverage is so important that several states now require it. Millions of drivers like these are out on the road, and having a collision with one of them would result in a financial catastrophe for you without adequate coverage. If an uninsured driver injured you in an accident, who would pay for your injuries if you're not adequately covered? Unless you have medical payments coverage, which most policyholders don't, you would be stuck covering your and your passengers' medical expenses.