Determine your insurance needs
Hopefully, you now realize the importance of having the right types and amounts of automobile insurance coverage. This next step is to correctly determine your specific insurance needs. This will depend on many factors, including your financial assets, value of your vehicles, budget constraints, etc.
We suggest that you first begin by printing our Automobile Coverage Worksheet. It contains each of the primary automobile insurance categories, and provides spaces for entering your answers. You will want to print a copy of the form for each of your automobiles. Select the appropriate format below:
Next, we want to concentrate on those items that have been mandated by the state in which you live. This includes minimum amounts of liability coverage, uninsured motorists (UM) coverage, and possibly no-fault or personal injury protection (PIP). Review our table to determine the minimum mandates for your specific state of residence. On the worksheet, enter these numbers in the Minimum Amount column.
Now we want to work on entering the appropriate values in the Recommended Amount column. We suggest using two different methods to determine the correct values for your situation. First, you can begin with the Automobile Coverage Analyzer provided by InsWeb.com. It is simple to use, and does provide both recommendations and the rationale for their answers. Still, the analyzer is rather generic in nature, and doesn't account for state-required minimums, etc. Also, as they are an insurance broker with a vested interest in maximizing a sale, you should consider their suggested amounts as maximum amounts of coverage.
Second, we have prepared informational pages of basic recommendations, including amounts and rationales, based on a variety of different financial situations. You should select the most appropriate category below. If your situation falls between two of these categories, then review them both and make the best determination.
- Low income, no financial assets - usually with family earnings below $25,000, renting, net worth below $10,000.
- Moderate income, few financial assets - typical of family earnings below $50,000, renting or a starter home, net worth below $25,000.
- Middle income, some financial assets - normally with family earnings below $100,000, some equity in a home, net worth below $100,000.
- Upper income, substantial financial assets - routinely family earnings above $100,000, significant equity in a home, net worth up to $500,000.
- Exceptional income, significant financial assets - usually with family earnings in excess of $200,000, more than one home, net worth in excess of $500,000.
Compare the results of our suggestions and the Analyzer results, and make your best determination regarding the coverage you should have. Enter these results in the Recommended Amounts column on your worksheet.
If you still have questions, consider getting professional help. Once you have determined your specific needs, then it is time to begin evaluating your current coverage so that you can identify and make the necessary changes.
Step 4 - Evaluate Your Insurance Policies