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How much coverage do you need?

Liability coverage is mandatory for car owners in 49 states and the District of Columbia, according to the Insurance Information Institute. But the amount of liability car insurance you buy is up to you.

"Purchase as much coverage as you can afford," says Tim Dodge, director of research and external communications at the Independent Insurance Agents & Brokers of New York. "This insurance covers you if you're legally responsible for someone else's injuries or damages. Because even seemingly minor accidents can result in costly neck or back injuries or extensive damage to a $30,000 car, it makes sense to buy a lot of liability insurance."

When you purchase only the minimum amount required by your state, your assets could be at risk if you are responsible for an accident.

"Say you hit a car that is driven by a surgeon, and his hand is broken," O'Connor says. "Your limit to cover his injuries will not even start to provide enough money. The doctor's insurance company will come to you looking for additional money. And, depending on your state law, your 401(k) and more would be in jeopardy. Your auto limit should minimally be enough to cover your net worth."


 

 

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