Auto Insurance Coverage
How Much Car Insurance Do I Need?
Looking to find out what the right auto insurance coverage level for you and your family? Are you looking for minimum auto insurance coverage to save money or the level that's required by your state?
Most of us these days are feeling the economic pinch, and we cut corners where we can. But not carrying auto insurance coverage is a huge mistake. If you're at fault in an accident, and you're not carrying car insurance coverage, not only are you in violation of the law, you could be vulnerable to a lawsuit if you cause an accident that results in property damage or injury to another party. You should carry at the very least minimum liability insurance, and you should know that the minimum auto insurance coverage may not protect you completely. As to damage to your own vehicle, unless you're driving an older car that has little value, you should carry collision insurance.
How much car insurance coverage do you really need? How much are you willing to pay? It can seem difficult, paying for something that you may never use, but what you're buying is peace of mind - if you ever do have a car accident, having the proper level of insurance can make a huge difference in what you end up paying out of pocket. Also, keep in mind that you're required by law to have vehicle insurance.
You absolutely have to have liability insurance. This protects the person that you harm if the accident is your fault. Determining how much liability insurance you need depends on a couple of factors. First, you need to find out what the minimum amount of auto insurance coverage is that's required by your state. Each state has its own requirements, and your insurance agent can advise you accordingly.
Second, you have to think about your financial situation. If you're in an accident, and it's your fault, and your liability insurance isn't sufficient to cover the other party's medical bills, then you can expect that they'll attempt to sue you for more money. If you're someone like Bill Gates, you don't care - you just cough up the difference. If you're like most of us, though, this can be an incredibly onerous financial obligation. So unless your pockets are incredibly deep, you should consider raising the amount of your liability insurance. If you don't have significant assets, obviously there's not much to take in the event that you end up with a judgment against you. But if you own your own home, or you have other assets, you could be putting them at risk. So if you have anything worth protecting, you'd be well advised to go with higher liability coverage.
What About Liability Insurance?
Every state, with the exception of New Hampshire, requires drivers to carry liability insurance, in case of bodily injury or property damage in the event of an accident. Some states will also require you to buy auto insurance coverage that will cover medical expenses and damage, even if the other motorist is at fault.
Generally speaking, it's in your best interest to buy more liability insurance than your state requires. If you're at fault in an accident, the minimum amount of liability insurance may not cover the other party's medical expenses, and then you can reasonably expect that the motorist (or their lawyer) will come after you. Experts suggest that you should buy at least $300,000 worth of liability insurance, and that you should understand that this may not be nearly enough.
Of course, if you don't have much in the way of assets, you could consider going with the minimum in liability insurance. It will save you money on your policy.
Collision and Comprehensive Insurance
If you have a car loan, or you're leasing a vehicle, then the holder of the lien will require you to have both comprehensive and collision coverage. Collision covers you for exactly what you might expect you'd be covered for - a collision with another vehicle or an object (not including an animal). Comprehensive covers you for other damage, like weather or vandalism. If you own an older vehicle, you may not need this type of car insurance. The basic rule of thumb is that if the annual costs of your comprehensive and collision coverage add up to more than 10% of the value of your car, skip it.
Collision insurance is just what it sounds like - it puts you back in the position you were in before should you collide with another vehicle, or an object like a light post or a fire hydrant. Comprehensive insurance covers you for non-collision damage - if your car is stolen, catches fire, explodes, or ends up under a falling object.
This type of insurance isn't required if you own your car, but if you have a car loan or you're under a lease contract, your lender will likely require you to have it.
Personal Injury Protection
This type of insurance covers you and members of your family if you're injured in an accident. If you have a good health insurance plan, you can likely opt out of this part of your car insurance coverage, unless your state requires it. Your insurance agent can tell you if you're in a state that requires personal injury protection.
Medical Payments Coverage
This is very similar to personal injury protection, but it begins where that type of coverage ends. If medical expenses for injured parties are more than what's covered by personal injury protection, then medical payments coverage picks up the slack. This is an enhanced level of protection for the policy holder.
Uninsured Motorist Coverage
If you're in an accident with someone who has no car insurance coverage, the mere fact that they're operating outside the law isn't going to help you. You can sue them, but if they can't afford vehicle insurance, chances are that they don't have any assets that can be seized to cover your losses. Uninsured motorist coverage isn't required by law, but it's a good idea. It usually doesn't add all that much to the overall cost of your car insurance coverage, and its well worth it if you should end up in an accident with someone who isn't insured.
It's up to you - you can buy roadside assistance insurance on your policy if you want to, but most of the time if your vehicle is still under warranty, the auto manufacturer will have this type of car insurance in place for you under the terms of your warranty. If your car is no longer under warranty, you may want to consider this type of car insurance - but not before investigating motor clubs such as AAA, which will usually offer lower rates along with other benefits.
Remember, Cheaper Isn't Necessarily Better
Do your homework, and find a policy that covers you for what you need but doesn't make you pay for what you don't need. And always, always, carry the most liability coverage you can afford. You're far better off paying a few hundred dollars more in any given year for good car insurance coverage than it is to end up bankrupted due to litigation following an accident.
Don't Buy What You Don't Need
If your car is old and easily replaced, you may want to forego collision and comprehensive insurance. If your health plan is good, you might want to bypass personal injury protection insurance, which can be expensive, if your state doesn't require you to have it. Uninsured motorist coverage is almost always a good buy.
Buy It and Hope You Never Have to Use It
It's not the easiest thing, getting your head around spending money on something that you might never see a benefit from. But if you're ever in an accident, you'll be glad that you have auto insurance coverage. You want to make sure that you have the best possible car insurance coverage, so think about what works with your lifestyle and your income. Then, if the worst happens, you'll be protected.