- 1). Determine your vehicle’s fair market value, which is the most an insurance company will pay if the vehicle is damaged in an accident.
- 2). For a vehicle with a low fair market value, drop all collision and comprehensive coverage, as the potential benefit is not justifiable for the required premium.
- 3). Evaluate separately your need for liability insurance, which provides coverage for liability to a third-party injured as a result of your negligence. Liability coverage is required by state law, as specified by a minimum coverage amount. Select a liability coverage greater than the required minimum, as you are personally liable for any third-party damages beyond the covered liability amount.
- 4). Assess separately uninsured motorist coverage needs. This coverage protects you from damages caused by other drivers who have either no, or too little, liability insurance coverage. Because there is a surprisingly high number of such drivers, a high uninsured motorist limit is strongly recommended.
- 5). Miscellaneous coverages, such as emergency towing and medical payments, are often times unnecessarily and duplicative of benefits provided by other sources. For example, a health insurance plan will generally provide for payment of necessary medical expenses. Thus, rendering medical payment coverage unnecessary for many drivers.
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