Get the Policy That Is Right for YOU

So far in this course we've reviewed the basics of auto insurance, examined how your policy works, and developed a "philosophy of insurance."

Ready to put those principles into practice?

Good, 'cause we've got a lot to accomplish and we better get started.


Hopefully after all that you've read you have got a pretty good idea of the coverage you want and the levels you need. But if you're still a little hesitant, don't worry. We'll run through all the basic coverages here and try and get some figures down on paper. (Also keep in mind that the insurance shopping services we recommend can help you decide coverage levels, too. And it never hurts to get a second opinion. . .)


And one last thing (the last, we promise!) These coverage levels are SUGGESTIONS, that's all. They won't cover every possible snafu you could get mixed up in. They're simply the levels we'd buy, and that we consider pretty safe and responsible. While we'd love to be able and give you some hard-and-fast numbers, we simply can't.

The policy you want: Choosing coverage levels

  • Liability. We've been stressing over and over how important this coverage is. But exactly how much liability coverage is enough?

Well, the most common level of bodily injury coverage is 100/300, and for most (but certainly not all) accidents, that is sufficient coverage.

However, if you own a home or have a family, you may want to consider doubling that. And if your assets are very extensive, consider insuring yourself for up to a million dollars or more. (Most auto insurers don't offer policies of over a million in coverage, so if you want more, you may have to purchase an umbrella policy from another insurer.)

As for property damage liability, we recommend carrying a healthy amount, say $50,000 worth. However, there's not as much need for the same super-high levels of protection that we recommend for bodily injury liability. That's because the sky is pretty much the limit when it comes to bodily injury claims, while property damage claims generally hover at a more reasonable dollar level.


  • Medical payments or PIP. One or the other of these coverages is mandatory in some states (including all no-fault states), but if it's not required coverage, consider a few things before you buy.

In general, investing in a good health plan is a better use of funds than is purchasing medical payments coverage. We just don't think it's a very efficient policy.

There are a couple of "buts" here, though. In some states PIP benefits are generous and broad (broader than a health plan), including coverage for lost wages or services. If you live in one of these states, you might want the added protection. Also, if you don't have health insurance, you may want to buy this coverage even if it is limited (just until you get health insurance, of course).


  • Uninsured and underinsured motorist bodily injury. Many drivers go without these very important policies, but we recommend carrying the same levels of these coverages as you do for liability. Almost one in six drivers nationally is without insurance, and they're very often those most financially unable to pay the costs of an auto accident. If you're injured by such a driver, this policy will be the best financial recourse you have.

  • Uninsured motorist property damage. We'll leave this one up to you, but in general it's not the most important policy in the book (but it's not expensive either). If you carry collision and comprehensive, they'll cover your damages if you're hit by an uninsured driver. If your car isn't valuable enough to warrant collision and comprehensive coverage, it probably doesn't warrant UMPD either. (And if you're worried about an uninsured motorist hitting your house, take out a homeowner's policy, for goodness sake!)


  • Collision and comprehensive. Carrying both of these coverages is a good idea if you're driving a newer car (and will be required if the vehicle is financed.) But don't make the common mistake of carrying these expensive policies on vehicles that are too old to warrant the cost. A good rule of thumb is this: don't pay for these policies if their combined annual cost is more than 10% of your car's worth. And when they are necessary, try to carry as high a deductible as possible.

Want to learn even more?

Take our quick auto insurance course, and learn the step-by-step to get the most out of your auto insurance policy for the least amount money.

Just ten easy lessons - start today