Auto Insurance Coverage: Is More Always Better?

Car insurance is a necessity, but the amount of coverage you need is up for debate. While most states impose minimum insurance requirements, it is recommended that drivers purchase more coverage than is required to ensure financial protection of assets.

The minimum amount of car insurance you’ll typically need is state-required liability coverage, which covers some, if not all, injuries and damages you’re liable for in an accident. However, individual state requirements vary widely, and your state may mandate higher or lower limits.

While minimum auto insurance coverage is better than nothing, it is not all a driver needs. It is recommended that drivers purchase the minimum and then some additional coverage on top of that. Collision coverage, comprehensive coverage, and uninsured/underinsured motorist coverage are all types of insurance that can be added on for more protection.

Liability coverage

Failing to obtain the required liability coverage can result in fines, suspension of your license, and even jail time for repeat offenses. Therefore, it is crucial to understand your state's requirements and choose a suitable coverage limit.

In addition to liability coverage, other types of auto insurance, such as collision and comprehensive insurance, can provide further protection for your vehicle.

Collision coverage

However, collision coverage may not be worth it if you have an old car with a low market value, as the policy will only pay out up to the car's current market value, minus your deductible. In this case, it may make more financial sense to pay for repairs or a new car out of pocket.

When deciding whether to opt for collision coverage, it is important to weigh up the value of your vehicle against the cost of the coverage and your deductible. You should also consider your level of driving experience and the likelihood of being involved in a collision. If you are a new or inexperienced driver, collision coverage could provide valuable peace of mind.

Ultimately, the decision to purchase collision coverage depends on your individual circumstances and your attitude towards risk.

Comprehensive coverage

The value of comprehensive coverage depends on the age of your car. For older cars, comprehensive coverage is often too expensive and may not be worth it. As a car gets older, its value decreases while the cost of insurance slowly drops. For example, it may not be a good investment to have full coverage on a 15-year-old car, as the cost of insurance may approach or exceed the value of the vehicle.

However, for newer cars, comprehensive coverage can be a worthwhile investment. It is recommended to keep comprehensive coverage on vehicles that are younger than ten years old. The cost of insuring a 5-year-old car is typically much lower than the value of the car, making comprehensive coverage a good financial decision.

Ultimately, the decision to purchase comprehensive coverage depends on the value of your car, your personal preferences, and your financial circumstances. If your vehicle has a high cash value or you cannot afford to repair or replace it out of pocket, comprehensive coverage can provide peace of mind and protect you from unexpected costs.

Personal injury protection

While PIP is a mandatory requirement in some states, it is optional in others. For example, in Texas, PIP insurance is not mandatory, but drivers must sign a waiver if they choose to decline the coverage. The cost of PIP insurance varies depending on factors such as location, coverage amount, and driving history.

When deciding whether to opt for PIP coverage, it is important to consider the potential benefits and peace of mind it can provide in the event of an accident. While health insurance may cover medical expenses, PIP offers additional financial protection by covering lost wages and other related expenses. Additionally, if a driver does not have health insurance or has high deductibles, PIP can be especially valuable.

Overall, while the decision to purchase PIP insurance depends on individual needs and circumstances, it can provide valuable financial protection and peace of mind in the event of a car accident.

Uninsured/underinsured motorist coverage

Uninsured motorist coverage will protect you if you are hit by a driver who does not have any auto insurance, while underinsured motorist coverage will protect you if the other driver does not have enough coverage to pay for the damages or injuries they caused. In some states, the number of uninsured drivers is over 20%, so it is a serious risk to drive without this coverage. If you don't have this insurance and are in an accident with an uninsured or underinsured driver, you may end up paying for medical bills or vehicle repairs out of your own pocket. Even if you have health insurance, it may not cover all the costs associated with an accident, such as lost wages or damage to your vehicle.

When deciding how much uninsured/underinsured motorist coverage to purchase, it is generally recommended to choose limits that match your liability coverage. For example, if your liability coverage limits are $50,000 per person and $100,000 per accident, you should consider choosing the same limits for your uninsured/underinsured motorist coverage. For UMPD, you can select a limit that is similar to the value of your vehicle.

Frequently asked questions