Haris Ashley
Choosing the right auto insurance coverage can be tricky. While state laws mandate a minimum amount of auto insurance coverage, you might wonder if it’s enough after an accident. The answer depends on your financial situation. Auto insurance offers financial protection after an accident, so try to purchase coverage equal to your net worth.
Liability coverage is required to drive in almost every state, but the amount you need may vary depending on where you live. This coverage pays for 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 property damage. However, experts recommend buying more than the legal minimum if you can afford to do so.
In addition to liability coverage, you may want to consider adding other types of coverage to your policy, such as collision and comprehensive coverage, which pay for damage to your own vehicle. Personal injury protection and medical payments coverage can help pay for your medical expenses and lost wages after an accident. Uninsured and underinsured motorist coverage can protect you if you are hit by a driver who does not have enough insurance.
When choosing an auto insurance policy, it is important to shop around and compare rates from multiple companies. Consider your budget, the types of coverage you need, and the reputation of the insurance provider.
What You'll Learn
Liability insurance
Liability car insurance falls into two categories: bodily injury liability coverage and property damage liability coverage. Bodily injury liability coverage applies to the medical expenses of the other party if you are found at fault in an accident. In some circumstances, it may even cover lost wages and/or legal fees if the injured party files a lawsuit. Property damage liability coverage applies to damages to property resulting from a covered accident in which you are at fault. It may cover the other party's vehicle repair or replacement costs, as well as other property that may have been damaged in the accident, such as fences, structures, or mailboxes.
When selecting liability insurance, it is important to consider the limits of coverage. Liability insurance has dollar limits on each of its components, depending on the level of coverage you choose when purchasing the policy. These limits include the maximum amount of coverage for property damage and bodily injury per person and per accident. It is also important to review the requirements for liability insurance in your state, as each state sets a minimum for how much liability coverage a motorist must carry.
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Collision insurance
When selecting a collision insurance policy, you will need to choose a deductible, which is the amount you agree to pay before your insurance coverage benefits kick in. A higher deductible will lower your monthly premium but will result in higher out-of-pocket costs if an accident occurs. On the other hand, a lower deductible will increase your monthly premium but provide more financial protection in the event of a collision.
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Comprehensive insurance
The cost of comprehensive insurance is typically based on the actual cash value of your vehicle, and you will be responsible for paying your selected deductible. The deductible is the amount you agree to pay before the insurance company starts paying for damages. A higher deductible can lead to lower insurance costs, while a lower deductible will result in higher insurance costs. Comprehensive insurance usually costs less than collision insurance, but the price can vary depending on the insurer, your location, the value of your vehicle, and other factors.
When deciding whether to purchase comprehensive insurance, consider the value of your vehicle, your financial circumstances, and your personal preferences. If your vehicle has a high cash value or you cannot afford to repair or replace it out of pocket, comprehensive insurance can provide valuable protection. It gives you peace of mind, knowing that you are covered for unexpected events that are beyond your control.
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Uninsured motorist insurance
UM coverage can pay for medical expenses for you and your passengers if you are in an accident with an uninsured driver. This includes medical bills, lost wages, and pain and suffering. UM coverage can also pay for repairs to your car or other property if it is damaged by an uninsured driver. This is known as uninsured motorist property damage coverage, or UMPD.
In some states, UM coverage is required by law. In others, it is an optional add-on to your car insurance policy. You can select the same coverage limits as you do for your liability policy. For example, if you have a $300,000 liability limit, you may want to have the same amount, or close to it, for your UM coverage.
UM coverage is especially useful if you have a high deductible or out-of-pocket maximum on your health insurance. It can also be useful if you do not have collision coverage.
There are two types of UM coverage: uninsured motorist bodily injury coverage (UMBI) and uninsured motorist property damage coverage (UMPD). UMBI covers medical expenses related to a crash with an uninsured driver, up to your chosen limit. UMPD covers repairs to your car if it is damaged by an uninsured driver. This may not be available in all states.
If you are in an accident with an uninsured driver, your UM coverage can provide financial protection for you and your passengers. It can cover medical expenses, lost wages, and repairs to your car. This coverage can provide peace of mind and help you manage the financial impact of an accident with an uninsured driver.
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Personal injury protection
PIP covers medical expenses for both injured policyholders and their passengers, even if they don't have health insurance. It also provides payments for lost income, childcare, and funeral expenses related to the accident. In some states, PIP may also cover services that the injured person can no longer perform, such as house cleaning or childcare.
The amount of PIP coverage required varies by state. In some states, PIP coverage is mandatory, while in others, it is optional or not available at all. If you live in a state that requires PIP, you may want to purchase the minimum coverage amount if you already have comprehensive health insurance. However, it's important to note that health insurance typically doesn't cover lost wages or help pay for services that the insured can no longer perform due to their injuries.
When selecting the right amount of PIP coverage, consider how you're covered by your health insurance plan and whether you have sufficient coverage for medical expenses, lost wages, and other related costs that may arise from a car accident.
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Frequently asked questions
The minimum amount of car insurance you need is determined by your state's requirements. Nearly every state requires liability insurance for property damage and injury to other drivers, but the minimum coverage amounts vary from state to state.
Liability insurance, which includes bodily injury liability coverage and property damage liability coverage, is mandatory in nearly every state. Some states also require uninsured motorist insurance, personal injury protection (PIP), and/or medical payments coverage (MedPay).
Full coverage car insurance typically includes liability coverage, collision coverage, and comprehensive coverage. Collision coverage pays for damage to your own vehicle in an accident, while comprehensive coverage pays for non-accident damage, such as theft or weather damage.
The amount of car insurance you need depends on your financial situation and the value of your assets. Try to purchase the maximum amount of coverage you can comfortably afford to ensure you are protected in most scenarios.
