It can be difficult to strike a balance in finding adequate insurance coverage, while avoiding unnecessary coverage or being underinsured.
While states generally require a minimum amount of auto insurance coverage, and mortgage lenders also generally require you to maintain homeowner’s insurance for at least the value of the mortgage, these amounts may not represent the optimum amount of insurance for your circumstances. For example, in New York, motorists are required to carry $25,000 in liability insurance for bodily injury to a single person, $50,000 for bodily injury to all persons, and $10,000 for property damage in any accident. Minimum “no-fault” coverage of $50,000 is also required. However, given the price of auto repairs and the price of a replacement car if a car is totaled in an accident, damages could far exceed the $10,000 minimum. If you only carry the minimum amount of insurance, you will be personally liable for any property damage in excess of $10,000.
In addition, insurance policies, whether they are auto, homeowner’s, or life insurance, contain a seemingly endless list of exclusions from coverage – it can be hard to determine exactly what is covered. However, these exclusions and limits are very important in protecting your hard earned nest egg in the event of an accident or other unforeseeable event.
Even if you do not have many assets to protect, declaring bankruptcy may not protect you from having to pay off a judgment. For example, a judgment relating to personal injuries while driving under the influence or resulting from willful or malicious conduct are non-dischargeable in bankruptcy, meaning the judgment will follow you until it is paid in full.
Bottom line: Having the right amount of insurance is crucial. You should assess your insurance coverage whenever you have a major life change, including when you buy a house. Call Peter Klose to discuss the ins and outs of Uninsured Motorist (UM) and Supplemental Underinsured Motorist Coverage (SUM).