How much automobile insurance should I have?

The answer is: as much as you can afford.  Indiana law requires drivers to have automobile insurance on their vehicles.  But the amount and types of insurance you get is up to you.  Here are the different types:

  • Liability: this covers you when you cause a crash and injure someone and/or cause property damage.  The most common liability coverage that people carry is 100,000/300,000.  That means you have coverage up to $100,000 for any one claimant and up to $300,000 for any one occurrence.  So if you caused a crash that injured 5 people, there would be $300,000 worth of insurance under your policy to cover all 5 claims.  If the value of the claims exceed the limit of your insurance, you will be on the hook personally for the amount that exceeds your insurance coverage.
  • Uninsured motorist benefits:  this covers you when someone causes a crash that is not your fault and that person does not have insurance.  The benefits are available to you and any other insured when an uninsured driver causes injury to you in a crash.
  • Underinsured motorist benefits: this covers you when someone causes a crash that is not your fault and that person has insurance, but not enough to cover your injuries.  If you have underinsured motorist benefits that exceed the liability coverage of the at-fault driver, then you can access these benefits under your policy up to the limits under your own policy.
  • Medical Payments Coverage: medical payments coverage is a medical insurance built into your auto policy.  It is a good thing to have because it can not only cover medical bills, but can cover co-pays and lost wages in certain circumstances.  It is a nice thing to have as a back up behind your health insurance.  The biggest benefit of medical payments coverage is its flexibility in use.  Typically, you only have to be (1) using the car when the injury occurs and (2) incur medical expenses as a result of the use of the car and medical payments coverage can be used.
  • Umbrella policy: an umbrella policy, like it sounds, provides excess coverage over and above your liability coverage and can also provide excess coverage over and above your uninsured or underinsured motorist benefits.  For instance, most insurance companies will offer a $1 million umbrella policy over your underlying insurance policy.  These policies are usually relatively cheap compared to the price of the underlying insurance.

My advice: Get quotes that include a $1 million umbrella policy that has a decent amount of medical payments coverage.  It is usually worth the cost.

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