Auto
Insurance
By: Elizabeth
Silvestri, CFP®
The Henssler Financial Group Position Paper
There are four general Insurance Services Offices (ISO) forms of automobile insurance that a driver can obtain: Personal Auto Policy (PAP), Family Auto Policy (FAP), Special Auto Policy (SAP) and the Basic Auto Policy (BAP). Regardless of which form you choose, it is mandatory that your coverage contain a liability portion. Liability protection coverage has a basic format that covers three areas: bodily injury per person, bodily injury per accident and property damage. Minimums imposed by each state and can vary.
What types of coverage should I look for in an Auto Insurance Policy?
Bodily Injury Liability
This type of coverage is required by law. It protects you in the event that you cause a crash that injures someone. Consider carrying the maximum amount available, $500,000 (buy less only if you have little income or few assets to protect). This will cover medical treatments, rehabilitation, funeral costs, and some legal costs.Property Damage Liability
This type of coverage is required by law. Consider carrying at least $50,000. This will cover repairs or replacement costs of property or vehicles that are damaged by someone insured on your policy.Uninsured Motorist
This type of coverage is optional; however, we recommend that you purchase it. With this type of coverage, you are purchasing bodily injury and collision for yourself in the event that you are involved in a motor vehicle accident where the other at-fault party is uninsured or underinsured. Coverage and limits are similar to that of bodily injury.Medical Payments
We do not recommend that you purchase this type of coverage. Your personal health plan probably covers you and your household already. If you do not have health insurance, you might want to consider purchasing the maximum amount available, $50,000. This should cover medical expenses of anyone riding in your car.Personal Injury Protection
We do not recommend that you purchase this type of coverage. If you are in good health and have good life and disability insurance, you do not need this coverage. Otherwise, only buy the minimum, $50,000.Collision
We recommend that you purchase this type of coverage if your vehicle is relatively new (less than four years old). This covers the repair cost of damages occurring in an accident. Consider paying a higher deductible, because the higher the deductible, the cheaper the premium will be.Comprehensive
Again, we recommend that you purchase this type of coverage if your vehicle is new or has value. This covers acts such as vandalism, theft, flood, fire and weather related damages. Consider raising your deductible, because the premium will be cheaper.Lease Gap Coverage
We recommend that you purchase this type of coverage. This is insurance on a leased car. It covers the "gap" between how much it would cost to replace your car and the amount you would have to pay a leasing company to break your lease.
How much insurance is enough?
You
must determine the amount of money you want to spend on insurance and compare
it to the amount of risk you want to take with your assets. Take your time and
shop around to find an affordable rate. You may want to consider purchasing an
umbrella policy to cover inadequate liability coverage in the auto policy. While
our clients have the ultimate say in their insurance coverage, our role as financial
advisers is to continue to educate ourselves and know our clients well enough
to be able to preserve their assets, while ensuring they are adequately covered
in the event of serious accident or injury. For more information regarding this topic, please contact The Henssler Financial Group at 770-429-9166 or comments@henssler.com.
All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The contents are intended for general information purposes only. Information provided should not be the sole basis in making any decisions and is not intended to replace the advice of a qualified professional, such as a tax consultant, insurance adviser or attorney. Although this material is designed to provide accurate and authoritative information with respect to the subject matter, it may not apply in all situations. Readers are urged to consult with their adviser concerning specific situations and questions. This is not to be construed as an offer to buy or sell any financial instruments. It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future profitability or expectations. As with all investments, there are associated inherent risks. Please obtain and review all financial material carefully before investing. Henssler is not licensed to offer or sell insurance products and this overview is not to be construed as an offer to purchase any insurance products.