Lisa Green
Appearances
NerdWallet's Smart Money Podcast
How to Get Ready for a Recession and Choose Enough Car Insurance
This can be fixing the other person's car. It could also mean repairing fences or buildings or government infrastructure like road signs or guardrails that you might have taken out. In a car insurance policy, you'll typically see your liability coverage written as three numbers, something like 100, 350. Here's what that would mean.
NerdWallet's Smart Money Podcast
How to Get Ready for a Recession and Choose Enough Car Insurance
The first number, 100, means that you would have $100,000 of bodily injury coverage for each person injured. But then the second number, 300, means that there's a $300,000 cap on the total bodily injury expenses per accident, no matter how many people are injured. So let's say four people are injured in the same wreck, and they each have $100,000 in medical bills.
NerdWallet's Smart Money Podcast
How to Get Ready for a Recession and Choose Enough Car Insurance
That adds up to $400,000 in medical bills, and your policy is covering a maximum of $300,000 per accident. So here you are exceeding what your policy will pay for that accident. And then that third little number, 50, that means your policy would cover $50,000 in property damage per accident.
NerdWallet's Smart Money Podcast
How to Get Ready for a Recession and Choose Enough Car Insurance
The first tier would be the minimum liability coverage required by your state. You must have at least this much liability coverage in order to legally drive. States don't necessarily agree on what that amount should be. As an example, Georgia requires $25,000 in property damage liability coverage, while Florida, right next door, says you can get away with just $10,000 of this coverage.
NerdWallet's Smart Money Podcast
How to Get Ready for a Recession and Choose Enough Car Insurance
So you'll need to check the requirements of the state where you live. But that's the first tier. Let's talk about why that first tier probably isn't enough for most people. Let's say you live in Colorado. Nice state. I was just out there this past fall for my niece's wedding.
NerdWallet's Smart Money Podcast
How to Get Ready for a Recession and Choose Enough Car Insurance
Colorado requires $25,000 in bodily injury liability per person, $50,000 in bodily injury liability per accident, and $15,000 in property damage liability per accident. So now you're driving along in Colorado and you get distracted by an elk and you run a red light and you cause an accident and this crash is your fault. The other driver is in the hospital and you are liable for the costs.
NerdWallet's Smart Money Podcast
How to Get Ready for a Recession and Choose Enough Car Insurance
How far do you think your $25,000 policy will go toward covering that other driver's hospital bill? Have you seen a hospital bill lately? And you're also responsible for fixing that other driver's shiny new SUV. Your policy says it'll pay $15,000. What will that get you? A bumper and a headlight, maybe? I don't think it's going to get you where you need to go.
NerdWallet's Smart Money Podcast
How to Get Ready for a Recession and Choose Enough Car Insurance
So for the hospital bills, for the car repairs, you may be personally responsible out of your pocket for whatever the insurance does not pay.
NerdWallet's Smart Money Podcast
How to Get Ready for a Recession and Choose Enough Car Insurance
Okay, so for a second tier, let's look at what you might get with a typical full coverage policy. Here at NerdWallet, we publish sample rates for the 100, 350 policies that I mentioned earlier. That's 100,000 in bodily injury coverage for each person injured, up to a total of 300,000 in bodily injury per accident, plus $50,000 in property damage liability. And by the way, you don't have to get
NerdWallet's Smart Money Podcast
How to Get Ready for a Recession and Choose Enough Car Insurance
full coverage in order to get these higher liability limits. If you drive an old car like mine and you don't think it's worth having collision and comprehensive coverage on it, you can still get a liability-only policy with a limit that's above your state's minimum requirement.
NerdWallet's Smart Money Podcast
How to Get Ready for a Recession and Choose Enough Car Insurance
So this bigger policy will hopefully get you closer to paying those costs that you would otherwise have to pay out of your pocket. And maybe that's still not enough. Medical expenses are high these days, and so are vehicle repairs. It is possible to go to an even higher tier of coverage. One suggestion is to buy enough liability insurance to cover your net worth.
NerdWallet's Smart Money Podcast
How to Get Ready for a Recession and Choose Enough Car Insurance
Now, your net worth is the amount of assets you own after you subtract your debts. Sort of like the money you could get your hands on if you absolutely had to. It could include your cash, the equity you have in your house, your investments, or anything else of value that you have.
NerdWallet's Smart Money Podcast
How to Get Ready for a Recession and Choose Enough Car Insurance
The idea here is that if you don't have enough liability insurance and you cause an accident, you could have to give up those things you own in order to pay the cost of the wreck you just caused. If you have enough liability insurance, your policy can pay the costs instead and you get to keep your stuff. Personally, I prefer to have the extra coverage.
NerdWallet's Smart Money Podcast
How to Get Ready for a Recession and Choose Enough Car Insurance
I have an auto insurance policy with liability limits of 250, 500, 100. That's the highest standard limits that my insurer offers. And then I layer an umbrella policy over that.
NerdWallet's Smart Money Podcast
How to Get Ready for a Recession and Choose Enough Car Insurance
Umbrella insurance is an extra layer of liability coverage that starts where your regular car or home insurance policy ends. I'll use my own situation as an example. As I mentioned, I have an auto insurance policy with limits of 250, 500, 100. My home insurance policy also has $500,000 in personal liability coverage for things that I might be liable for that aren't related to my car.
NerdWallet's Smart Money Podcast
How to Get Ready for a Recession and Choose Enough Car Insurance
And then I have a $3 million umbrella liability policy that stretches over both of these policies. That's pretty typical for an umbrella policy to supplement both auto and home insurance at the same time. But since we're talking about auto insurance, I'll use an auto insurance example to explain how this works. Let's say I cause an accident that looks like one you might see in an action movie.
NerdWallet's Smart Money Podcast
How to Get Ready for a Recession and Choose Enough Car Insurance
Now, I'm going to leap to safety just like the stuntmen do, but my car keeps going and it crashes into a building and the entire building explodes and it burns to oblivion. The $100,000 limit for property damage on my regular car insurance policy is not going to cover the cost of the problem that I just caused. Let's say it's going to take $2 million.
NerdWallet's Smart Money Podcast
How to Get Ready for a Recession and Choose Enough Car Insurance
So my regular policy would cover up to its limit of $100,000 in property damage. And then the umbrella policy would kick in to cover the rest. And nobody is going to be coming after me for $2 million. Umbrella policies also sometimes cover things that your underlying policy doesn't. For example, it might cover legal fees and damages if I'm sued for libel or slander.
NerdWallet's Smart Money Podcast
How to Get Ready for a Recession and Choose Enough Car Insurance
Sean is right. An umbrella policy can be surprisingly cheap. Mine gives me anywhere from six to 30 times as much liability coverage as my base auto insurance policy, but it only costs a few dollars a month. You can kind of see why it's cheap. Chances are I am not going to drive my car into an exploding building.
NerdWallet's Smart Money Podcast
How to Get Ready for a Recession and Choose Enough Car Insurance
If I file an insurance claim, it will probably be small enough that my regular car insurance policy will cover it. So the umbrella policy probably will never need to pay out. It's just that extra measure of coverage in case of a catastrophe. So do you need it? Kind of depends on your circumstances.
NerdWallet's Smart Money Podcast
How to Get Ready for a Recession and Choose Enough Car Insurance
A lot of everyday activities can put you at a higher risk of being sued, like owning a dog that might bite or coaching kids sports where parents might get angry. If you end up in a lawsuit, having an umbrella insurance policy can be a relatively cheap way to shield your assets against the possibility of a legal judgment against you.
NerdWallet's Smart Money Podcast
How to Get Ready for a Recession and Choose Enough Car Insurance
That is a good question. If you have the types of coverage that we've already talked about, you have most of your bases covered. But I will mention some coverage options that you might be grateful for if you get into an accident that is not your fault. These are called uninsured and underinsured motorist coverage. It's a sad fact that a lot of drivers out there don't have car insurance because
NerdWallet's Smart Money Podcast
How to Get Ready for a Recession and Choose Enough Car Insurance
or don't have as much as they need. Where I live in Tennessee, more than 20% of drivers don't have insurance, according to the Insurance Research Council. It's illegal for them to drive without insurance, but they're on the road anyway. They have to get to work or school or the grocery store. So if I do get hit by someone, there's at least a one in five chance
NerdWallet's Smart Money Podcast
How to Get Ready for a Recession and Choose Enough Car Insurance
They won't have insurance to pay my expenses that they are liable for. So to deal with that, my policy has uninsured and underinsured motorist coverage. Uninsured motorist coverage is for cases where the other driver doesn't have auto insurance at all. And underinsured motorist coverage is for cases where the other driver does have some insurance,
NerdWallet's Smart Money Podcast
How to Get Ready for a Recession and Choose Enough Car Insurance
but it's not enough to pay for the damage they caused. For example, maybe they caused an expensive accident and they only have the state minimum required coverage, which, as we've already discussed, is typically pretty low. Now, the last time that another driver crashed into me, I was lucky. He had insurance.
NerdWallet's Smart Money Podcast
How to Get Ready for a Recession and Choose Enough Car Insurance
But the next time, I might not be so fortunate, so I'm glad to have this coverage in place.
NerdWallet's Smart Money Podcast
How to Get Ready for a Recession and Choose Enough Car Insurance
Sean, it is tough to see those premiums keep on rising. In this environment especially, I think the most important advice is to shop around. Every insurer has its own formula for setting rates. And when we crunch the numbers every month at NerdWallet, I'm always astonished at how widely the rates can vary for the same driver.
NerdWallet's Smart Money Podcast
How to Get Ready for a Recession and Choose Enough Car Insurance
For example, one company might really penalize you for getting a speeding ticket, while another one might not raise your rate at all. One company might think you're really risky because you drive a red sports car, while another company might just think you're cool, and on and on. So the cheapest company for your neighbor may not be the cheapest for you.
NerdWallet's Smart Money Podcast
How to Get Ready for a Recession and Choose Enough Car Insurance
And the cheapest company for you last year may not be the cheapest company for you this year. Don't be afraid to switch insurers. NerdWallet recommends comparing quotes from at least three insurers once a year to make sure you're getting the best rate.
NerdWallet's Smart Money Podcast
How to Get Ready for a Recession and Choose Enough Car Insurance
Yes, absolutely ask about discounts. Insurers don't always volunteer this information. For example, I save $200 a year by taking advantage of my insurer's auto pay discount. You can also take a look at your policy and see if you're paying for coverage that you don't need. I dropped roadside assistance and towing coverage after I realized that they just duplicated coverage I already had elsewhere.
NerdWallet's Smart Money Podcast
How to Get Ready for a Recession and Choose Enough Car Insurance
And you can consider raising your deductible, the share of a comprehensive or collision claim that you pay. By choosing a deductible of $1,000 instead of $500, I was able to reduce premiums by more than 10%. Now, be careful if you try this. It can make your policy cheaper, but you're now responsible for paying a lot more money up front if you do have a claim.
NerdWallet's Smart Money Podcast
How to Get Ready for a Recession and Choose Enough Car Insurance
So only raise it to a level that you're confident that you can pay in a pinch. And of course, NerdWallet has an insurance finder that lets you compare rates in just a couple of minutes. We'll link to that in today's show notes or just search online for NerdWallet auto insurance finder.
NerdWallet's Smart Money Podcast
How to Get Ready for a Recession and Choose Enough Car Insurance
Well, thank you so much for having me.
NerdWallet's Smart Money Podcast
How to Get Ready for a Recession and Choose Enough Car Insurance
I'm glad to be here and chat about insurance.
NerdWallet's Smart Money Podcast
How to Get Ready for a Recession and Choose Enough Car Insurance
Let's start by thinking about why you should have car insurance at all. Driving is a pretty risky business. I mean, think about it. You're whizzing along at 50 or 60 miles an hour, driving a 3,000, 4,000, or 5,000-pound machine. and so are thousands of other people. So think of it like a giant bumper car situation. Bad things are going to happen sometimes.
NerdWallet's Smart Money Podcast
How to Get Ready for a Recession and Choose Enough Car Insurance
Sometimes those bad things might happen to you. Even if you are the safest driver ever and you obey every rule of the road, remember those thousands of other people? Some of them might be texting or eating a sandwich or putting on makeup in the rearview mirror. I I had a neighbor tell me once that he read an entire book while driving from Tennessee to North Carolina.
NerdWallet's Smart Money Podcast
How to Get Ready for a Recession and Choose Enough Car Insurance
He just propped his paperback up on his steering wheel.
NerdWallet's Smart Money Podcast
How to Get Ready for a Recession and Choose Enough Car Insurance
Exactly, Sean. When you start thinking about how much car insurance you should have, think about it this way. What's the worst that can happen if your two-ton hunk of metal crashes with another one somewhere out there? Maybe you're in the hospital with really bad injuries and you'll need months of rehab.
NerdWallet's Smart Money Podcast
How to Get Ready for a Recession and Choose Enough Car Insurance
Maybe the other person is in the hospital and you are held responsible for paying their medical bills because you were at fault in this accident. The amount of car insurance you should have is the amount that makes you feel you could even dare to get behind the wheel of a car when you think about what could happen there.
NerdWallet's Smart Money Podcast
How to Get Ready for a Recession and Choose Enough Car Insurance
Absolutely, Elizabeth. Let's talk first about liability insurance. Liability means that you are legally responsible for damage that you cause as a driver. So if you hit a person with your car, you are probably liable for their injuries. You are legally responsible, and so you may be required to pay for their medical treatment. If you hit someone's property with your car,
NerdWallet's Smart Money Podcast
How to Get Ready for a Recession and Choose Enough Car Insurance
you are probably liable for the property damage that you caused, and you may be required to pay the cost to repair that damage. Because of this, liability insurance is the first type of coverage that you'll buy. Liability insurance is designed to pay the expenses that you are liable for if you cause an accident. In most states, you must have liability insurance in order to legally drive.
NerdWallet's Smart Money Podcast
How to Get Ready for a Recession and Choose Enough Car Insurance
That's right. Liability insurance is mostly about protecting other people from you. If you smash into someone else's car, liability insurance will pay to fix the other person's car. But for fixing your own car, you're on your own. This is why a lot of people will want two other types of car insurance. First, we have collision insurance.
NerdWallet's Smart Money Podcast
How to Get Ready for a Recession and Choose Enough Car Insurance
Collision insurance will pay to fix or replace your car in a crash that you cause. You'll normally have a deductible to pay, like let's say the first $1,000 of repair expenses, and then the collision insurance will cover the rest. Collision insurance will also pay to fix your car in certain other situations, like if you're the victim of a hit and run. And then there's comprehensive insurance.
NerdWallet's Smart Money Podcast
How to Get Ready for a Recession and Choose Enough Car Insurance
This helps replace your car if it's stolen or fix it if it's damaged by something like a tornado or a fire or hitting an animal. So there you have the three major types of coverage, liability, comprehensive, and collision. A lot of times people will buy these three types together, and that's called full coverage.
NerdWallet's Smart Money Podcast
How to Get Ready for a Recession and Choose Enough Car Insurance
If you have a loan or a lease on your car, your lender will probably require you to have full coverage.
NerdWallet's Smart Money Podcast
How to Get Ready for a Recession and Choose Enough Car Insurance
Sometimes people may not understand why liability insurance is so important. It doesn't pay to fix your car, right? So people may not see the value of it. But in truth, liability is where you run into huge financial risks. Let's say I cause a wreck and my car is totaled. Now I drive a 10-year-old Altima and now I have nothing to drive. And Kelley Blue Book says that my car was worth about $6,000.
NerdWallet's Smart Money Podcast
How to Get Ready for a Recession and Choose Enough Car Insurance
So I've lost $6,000 and that's bad. If I had been driving a brand new car, maybe I would have lost $50,000. But what's really bad is if my wreck caused a lot of injuries and property damage to other people and I had to pay for these. That is where the costs can run into hundreds of thousands of dollars or more. And that is why liability is the most important coverage of all.
NerdWallet's Smart Money Podcast
How to Get Ready for a Recession and Choose Enough Car Insurance
Bodily injury liability insurance covers other people's medical costs when they are injured in a crash that you caused. In addition to medical bills, it can also cover things like pain and suffering, lost wages, and even funeral costs. And then there is property damage liability insurance. Now, this pays to repair damage to other people's property after a wreck that you cause.
NerdWallet's Smart Money Podcast
Cross-Country Moving Tips and What a CFPB Shutdown Could Mean for You
Hey, Sean. Hi, David.
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Cross-Country Moving Tips and What a CFPB Shutdown Could Mean for You
Yeah, David, I think that's a great question. I have several rental homes myself, including a couple that I used to live in. And in my experience, you know, keeping a home, a previous residence as a rental property has been a really strong investment.
NerdWallet's Smart Money Podcast
Cross-Country Moving Tips and What a CFPB Shutdown Could Mean for You
You continue benefiting from house values appreciating and your rents will also typically go up over time while your mortgage payment stays the same.
NerdWallet's Smart Money Podcast
Cross-Country Moving Tips and What a CFPB Shutdown Could Mean for You
So meanwhile, while you're enjoying this nice cash flow from your property, tax laws let you depreciate the property, which means that even while you've got positive cash flow money coming in, you may show a loss on paper that can save money on your taxes. And if you ever want to go back to your previous area to visit, check on your property while you're there.
NerdWallet's Smart Money Podcast
Cross-Country Moving Tips and What a CFPB Shutdown Could Mean for You
And now you have a tax write off for the travel because you had to travel back to check on your property. 10 years from now, when your house is paid off, most or all of that $2,200 monthly mortgage payment will go away and that turns into an income stream for you. So I would definitely look at trying to hang on to the house and try renting it.
NerdWallet's Smart Money Podcast
Cross-Country Moving Tips and What a CFPB Shutdown Could Mean for You
There are some caveats to renting out your house. Tenants don't take care of a property typically the way you would take care of your own property. And being halfway across the country, it's a little bit hard to keep an eye on it. And vacancies are expensive because you'll lose your rental income at the same time that you have to shoulder expenses for maintenance and repairs between tenants.
NerdWallet's Smart Money Podcast
Cross-Country Moving Tips and What a CFPB Shutdown Could Mean for You
So you need a cash cushion. And most of all, I think that you need a property manager. a good property manager. When we were first getting started with rental properties, we managed them ourselves, screened the tenants ourselves, dealt with the phone calls ourselves about something being broken.
NerdWallet's Smart Money Podcast
Cross-Country Moving Tips and What a CFPB Shutdown Could Mean for You
And then we finally hired a property manager and we have not really had to deal with those kinds of issues at all. The property manager will typically charge about 10% of their rental income. And for that, they will find and screen your tenants. They will collect your rents. They'll handle the maintenance, keep records, and send you money every month.
NerdWallet's Smart Money Podcast
Cross-Country Moving Tips and What a CFPB Shutdown Could Mean for You
I think that this is especially important for a long distance rental because you don't want to get a call in the middle of the night about a clogged toilet 2,000 miles away. The property manager will be equipped to handle things like that.
NerdWallet's Smart Money Podcast
Cross-Country Moving Tips and What a CFPB Shutdown Could Mean for You
absolutely it's good to have a cash cushion. Another option is to kind of tap into the equity in the property that you already own. When we were first getting started, one of the first things that we did was set up a home equity line of credit on the house that we lived in. That gave us a way to get money if we needed it when something broke or we had a vacancy.
NerdWallet's Smart Money Podcast
Cross-Country Moving Tips and What a CFPB Shutdown Could Mean for You
If you want to go that route, I would suggest you may want to get that home equity line of credit set up on the house that you're currently in while you're still living in it, it's going to be easier and you'll get better terms as an owner-occupant to get that home equity line of credit set up. And then typically, you can just continue to keep it even after you move out of the house.
NerdWallet's Smart Money Podcast
Cross-Country Moving Tips and What a CFPB Shutdown Could Mean for You
That's what we do.
NerdWallet's Smart Money Podcast
Cross-Country Moving Tips and What a CFPB Shutdown Could Mean for You
Our properties, our rental properties are not out of state, but they are probably over an hour from where we live. And since we've had a property manager in place, we really essentially have not had to drive that hour and go up there at all. It's been a life changer.
NerdWallet's Smart Money Podcast
Cross-Country Moving Tips and What a CFPB Shutdown Could Mean for You
I can share a story from my sister's situation. She lived in one state and had just bought a new house and furnished the new house in that state when she got a grandchild in another state and decided to move to be near that baby. So since she had just purchased all of this new furniture, Of course, she thought the thing to do would be to take it with her.
NerdWallet's Smart Money Podcast
Cross-Country Moving Tips and What a CFPB Shutdown Could Mean for You
And that turned out to be not perhaps exactly her best move. She hauled all of that furniture down there and then it didn't fit the vibe of the house. It didn't fit the vibe of the new state, which was coastal rather than inland. It just didn't work. She ended up having to get rid of the furniture down there and get new furniture.
NerdWallet's Smart Money Podcast
Cross-Country Moving Tips and What a CFPB Shutdown Could Mean for You
Exactly. The table just won't fit in that corner here, you know?
NerdWallet's Smart Money Podcast
Cross-Country Moving Tips and What a CFPB Shutdown Could Mean for You
I'll toss out one more thought on your furnishings as well. You have a fully furnished home that you are thinking of renting out. There are opportunities to rent it out with the furnishings in it. I think this is a bit of a niche, but there are short-term rentals for travelers, for traveling nurses, for vacationers, etc.
NerdWallet's Smart Money Podcast
Cross-Country Moving Tips and What a CFPB Shutdown Could Mean for You
It may not be suitable for your location, but it's certainly something you could think of.