Auto Insurance: How Many Have Adequate Coverage?

The topic of auto insurance levels is a complex one, with many variables to consider. Firstly, it's important to understand the different types of auto insurance coverage. The most common types include liability coverage, which is mandatory in most states and covers damage to other people's property and injuries; collision coverage, which is often required by lenders and covers repairs to your own vehicle in the event of an accident; and comprehensive coverage, which protects against non-collision damages such as theft, vandalism, or natural disasters. While collision and comprehensive coverage are not required by law, they are highly recommended for financial protection.

The amount of auto insurance coverage one needs varies depending on individual circumstances and state requirements. Most states have minimum liability coverage requirements, but these may not be sufficient in the event of a serious accident. It is generally recommended to purchase higher liability coverage limits, such as $100,000 per person and $300,000 per accident for bodily injury, and $100,000 for property damage. Additionally, factors such as age, driving record, vehicle type, and location can impact the cost of auto insurance.

When determining the typical level of auto insurance, it's essential to consider the financial implications of different coverage levels. While purchasing the maximum coverage may not be feasible for everyone, it is crucial to strike a balance between affordability and adequate protection. It is also worth noting that certain states, such as New Hampshire and Virginia, do not require auto insurance, while others mandate additional coverages like personal injury protection (PIP) or uninsured/underinsured motorist coverage.

How much liability insurance should I buy?

Liability insurance is a type of auto insurance that covers damage and injuries you cause to others in an accident. It is the main mandated coverage in most states. The minimum amount of liability insurance you need to buy varies by state, but it is generally recommended to purchase more than the minimum requirements to ensure you have adequate coverage in the event of an accident.

When determining how much liability insurance to buy, it is important to consider your state's requirements, your financial situation, and the value of your assets. Here are some factors to consider:

• State requirements: Each state has different minimum requirements for liability insurance. Make sure you are familiar with the requirements in your state.
• Financial situation: Consider your income, savings, and ability to pay for damages out of pocket. If you don't have enough savings to cover the costs of an accident, you will need higher liability insurance limits.
• Value of your assets: If you have significant assets, such as a home, business, or retirement funds, you may want to purchase higher liability limits to protect yourself from lawsuits and financial loss.

It is generally recommended to carry liability insurance limits of at least 100/300/100, which provides:

• $100,000 for bodily injury to one person per accident
• $300,000 for bodily injury to multiple people per accident
• $100,000 for property damage per accident

However, you may want to consider even higher limits, especially if you have a lot of assets to protect. You can also purchase an umbrella insurance policy, which provides additional liability coverage above your base auto and home insurance policies.

In addition to liability insurance, there are other types of optional auto insurance coverages you may want to consider, such as collision insurance, comprehensive insurance, uninsured/underinsured motorist coverage, and personal injury protection. When deciding on the amount and type of insurance to purchase, it is important to assess your financial situation and determine what coverage is necessary to protect yourself and your assets in the event of an accident.

Is minimum car insurance coverage enough?

While the minimum amount of car insurance required by your state is essential to know, this amount may not be adequate for your needs.

In most states, liability insurance is the main mandated coverage. This covers damage and injuries you cause to others in an accident. The most common minimum limits for liability are $25,000 per person and $50,000 per accident for bodily injury, and $25,000 for physical damage. However, these limits can vary by state.

The minimum coverage will not cover your injuries, vehicle repairs, or damages due to theft, vandalism, natural disasters, and uninsured/underinsured motorists.

If you cause a serious car accident, the cost of repairs and medical expenses can quickly exceed the limits of minimum insurance coverage. In this case, you would be responsible for paying the amount above your coverage limits.

It is recommended that you try to purchase the maximum amount of car insurance coverage that you can comfortably afford so that you and your vehicle are covered in most scenarios. This will ensure that you have optimal protection and avoid being underinsured when filing a claim.

• Collision insurance: covers damage to your car if it collides with another vehicle, crashes into an object, or turns over.
• Comprehensive insurance: covers losses from incidents other than a collision, such as fire, theft, windstorm, vandalism, flood, or hitting an animal.
• Uninsured motorist insurance: covers your expenses if you are hit by a driver without insurance or with insufficient insurance.
• Medical payments insurance: covers medical expenses beyond those covered by personal injury protection (PIP), regardless of who is at fault.
• Rental reimbursement coverage: reimburses you for car rental if an accident leaves your car unable to be driven.
• Accident forgiveness coverage: protects you from rising insurance rates if you are at fault in an accident.
• Roadside assistance: provides towing coverage and other services like flat tire changes, jump starts, and fuel delivery.

When determining car insurance rates, insurers consider factors such as your age, location, driving history, car type, coverage limits, and deductibles.

You can buy car insurance online, in-person, or by phone. It is recommended that you compare quotes from multiple insurance companies to get the best deal. Make sure to ask about car insurance discounts, as many types of discounts are available.

How much collision and comprehensive insurance should I buy?

Collision and comprehensive insurance are not legally required by any state. However, they are often required by lenders if you are leasing or financing your vehicle. Even if you are not required to buy collision and comprehensive insurance, you may still want them. Ask yourself: if your car were damaged or stolen, could you easily pay for repairs or buy another car? If the answer is no, collision and comprehensive insurance can be a smart buy.

Collision insurance covers damage to your vehicle caused by a crash involving another car or object, such as a tree, mailbox, guard rail, fence or telephone pole. Comprehensive insurance covers damage to your vehicle caused by a non-collision incident, such as fire, vandalism, falling objects, weather-related damage and theft.

The cost of comprehensive vs. collision car insurance depends on many factors, including your age, gender, location, driving record, credit score and the type of car you drive. On average, U.S. drivers pay $263 per year for comprehensive coverage and $723 per year for collision insurance.

When deciding how much collision and comprehensive insurance to buy, consider the value of your car and your financial situation. If your car is old or has low value, it may not be worth paying for comprehensive and collision coverage. Collision and comprehensive insurance may also not be worth it if your car is paid off and you have a high deductible. In this case, you may decide to pay for any vehicle damage out of your own pocket if you're at fault in an accident or your car is damaged from an incident beyond your control.

If you lease or finance your car, you will probably need comprehensive and collision insurance. Banks and other financing companies usually require you to keep these types of coverage while you carry a loan or lease for a vehicle. Getting comprehensive and collision coverage is also a good idea if you own a high-value vehicle or live in an area with a high incidence of car theft, vandalism, severe weather or animal collisions.

How much PIP insurance should I buy?

The amount of Personal Injury Protection (PIP) insurance you should buy depends on a variety of factors, including the state in which you live, whether you have health insurance, and the nature of your health insurance plan.

State Requirements

Firstly, it's important to note that not all states offer or mandate PIP insurance. Currently, 17 states mandate it, and in a handful of others, it is available but not required. If you live in a state that requires PIP coverage, you must carry a minimum amount, which varies by state. For example, Oregon requires a minimum of $15,000 of PIP coverage, whereas Maryland's minimum is $2,500.

Health Insurance

If you have health insurance, PIP may not be necessary. However, it's worth considering the extent of your health insurance coverage. If your health insurance plan has a high deductible, PIP could be a favourable option as it typically doesn't have a deductible, or the deductible is low. Additionally, PIP covers a range of costs that health insurance doesn't, such as lost wages, household replacement services, and funeral expenses.

Other Considerations

When deciding on the amount of PIP coverage, it's important to weigh the benefits of increased protection against the potential increase in your auto policy's rate. If you opt for higher PIP coverage, it could result in higher premiums. However, in the event of an accident, PIP can provide valuable financial protection, especially if you don't have life insurance or comprehensive health insurance.

In summary, while the specific amount of PIP insurance to purchase depends on individual circumstances, it is generally advisable to obtain at least the minimum amount of personal injury protection offered in your state.

How much MedPay should I buy?

MedPay, or medical payments, is an optional coverage add-on to your car insurance policy. It covers medical expenses and funeral costs resulting from an accident, regardless of who is at fault. MedPay can also cover you if you're injured in an accident in someone else's car, as a pedestrian, or while riding your bike.

The amount of MedPay coverage you buy represents the maximum amount available to each person who is covered under your policy. For example, if you purchase $2,000 of MedPay coverage and you and your passenger are hurt in a car accident, you'll have up to $2,000 each in MedPay coverage.

MedPay is usually sold in small amounts between $1,000 and $5,000, but you can get as little as $500 or as much as $50,000 or more. The limit you choose will determine how much your insurance will pay after a car accident. The higher your coverage limit, the higher your monthly premium will be.

When deciding how much MedPay coverage to buy, consider the following:

• Your health insurance coverage: If you have a high-deductible health plan, MedPay can help offset the deductible if you get hurt in a car accident.
• Your budget: MedPay coverage is typically quite low-cost, but the more coverage you choose, the higher your premiums will be.
• Your passengers: If you frequently drive passengers who aren't part of your family, MedPay can cover their medical expenses as well.
• Your location: MedPay is required in Maine and sometimes in New Hampshire. In some states, you can't buy MedPay because personal injury protection (PIP) is required instead.

In general, it's a good idea to have enough MedPay coverage to pay for any out-of-pocket medical expenses that you or your passengers may incur in the event of a car accident. This will ensure that you're financially protected and can focus on recovery.

Frequently asked questions