The minimum amount of insurance that a person needs to carry is $25,000, which is extraordinarily low. It’s easy to generate $25,000 in medical bills. With MRI’s costing $2,000, with hospital and emergency room fees being in the $5,000 range, you can very quickly exceed your insurance coverage.
It’s important that your insurance be proportionate to the amount of money you earn and the assets you have so that you are covered. What’s amazing is that adding additional coverage often isn’t that expensive. If you start investigating it, increasing your coverage usually is an incremental additional cost that provides you a huge amount of peace of mind and coverage if you need it.
One other important part of the insurance equation that people need to keep in mind is what’s called “medical payments coverage.” This is the coverage that you have that simply pays medical bills arising out of an accident regardless of fault.
If you caused the accident, people in your car could use that money to pay their medical bills. If somebody else causes the accident, you can use that money to pay your medical bills.
Why is that important?
As health insurance changes from low deductibles to high deductibles, if you’re in a car accident, you have to pay your health insurance deductibles for all of the care you get, and your medical payments coverage can fill that gap between, say, nothing and $6,000 out of pocket if you have a nice $10,000 medical payments coverage.
That’s why it’s so important to keep an eye out on your medical payments coverage. I used to recommend a minimum of $10,000. You might even want to think if your health insurance is not great, you might want to think of a $25,000 medical payments coverage.
It can really be a life saver, especially when some lawsuit in your life takes much longer than most people expect to come to fruition.
Q: How much uninsured or underinsured motorists’ coverage do you recommend?
The amount of coverage you should have is proportionate to the amount of money you are earning and your assets. If you’re a professional earning six figures, I would expect you to have at least a half million dollars for underinsured and uninsured motorists, plus an umbrella policy.
An umbrella policy is usually tied to your home, and it is a policy that covers all of your smaller policies, and if you are a highly paid professional, you should have at least a million dollar umbrella on top of your $500,000 policy. Normally, most professional people carry $2 million dollars on top of their regular policy.
For the average person who maybe doesn’t think that that’s a reasonable amount of coverage to have, you should still think about “What would happen if I was in a serious accident and couldn’t work? What would happen to my family or the breadwinner in my family if they couldn’t work?” Your coverage should be in proportion with that as it is within your means to do so.