Schwab MoneyWise ®
Schwab MoneyWise®

Auto Insurance

Getting the right policy

Our Two Cents

Often the state-mandated insurance minimums are not adequate. It is prudent to purchase at least $100,000 of bodily injury protection per person or $300,000 per accident. If you have significant assets, you should also consider purchasing an umbrella policy to protect you if the damages exceed the limits of your auto insurance

According to the National Highway Traffic Safety Administration, traffic accident rates for 16- to 19-year-old drivers are higher than those for any other age group. So on top of the importance of talking to your kids about safe driving habits, you need to make sure they're properly insured. Not only is having auto insurance important, in most states, it's the law.

Keep these points in mind when investigating policies:

  • Most states require auto insurance. Most states require you to have a minimum amount of liability insurance for accidental bodily injury and property damage. Liability insurance is typically stated in threes: for example, 25/50/10 describes coverage of $25,000 per person, $50,000 bodily injury per accident and $10,000 property damage per accident. Some states that have instituted no-fault insurance laws also require personal injury protection (PIP) insurance. If your state doesn't have minimum insurance requirements, you will likely have to prove that you have enough assets to cover the damages caused by an accident.
  • If you have an auto loan, you may need additional coverage. Financing (loan) companies usually mandate that you carry comprehensive and collision coverage as a condition of your car loan.
  • Evaluate whether comprehensive and collision insurance is worth the expense. Collision insurance protects against damage to your vehicle resulting from collision with another vehicle. Comprehensive insurance protects against damage that results from events other than collision (like from theft, vandalism or fire). Look at the Kelley Blue Book value of your car compared with the cost of premiums and deductibles for these types of insurance.
  • Think about raising your deductible. Higher deductibles mean lower premiums, which can be especially valuable when you have a teen on your policy.
  • Shop for discounts. Your child may be able to stay on your policy and be eligible for a multi-policy discount. In addition, many companies offer discounts for teens who have taken approved driver training or maintained good grades.


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