Vehicle Insurance Review Checklist

Do an annual review. It pays to do a major review of your vehicle insurance coverage, especially considering the enormous risks you’re exposed to when driving, and the hundreds, and perhaps thousands, of dollars you may be paying a year for your vehicle insurance policies. Start by reviewing the different parts of your coverage, looking for where you need to increase your protection and how you can save on premiums.

Make sure your vehicle liability insurance is adequate. Review the three major parts of your vehicle liability insurance:

• Bodily injury liability protects you against claims if you're the cause of an accident in which other people are injured.
• Property damage liability pays for any damage you cause to the property of others.
• Uninsured and underinsured motorist coverage pays if you're injured by a hit-and-run driver, a driver who doesn't have auto insurance, or a driver with little or no insurance.

If you live in a state with no-fault laws, review your personal injury protection coverage that pays a minimum benefit amount per person for injury regardless of fault. Then check with your insurer or state insurance department for specific information about your state’s no-fault laws and insurance.

Consider personal liability umbrella coverage. If you're sued and the judgment against you exceeds the limits of the liability coverage in your vehicle policy, you'll have to pay the difference. To get increased and broader liability protection against catastrophic lawsuits, buy a personal umbrella liability policy that picks up where your existing coverage leaves off. In addition to the loss exposures covered by your basic vehicle policy, umbrella policies cover a wide range of risks including false arrest, wrongful eviction, libel, slander, defamation of character, and invasion of privacy. Liability limits under umbrella policies commonly range from $1 to $5 million, and because coverage doesn't kick in until your vehicle insurance liability limits are exhausted, these policies are relatively inexpensive.

Evaluate your optional coverages. Medical payments coverage pays medical and funeral expenses for you or others injured or killed in an accident while riding in or driving your auto, regardless of fault. It also covers you or members of your family if you're struck by an auto while walking, or riding in another auto. Although this coverage is optional and may duplicate health or disability coverage you already have, insurers generally recommend you have it to cover the passengers in your vehicle.

Collision coverage pays for physical damage to your car as a result of your auto colliding with an object, such as another car or tree. Comprehensive coverage pays for damage to your auto from all other causes, including fire, severe weather, vandalism, flood, and theft. Although collision and comprehensive coverages aren't required by law, lenders and lessors require them. You can reduce the premiums on these coverages by raising your deductibles. If you have an older car, check with your insurer to see if it's more cost effective to drop these coverages altogether since insurers only cover repairs up to your car's book value.

Two other optional coverages are rental reimbursement and towing and labor. You may be able to handle any related losses out-of-pocket, and they may duplicate coverages you already have, through your auto club for example.