Auto Insurance: What's Recommended?

Auto insurance is a contract between you and an insurance company. While the minimum coverage requirements vary by state, liability insurance is the main mandated coverage across the US. It covers damage and injuries you cause to others in an accident. The recommended auto insurance coverage depends on your financial situation and the specific scenarios you want to be covered in.

In addition to liability insurance, collision and comprehensive insurance are often recommended, especially for expensive vehicles. Collision insurance covers the cost of repairs to your car, whereas comprehensive insurance covers damage caused by events outside your control, such as vandalism or natural disasters.

Other optional coverage types include uninsured motorist coverage, personal injury protection, medical payments coverage, and roadside assistance. When deciding on the recommended auto insurance coverage for your needs, it is essential to consider your state's requirements, your financial situation, and the specific risks you want to be protected against.

Liability insurance

Property damage coverage pays for repairs to the other driver's vehicle, a rental vehicle while the other person's car is being repaired, damage to buildings, fences, or other structures, damage to personal property, legal fees if you're sued for property damage, and other related costs.

Bodily injury coverage provides payment for the medical expenses of others injured in an accident, including rehabilitation and legal costs. It also covers legal fees if you're sued for injuries you caused.

The minimum liability insurance requirements vary by state, and it's important to know your state's requirements. For example, in California, the minimum liability insurance required is $15,000 for bodily injury to one person, $30,000 for bodily injury to multiple people in a single accident, and $5,000 for property damage. However, these amounts may not be sufficient to cover the costs of a serious accident, and it's recommended to purchase higher coverage limits if you can afford it.

When determining how much liability insurance to purchase, consider your net worth and how much you drive. If you don't have enough coverage to pay for the injuries or property damage you cause, you could face a lawsuit. It's important to have enough liability insurance to protect your financial security and cover the full cost of an accident without putting your assets at risk.

In addition to the minimum liability insurance, you may also want to consider optional coverage types, such as uninsured motorist coverage, medical payments coverage, and roadside assistance, depending on your specific needs and concerns.

Collision insurance

It is important to note that collision insurance does not cover damage to other vehicles or objects, nor does it cover bodily injuries sustained in the accident. It also does not cover damage caused by natural disasters, weather, fire, or theft.

The cost of collision insurance varies depending on factors such as driving history and the type of car. The average annual cost is around $381, according to the National Association of Insurance Commissioners (NAIC). Collision insurance can be expensive, but people can save on premiums by choosing a higher deductible.

Comprehensive insurance

Comprehensive coverage does not have a limit that you select. The maximum it will pay out is based on the actual cash value of your vehicle, and you will be responsible for paying your selected deductible.

Personal injury protection

PIP can help cover medical expenses for you and your injured passengers. It can also help pay for your health insurance deductible and funeral, burial, or cremation expenses after an accident. If you're injured in an accident and can't work, PIP can help replace lost income, including if you're self-employed and need to hire temporary workers.

The amount of PIP coverage you need may depend on your state's requirements and your personal financial situation. In Massachusetts, for example, the required minimum limit for PIP is $8,000 per person, per accident. In Texas, the minimum amount of PIP insurance offered is $2,500, and you can typically increase your coverage to $5,000 or $10,000 if desired.

It's important to note that PIP doesn't cover everything. It won't cover the other driver's injuries in a collision or any injuries from an accident that occurred while you were committing a crime or receiving payment for driving. To ensure full coverage, you may also want to consider bodily injury liability insurance and property damage liability insurance.

Uninsured motorist coverage

Underinsured motorist coverage is similar but distinct from uninsured motorist coverage. It comes into play when the at-fault driver has some insurance but not enough to fully cover your damages or medical bills. While some states require both types of coverage, others may only mandate one or the other, or none at all. It is important to check the requirements and options in your state.

When choosing uninsured motorist coverage, you can select the insurance limits that best suit your needs. For bodily injury coverage, it is recommended to match the amount of your liability coverage. As for UMPD, you can choose a limit that reflects the value of your vehicle, especially if you do not have collision coverage.

In the unfortunate event of an accident, it is important to take the necessary steps to file a claim with your insurance company. Check for injuries, call for emergency assistance if needed, and notify the police. If it is a hit-and-run, gather as much information as possible, including witness details and the other car's license plate number if possible. Submit all relevant information and bills to your insurance provider as soon as you can, as there may be time limits for filing an uninsured claim.

Frequently asked questions