Auto Insurance: Protecting Your Vehicle And Wallet

The amount of auto insurance you need for your own vehicle depends on your financial situation, the value of your assets, and the minimum coverage requirements of your state. While liability coverage is required to drive in almost every state, the amount you need varies depending on where you live. It's important to purchase coverage that equals your net worth to protect your financial security in the event of an accident. Full coverage insurance is also an option, which includes liability, collision, and comprehensive coverage. Collision coverage pays for damage to your car in the event of a crash, while comprehensive coverage protects against non-crash damage, such as theft or natural disasters. When deciding on the amount of auto insurance, consider your budget, the value of your vehicle, and the level of protection you want.

Liability insurance

The limits of liability insurance are typically expressed as three numbers, such as 25/50/10, indicating the coverage for bodily injury per person, bodily injury per accident, and property damage per accident, respectively. For example, a policy with limits of 25/50/10 would provide $25,000 in bodily injury coverage per person, $50,000 in bodily injury coverage per accident, and $10,000 in property damage coverage per accident. It is important to select appropriate limits that adequately protect your financial well-being in the event of a significant accident.

In addition to the minimum requirements set by each state, individuals may choose to purchase additional liability coverage to suit their specific needs. This is particularly important if you have considerable assets that you want to protect from potential lawsuits. Umbrella insurance policies can provide additional liability coverage on top of your existing auto and homeowners insurance policies, typically offering increments of $1 million or more.

Collision insurance

If you own your vehicle outright and choose not to carry collision coverage, you will have to pay for repairs or a replacement 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.

When deciding whether to opt for collision coverage, consider factors such as the value of your vehicle and your ability to pay for repairs or a replacement out of pocket. If your vehicle is brand new or still worth a considerable amount, collision coverage may be worthwhile to help with expensive repairs or replacement. Additionally, if you're leasing or financing your vehicle, your lender may require collision coverage to protect their investment.

The cost of collision insurance varies depending on factors such as your location, vehicle type, driving history, and chosen deductible amount. It's recommended to choose a deductible that reflects your ability to pay for repairs out of pocket, as a higher deductible will result in lower premiums, but you'll be responsible for higher out-of-pocket expenses if you file a claim.

Comprehensive insurance

The cost of comprehensive insurance varies depending on factors such as the value of the vehicle, location, and the driver's insurance history. The average cost of comprehensive insurance is around $134 per year but can be nearly double that in certain states. The most expensive state for comprehensive insurance is South Dakota, with an average of $347.61, while California has the lowest average cost at $96.53.

When deciding whether to purchase comprehensive insurance, consider the value of your car, your financial situation, and your personal preferences. If your vehicle has a high cash value or you cannot afford repairs or replacement costs out of pocket, comprehensive insurance can provide valuable protection. However, if your car is older and has a low cash value, you may decide that the cost of comprehensive insurance is not worth the benefit.

Uninsured motorist coverage

When deciding how much uninsured motorist coverage to purchase, it is generally recommended to choose limits that match your liability coverage. For example, if your liability coverage is $50,000 per person and $100,000 per accident, you may want to select the same limits for your uninsured motorist coverage. This ensures that you have sufficient protection in the event of an accident with an uninsured or underinsured driver.

It is worth noting that uninsured motorist coverage does not include a deductible, so you can make a claim directly against your policy without having to pay any additional costs. This can be especially helpful if you have a high deductible on your health insurance or collision coverage.

In summary, uninsured motorist coverage is a crucial consideration when determining how much auto insurance you need for your own vehicle. By understanding the risks associated with uninsured and underinsured drivers, you can make an informed decision about the level of protection you need to safeguard yourself and your passengers in the event of an accident.

Personal injury protection

PIP coverage may even help cover your health insurance deductible. If you're self-employed and need to hire temporary workers to perform tasks, this benefit can also apply. Your PIP coverage can also help pay for funeral, burial, or cremation expenses after a car accident. If you pass away in an auto accident, your PIP insurance can help replace your lost income for your surviving dependents.

PIP insurance won't cover the other driver's injuries in a collision, any injuries from an accident while you were committing a crime (like fleeing the police), or injuries in an accident while you received payment for driving.

In the US, some states require PIP as part of its "no-fault auto insurance" laws, while in other states, you can buy PIP as an optional coverage type. For example, in Texas, PIP insurance is not mandatory, but you have to sign a waiver if you want to decline the coverage.

Frequently asked questions