Car InsuranceInsurance

How Much Car Insurance Do I Need?

How Much Car Insurance Do I Need? If you drive a car, you must demonstrate “financial responsibility,” which means you may pay for damages if you or another person operating your vehicle causes an accident.

Every state has a financial responsibility mandate of some kind, and the majority of drivers fulfill this obligation by purchasing auto insurance. Usually, it’s the simplest and least expensive option. Your state could require you to post a bond that can cost up to $50,000 to prove your financial responsibility if you don’t want auto insurance.

The next obvious question is: How much automobile insurance do I need? once you’ve ruled out the possibility of paying your state tens of thousands of dollars.

How Much Car Insurance Do You Really Need?

You must purchase the bare minimum amount of automobile insurance mandated by your state. State requirements, however, are grossly insufficient and do not cover the costs of repairing your own vehicle. You’ll need to purchase more than the bare minimum if you want better coverage.

There are various coverage options available. You can create a solid policy that meets your individual insurance needs if you have a basic understanding of the most common types of auto insurance.

Coverage Okay Good Even Better
Liability car insurance State minimum • $100,000 per person for bodily injury liability

• $300,000 per accident for bodily injury liability

• $100,000 for property damage

• $250,000 per person for bodily injury liability

• $500,000 per accident for bodily injury liability

• $250,000 for property damage

Uninsured/underinsured motorist coverage State minimum • $100,000 per person for bodily injury liability

• $300,000 per accident for bodily injury liability

• $250,000 per person for bodily injury liability

• $500,000 per accident for bodily injury liability

Personal injury protection (PIP) State minimum $40,000 State maximum
Collision coverage Not required Recommended Recommended
Comprehensive coverage Not required Recommended Recommended

Liability insurance

When you cause a car accident, liability car insurance covers other people’s medical bills and property damage. If you are sued as a result of an accident, it also covers your legal defense. Some instances of what liability insurance covers are as follows:

  • At a stoplight, you hit the rear of another vehicle, causing damage.
  • You collide with the fence of your neighbor.
  • If you caused a car accident, the other driver was hurt.

Except for New Hampshire and Virginia, every state mandates the purchase of liability auto insurance (although both states have some liability requirements under certain conditions). A minimum quantity will be needed of you.

The issue is that if you cause a catastrophic auto accident, these sums are insufficient. $5,000 worth of property damage won’t go you very far if you total someone else’s car. Additionally, if you caused a car accident with several injuries and are at blame, your medical bills might easily go beyond $30,000. Any sum in excess of the coverage restrictions will be your responsibility.

What kind of liability coverage should I purchase? Generally speaking, you should purchase enough liability insurance to protect your assets in case you are sued after a car accident. For instance, a policy with 250/500/100 would be a much better option in California than the required minimum.

Consider purchasing an umbrella insurance policy for additional liability protection beyond your standard auto and house insurance policies. You can purchase an additional $1 million or more in liability coverage through an umbrella policy for a reasonably low cost.

Uninsured motorist insurance

If someone hits you and has neither enough nor enough liability insurance, your medical bills will be covered by an uninsured motorist (UM) and underinsured motorist (UIM) insurance. Some states mandate uninsured motorist coverage, while others make it optional. You usually have the opportunity to decline the coverage in writing in states where UM is optional.

If UM is offered in your state, having it is a wise choice. UM, coverage covers:

  • Health-related costs for both you and your passengers
  • Lost wages if an auto accident injury prevents you from working
  • Funeral costs
  • Distress and suffering
  • Auto damage (depending on your state)

How much coverage against uninsured drivers should I purchase? Typically, you must buy UM in an amount equal to your liability insurance. For instance, you’ll need to get the same amount of UM insurance if your policy is 250/500/100.

Collision and comprehensive insurance

Collision and comprehensive insurance are required if you want coverage for auto repair costs. They cover a variety of issues, including car accidents, car theft, vandalism, collisions with animals, falling items, fires, floods, and hail damage. They are frequently marketed combined. Your lender or leasing company will probably demand you to carry both of them if you have a car loan or lease.

How much comprehensive collision insurance should I purchase? Both types of coverage will pay for the costs of replacing or repairing your car if it is harmed by an issue that is covered by the policy. The amount you’ll have to pay out of pocket if you file an insurance claim can be increased if you want to save expenditures.

Personal injury protection

Regardless of who caused the car collision, personal injury protection (PIP) pays for your and your passenger’s medical expenses. It also covers other costs including missed wages, burial costs, and substitute services like cleaning or child care that you can’t do due to injuries.

PIP is a mandatory component of the “no-fault vehicle insurance” regulations in some jurisdictions, but it is also an optional coverage type in others.

How much PIP coverage ought I to purchase? State-by-state variations in PIP regulations exist. For instance, PIP options for Florida auto insurance range from basic to extended:

  • Basic will pay for 80% of your medical expenses, 60% of lost wages, and replacement services.
  • Extended pays all medical expenses in full, as well as 80% of missed salaries and replacement services.

If PIP is optional in your state, you can decide not to accept it if you already have reliable health insurance coverage. However, PIP provides benefits that your health insurance won’t offer, such as payment for services and missed wages.

Medical payments

A common abbreviation for medical payments coverage is “MedPay.” Similar to PIP, it covers your and your passengers’ medical fees and other costs regardless of who caused the car accident. In some states, MedPay is mandated. For instance, in Pennsylvania, Maine, and New Hampshire, you must purchase MedPay in order to purchase auto insurance.

How much MedPay do I need to purchase? When MedPay is offered in a state, it’s often sold in tiny packages with coverage amounts between $1,000 and $5,000.

Optional Car Insurance Coverage Types

A solid base for an automobile insurance policy includes liability insurance, uninsured motorist protection, medical payments coverage, and collision and comprehensive insurance. But to fill in some gaps, you might need a few extra forms of covering. Here are a few to think about.

  • Gap protection. Gap insurance pays the difference between the actual cash value (ACV) of your car and the balance due on your loan or lease if it is totaled due to an issue covered by your policy, such as a car accident or fire. For instance, if your loan balance is $15,000 and the value of your car is $13,000, this coverage will cover the $2,000 difference.
  • Insurance for rental reimbursement. This coverage covers the cost of a rental automobile or alternate modes of transportation, such as train and bus fares, while your car is being repaired as a result of a problem covered by your policy.
  • Insurance for roadside assistance. This covers services like a tow truck, jump start, fuel delivery, or a locksmith if your car breaks down or you have another issue (such as locking your keys in your car).

How to Buy Car Insurance

The National Association of Insurance Commissioners’ most current statistics shows that the average cost of liability, collision, and comprehensive auto insurance across the country is $1,190. However, when searching for a car insurance plan, you shouldn’t limit your search to price alone.

Because different auto insurance providers compute rates in different ways, there is a huge variety of costs—sometimes by thousands of dollars annually. It makes sense to compare auto insurance quotes from various providers. You can contact a local independent agent or request free quotations online.

Be sure to inquire about any savings for auto insurance. To entice clients, insurance firms provide a variety of discounts, including ones for being a good driver, car safety, having several policies, paying in full, and going paperless.

Consider a company’s customer service as the last factor. The greatest auto insurance providers combine affordable premiums with top-notch clientele. If you are in a car accident, you want to know that your insurance provider will make the filing of your insurance claim as simple as possible.

Read Also:

How Much Is A $500,000 Life Insurance Policy

Best Cheap Car Insurance for Young Adults

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