Dave Ramsay's Auto Insurance Liability Recommendations

Dave Ramsey recommends a minimum of $500,000 in auto insurance liability coverage. He believes that this amount of coverage is important to protect assets as state minimums are not enough to cover all expenses in the event of an accident. In addition to liability insurance, Ramsey suggests getting comprehensive and collision coverage. Comprehensive coverage will protect against vehicle damage occurring outside of multi-vehicle accidents, while collision coverage protects against vehicle damage that occurs during multi-vehicle accidents.

Liability coverage of at least $500,000

Dave Ramsey recommends a minimum of $500,000 in liability coverage for auto insurance. This is because state minimums are often not enough to cover the costs of an accident, and drivers could be held personally liable for any costs that exceed their insurance coverage. In addition to protecting oneself from financial risk, liability insurance is also required by law in most states.

Liability insurance covers the costs of property damage and bodily injury to the other driver(s) and their passengers in an accident where you are at fault. The recommended $500,000 in coverage includes both property damage liability and bodily injury liability.

Bodily injury liability covers medical, legal, funeral, and lost wage costs for the other driver(s) and their passengers. Property damage liability covers the cost of replacing or repairing the other vehicle(s) involved in the accident.

When reviewing your auto insurance policy, it is important to understand the difference between split coverage and single coverage. Split coverage will list three numbers, such as 100/400/100, which correspond to the maximum amount your policy will pay for bodily injury per person, bodily injury per accident, and property damage per accident, respectively. Single coverage, on the other hand, has just one number that covers all liability costs for an accident, regardless of whether they are property damage or injuries.

Dave Ramsey's recommendation of $500,000 in liability coverage assumes that your policy uses split coverage. To achieve this coverage with single coverage, you would need a higher limit.

Comprehensive coverage

Dave Ramsey recommends comprehensive coverage as one of the "Big Three" types of car insurance, along with liability and collision coverage. Comprehensive coverage protects your vehicle in the event of theft or damage from a fire, storm, natural disaster, or other incidents that are not collisions. For example, if a tree branch falls on your car during a storm, comprehensive coverage will pay to repair or replace your car.

If you drive an older vehicle and could afford to replace it with cash, you may consider forgoing comprehensive coverage. However, Ramsey generally recommends full coverage, which includes both comprehensive and collision insurance, to better protect yourself.

Collision coverage

Dave Ramsey recommends Zander Insurance, a company he trusts for offering insurance programs in line with his recommendations. While he does not go into detail about collision coverage, he does recommend choosing the highest level of deductible possible based on your emergency fund. He also recommends purchasing full comprehensive and collision insurance if you have a newer vehicle.

If you own your vehicle outright and choose not to carry collision coverage, you will be responsible for the cost of repairs or replacement if you are involved in a single-vehicle accident or are found at-fault in an accident. However, if the other driver is at fault, their liability coverage will typically cover the damage.

When considering collision coverage, it is important to take into account your personal financial situation and the value of your vehicle. If your vehicle is brand new or still worth a significant amount, collision coverage can help with expensive repairs or replacement costs. On the other hand, if your vehicle is older and not worth much, collision coverage may not be beneficial.

It is also worth noting that collision coverage does not apply to collisions with animals or damage caused by events outside of your control, such as a tree falling on your vehicle. These types of incidents would typically be covered under comprehensive coverage.

Uninsured and underinsured motorist coverage

Dave Ramsey recommends choosing the highest level of deductible possible for auto insurance, based on your emergency fund. He also recommends purchasing at least $500,000 in property damage, liability, and bodily injury liability.

Uninsured motorist coverage (UM) and underinsured motorist coverage (UIM) are types of auto insurance that protect you if you are hit by a driver with no insurance or insufficient insurance, respectively. These coverages are crucial because they can help protect you from financial losses in the event of an accident with an uninsured or underinsured driver.

Uninsured motorist coverage typically covers bodily injuries to you and your passengers resulting from a hit-and-run accident or a collision with an uninsured driver. It may also include uninsured motorist property damage (UMPD) coverage, which pays for repairs to your vehicle. However, UMPD may not cover hit-and-run incidents in some states, so it is important to review your policy carefully.

Underinsured motorist coverage, on the other hand, protects you when the at-fault driver's insurance coverage is insufficient to pay for the damages or injuries they caused. This type of coverage usually includes underinsured motorist bodily injury (UIMBI) and underinsured motorist property damage (UIMPD), ensuring that your injuries and vehicle damage are covered.

While not all states mandate UM/UIM coverage, it is highly recommended for all drivers. In some states, the number of uninsured drivers is over 20%, so driving without this coverage could put you at significant financial risk. By having UM/UIM coverage, you can have peace of mind knowing that you and your passengers are protected in the event of an accident with an uninsured or underinsured driver.

When purchasing UM/UIM coverage, you can usually choose the insurance limits. For bodily injury coverage, it is generally recommended to match the amount of your liability coverage. As for UMPD/UIMPD coverage, you can select a limit that reflects the value of your vehicle, especially if you do not have collision coverage.

Medical payments coverage

Dave Ramsey recommends choosing the highest level of deductible possible based on your emergency fund when it comes to auto insurance. He also recommends purchasing full comprehensive and collision insurance if you have a newer vehicle. However, it is not clear whether Ramsey recommends medical payments coverage.

While MedPay can provide financial protection and peace of mind, it is important to consider your specific needs and circumstances. If you have comprehensive health insurance coverage, you may already have sufficient protection for medical expenses resulting from a car accident. Additionally, other types of auto insurance coverage, such as liability insurance and personal injury protection (PIP), may also provide some coverage for medical expenses. Therefore, it is essential to carefully review your existing policies and assess your overall insurance needs before deciding whether to include MedPay in your auto insurance policy.

In conclusion, while MedPay can be a valuable addition to your auto insurance policy, it is not a mandatory coverage in most states. By evaluating your current insurance coverage, financial situation, and personal preferences, you can make an informed decision about whether MedPay is right for you.

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