Auto Insurance Qualification: 9 Units Enough?

Auto insurance is a legal requirement in most states, and it is important to understand the different types of coverage available. The two main types of auto insurance are liability coverage and comprehensive coverage. Liability insurance covers any damage you may cause to other people or their property, while comprehensive coverage protects your own car from damage. When storing your car, comprehensive coverage is essential to protect it from any potential damage. While you may be able to pause certain types of car insurance, most states require liability insurance, and you won't be able to legally drive without it.

Minimum auto insurance requirements

In the United States, auto insurance requirements vary by state. Here is a summary of the minimum auto insurance requirements in California, Illinois, New York, and Florida.

California

In California, drivers are required to carry a minimum amount of car insurance. The state mandates two types of liability coverage with minimum coverage limits:

• Bodily Injury Liability Coverage: The minimum limits are $15,000 per person and $30,000 per accident.
• Property Damage Liability Coverage: The minimum limit is $5,000 per accident.

Liability coverage protects drivers financially if they are found to be at fault for an accident, helping to pay for the medical bills and property damage repairs of those involved. It is important to note that liability coverage does not cover damage to the driver's own car or their medical bills.

Illinois

The minimum auto insurance requirements in Illinois are as follows:

• Bodily Injury Liability Coverage: $25,000 per person and $50,000 per incident.
• Property Damage Liability Coverage: $20,000 per accident.

In Illinois, liability coverage is also required, providing protection in the event of a covered accident. This includes safeguarding assets if the policyholder is found legally responsible for an accident, covering certain expenses associated with bodily harm to others, and damage to another party's property.

New York

In New York, the minimum coverages and amounts required to satisfy the financial responsibility needed to register a vehicle and obtain license plates include:

• No-Fault (Personal Injury Protection): Covers medical expenses, lost earnings, and other reasonable and necessary expenses for the driver or passengers injured in the insured car, up to $50,000 per person.
• Liability Coverage: Protects against harm caused by the insured vehicle to other people and their property, with minimum limits of $25,000 for bodily injury, $50,000 for any injury resulting in death, and $10,000 for property damage liability protection per accident.
• Uninsured Motorists Coverage: Provides protection for bodily injury for the policyholder and their family members residing in the household if injured due to the negligent actions of an uninsured or hit-and-run motorist.

Florida

In Florida, before registering a vehicle, proof of Personal Injury Protection (PIP) and Property Damage Liability (PDL) automobile insurance is mandatory. The minimum requirements are as follows:

• Personal Injury Protection (PIP): Covers 80% of all necessary and reasonable medical expenses up to $10,000, regardless of who is at fault in the crash.
• Property Damage Liability (PDL): Pays for damage to another person's property caused by the insured vehicle or its driver, with a minimum requirement of $10,000 in PDL coverage.

Bodily injury liability

In the unfortunate event of an accident, bodily injury liability coverage can help pay for the other person's medical expenses, including emergency care, hospital fees, follow-up visits, and medical equipment. It also covers lost income if the injured person is unable to work and can even provide compensation for pain and suffering resulting from long-lasting emotional trauma related to the accident.

Additionally, this coverage can protect your assets if you are sued due to an accident. It can help cover legal expenses, including attorney fees and court costs. However, it's important to ensure that your policy includes enough liability coverage to provide this protection.

When considering the amount of bodily injury liability coverage to include in your auto insurance, it's generally recommended to have higher limits than the state minimums. The state minimums may not provide sufficient protection in the event of a lawsuit. Experts suggest having bodily injury limits of at least $100,000 per person and $300,000 per accident. However, you may want to increase these limits further to safeguard your financial assets in the event of a lawsuit. Ideally, your coverage should be sufficient to protect your net worth.

It's worth noting that some states, like California, require a minimum amount of bodily injury liability coverage by law. In California, the minimum requirement is $15,000 for the injury or death of one person and $30,000 for the injury or death of more than one person in a single accident.

Property damage liability

Most states require a minimum amount of property damage liability coverage, and while buying more than the state-mandated minimum offers more financial protection, it is more expensive. For example, in New York, the minimum limit of coverage required by law for property damage liability protection is $10,000 per accident, whereas, in Florida, the minimum coverage is $10,000 in property damage liability.

Liability insurance is typically represented in three numbers on a policy, like "25/50/10." The first two numbers represent how much bodily injury coverage you have per person and per accident, respectively, while the third number is the policy's property damage liability limit.

If you damage someone else's property while driving, you should provide your insurance information to the property owner. They can then contact your insurance company to initiate the claims process. Your insurer will work with the other party to assess the damage and pay for repairs, up to your policy's property damage liability limit. As a result of the claim, you will likely experience increased rates at your next policy renewal.

Uninsured/underinsured motorist coverage

In some states, underinsured motorist (UIM) coverage is also available. UIM coverage kicks in if your damages exceed the at-fault driver's policy limits, paying the difference between their policy limit and your total damages, up to your policy limit.

Even if you have health insurance, uninsured/underinsured motorist coverage can still be beneficial as it covers additional expenses that health insurance may not, such as lost wages and property damage. It also provides benefits that health insurance won't, like compensation for pain and suffering.

The amount of coverage you need depends on your state's requirements and your personal situation. In some states, the minimum UM coverage is set by law and is typically equal to your liability coverage amounts. In other states, you may have the option to choose a lower amount of coverage. If you can afford it, it is generally recommended to purchase as much coverage as possible.

Collision and comprehensive coverage

Collision coverage protects your vehicle from damage caused by accidents involving other vehicles or objects, such as road signs, buildings, or guardrails. It covers the cost of repairs or the replacement of your vehicle, regardless of who is at fault. For example, if you rear-end another car or hit a tree, collision coverage will pay for the necessary repairs. It is important to note that collision coverage does not cover damage to other vehicles involved in the accident.

On the other hand, comprehensive coverage is designed to protect your vehicle from non-collision incidents that are outside of your control. This includes theft, vandalism, glass and windshield damage, fire, accidents with animals, weather damage, or other acts of nature. For instance, if a tree falls on your parked car or a deer runs in front of your car, comprehensive coverage will cover the resulting damages. Comprehensive coverage also reimburses you for car theft and does not cover damage to other vehicles.

Both collision and comprehensive coverage typically become mandatory if you lease or finance your vehicle. Lenders require this coverage to protect their investment in the vehicle until the loan is fully paid off. Once the car loan is paid off, collision and comprehensive coverage become optional. However, it is recommended to evaluate your financial situation, the value of your car, and your personal preferences to decide if you should continue this coverage.

Frequently asked questions