Auto Insurance: Getting The Right Coverage For Peace Of Mind

Auto insurance coverage is a complex topic, and the amount of coverage one needs depends on various factors. The minimum amount of car insurance required by law varies by state, with some states mandating additional coverage such as personal injury protection or uninsured motorist coverage. It is important to understand your state's requirements and your specific situation to determine how much coverage is enough.

The key types of auto insurance coverage include liability, collision, and comprehensive. Liability insurance covers damage and injuries caused to others in an accident and is the main mandated coverage. Collision insurance covers the cost of repairing or replacing your car after an accident, while comprehensive insurance covers damage to your car from non-collision incidents such as theft, vandalism, or natural disasters.

When deciding on the amount of coverage, it is essential to consider your budget, the value of your car, and your personal preferences. While minimum coverage may be sufficient for some, others may require additional protection. It is recommended to purchase the maximum coverage you can comfortably afford to ensure you are covered in most scenarios.

Additionally, factors such as your age, location, driving history, and vehicle type can impact the cost of your insurance premium. It is advisable to compare quotes from multiple insurance companies to find the best coverage for your needs.

Liability insurance

The most commonly required liability limits are $25,000/$50,000/$25,000, which mean:

• $25,000 in bodily injury per person
• $50,000 in total bodily injury per accident
• $25,000 for property damage per accident

However, individual state requirements vary widely. For example, in California, you need to have liability insurance with at least $15,000 for bodily injury to one person, $30,000 for bodily injury to multiple people in a single car accident, and $5,000 for property damage. In Iowa, the minimum liability coverage is $20,000 of bodily injury to or death of one person in any one accident, $40,000 because of bodily injury to or death of two or more persons in any one accident, and $15,000 because of injury to or destruction of property of others in any one accident.

But these minimums are usually woefully inadequate and won't provide any coverage for your own car's repair bills. If you want better coverage, you're going to need to buy more than the minimum requirements. A good rule of thumb is to buy enough liability insurance to cover what you could lose in a lawsuit against you if you cause a car accident. In California, a policy with 250/500/100 would be a much better choice than the state minimum.

You should carry the highest amount of liability coverage you can afford, with 100/300/100 being the best coverage level for most drivers.

Collision insurance

If you own your vehicle outright and choose not to carry collision coverage, you will have to pay to repair or replace your vehicle out of pocket if you're involved in a single-vehicle accident or are found at fault in an accident. If the other driver is found at fault, their liability coverage will typically pay for the damage.

• Single-vehicle accidents, like hitting a guardrail or a telephone pole.
• Collisions with other vehicles.
• Collisions while your vehicle is parked (including hit-and-runs).

It does not cover:

• Collisions with animals, which are covered under comprehensive coverage.
• Injuries or damage you cause to another driver and their vehicle—your liability coverage applies instead.
• Damage to your vehicle caused by events outside of your control (such as a tree falling on it), which is covered under comprehensive coverage.

When deciding whether collision coverage is worth it for your vehicle, consider the following factors:

• The value of your vehicle: If your vehicle is brand new or still worth a considerable amount, collision may make sense as it can help you pay for expensive repairs or a replacement if it's damaged.
• Ability to pay out of pocket: If you couldn't afford to pay for repairs or a replacement vehicle out of pocket, collision is worth considering for peace of mind.
• Whether your vehicle is in storage: If your vehicle won't be driven for a long period of time, such as a boat or RV, it may not be worth carrying collision coverage while it's in storage.

The cost of collision insurance varies depending on factors such as the car you drive, how many miles you drive, and where you live. Choosing a higher deductible can lower your premium as long as you can cover the out-of-pocket costs if you need to file a claim.

Comprehensive insurance

The cost of comprehensive insurance varies depending on factors such as your age, driving record, the age and make of your vehicle, your state, and your chosen deductible. According to the National Association of Insurance Commissioners, the average annual comprehensive insurance premium for drivers in the U.S. in 2019 was $171.87, with state averages ranging from $96.53 in California to $347.61 in South Dakota.

When deciding whether to purchase comprehensive insurance, consider the value of your car, the likelihood of weather-related damage or theft, and how much you can afford to pay out of pocket for repairs or replacement. Comprehensive insurance is particularly useful if you have a new car or a car with a high value, as it can save you a lot of money on repair or replacement costs. However, if your car is older and has little value, the coverage may not be worth the price.

Personal injury protection (PIP)

PIP is required in some states and optional in others. In "no-fault" states, if a policyholder is injured in a car crash, their policy pays for their medical care, regardless of who caused the accident. In these states, every driver must have a minimum amount of PIP coverage to keep insurance costs down by preventing minor injuries from going to court.

The amount of PIP coverage required varies by state. For example, in Florida, the minimum personal injury protection policy is $10,000, while in Delaware, the minimum is $15,000 per person and $30,000 per accident. In Michigan, drivers can choose between unlimited medical benefits, a $250,000 limit, a $50,000 limit, or a PIP medical opt-out.

While PIP covers medical expenses and lost wages, it does not cover damage to your vehicle or property damage. It also does not cover injuries to other drivers involved in the accident or injuries sustained while committing a crime.

If you live in a state where PIP is optional, it is a good idea to purchase it if you want additional protection in case of an accident. PIP can help cover medical expenses for you and your passengers, as well as non-medical costs like childcare and lost wages.

Medical payments coverage (MedPay)

Medical Payments Coverage, commonly known as MedPay, is an optional add-on to an auto insurance policy that covers expenses related to vehicular accidents. MedPay is not a legal requirement, but it is a good idea for individuals concerned about managing potential medical expenses following a car accident, for themselves or their passengers.

MedPay covers the policyholder, any passengers in their vehicle, any pedestrians they may injure, and the policyholder if they are injured as a pedestrian, bike rider, or public transport rider. It covers medical payments such as health insurance deductibles and co-pays, hospital visits, X-rays, surgeries, ambulance fees, rehabilitation and nursing care, and some medical equipment. It is important to note that MedPay does not cover lost wages or rehabilitation costs.

The coverage takes effect regardless of who is at fault for the accident. This is especially beneficial if you are at fault, as auto liability insurance generally won't cover your medical expenses in this case. MedPay is also useful if you caused an accident due to alcohol or drug use, as a no-fault insurance policy won't cover you in this situation.

MedPay is typically sold with limits ranging from $1,000 to $10,000, with an average cost of around $20 to $50 per year for up to $10,000 in coverage. It is generally recommended to carry coverage equal to your health insurance deductible so that MedPay can be used to cover out-of-pocket medical expenses. If you don't have health insurance, consider a higher MedPay limit to help pay medical bills.

MedPay is not available in every state, and some states offer Personal Injury Protection (PIP) coverage instead. PIP is mandatory in no-fault states and covers medical expenses, lost wages, and rehabilitation costs. It often has higher limits and covers a wider range of issues, but it is generally more expensive than MedPay.

Frequently asked questions