Understanding Your Auto Insurance Needs - Step 3

Now that you know what the auto insurance puzzle looks like, you can assess which pieces are right for you. Start with the foundation piece: liability insurance.

Insurers generally recommend you purchase at least 100/300 limits of bodily injury liability because that will protect you from the majority of accidents, says Michael Plesko, former head of claims at Prudential Property & Casualty and current consulta

nt based in Liberty, Mo. Plesko says that even if you've caused a serious injury, a plaintiff attorney is likely to settle a case against you for your 100/300 limits rather than sue you. "If you have only the minimum coverage, the attorney is going to be

compelled to go after your assets," says Plesko.

Clinton Miller, a San Jose, Calif.-based insurance claims consultant and former claims manager for The Hartford, agrees. "The unwritten rule among plaintiff attorneys for the last 37 years, as I've seen it, is that they take the policy limits, and they

won't go after your personal assets unless you're arrogant or malicious, you show that you enjoy injuring people, or you're a jerk," he says. "Jerks will need to buy more liability insurance or learn how to be nicer," he jokes.

If bodily injury liability limits of 100/300 are out of your price range, you have to weigh what you can afford against the assets you have, says Plesko. If you don't own a home, don't have a savings account, and you are barely able to make ends meet,

you might not need lots of liability insurance to protect your assets from a court judgment. In fact, your state's minimum required liability limits might do you just fine. Keep in mind, however, that you're gambling with your assets, as well as the finan

cial well-being of others when you choose the minimum limits. Plesko notes that liability insurance becomes a bargain the higher the limits you choose. "You can get a lot more protection for just a little more money," he says.

If you own a home and have nest egg and a savings account, you should consider more liability insurance because, in most states, drivers are allowed to sue other drivers who injure them in car accidents. If you're sued and your liability insurance does

n't pay for all of the damages, your personal finances are on the hook, and it's likely you'll become a target, says Plesko. "Judges and juries tend to want to take from those who have and give to those who have been injured," he says. If you have a signi

ficant number of assets, you'll want to have a significant amount of auto insurance because, says Plesko, "Insurance is about protecting against the things that don't happen very often."

Miller recommends you purchase at least $50,000 worth of property-damage liability insurance if you live in an affluent neighborhood; $25,000 in property-damage coverage will do if you don't live in an affluent community. "Look around. Ask yourself, 'I

f I hit that car, do I have enough insurance?'" he says. Continue to Step 4: Know your vehicle

By Joe Frey
insure.com