What’s the Best Amount of Car Insurance Coverage?
At a minimum, you need liability car insurance, but that only protects others on the road if you cause an accident. What about protecting yourself? The law doesn’t require insurance for yourself, but you should consider it for financial protection.
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There’s a fine line between good coverage and excessive coverage. We help you understand the different types of insurance below to help you choose the right policy.
Insurance Coverage for Others
Liability coverage protects the other people involved in an accident you caused. As we said above, liability insurance is mandatory. This includes both bodily injury and property damage. If you cause an accident, you must pay for the damages to the person and/or their car. Each state has a minimum amount of liability coverage you must carry. The premiums for liability insurance are low compared to the cost of being sued for damages.
Carefully evaluate the amount of liability insurance you carry. If you have a lot of assets, you may want to consider a personal umbrella policy as well. You can’t predict who or what you will damage when involved in an accident. What if you damage a $100,000 car but don’t have the insurance coverage for that amount? They could come after your personal assets. Talk with your insurance agent about worst-case scenarios to ensure that you have enough coverage.
Insurance Coverage for Yourself
Liabilityinsurance covers the other people or property you damage – it doesn’t protect you. That’s where collision and comprehensive insurance helps. If you cause an accident, your collision coverage pays for the damage to your vehicle.
You can choose from a variety of deductibles for your collision coverage. The higher the deductible, the less you pay for your premium. Make sure you choose an affordable deductible, though. For example, opting for a $2,500 deductible may save you money on your monthly premium, but can you afford $2,500 out of pocket? That’s what it will cost you if you are in an accident. Insurance won’t kick in until you cover that deductible.
Most states don’t require collision insurance, but your bank might require if you took out a loan. If your car is worth more than you can afford to pay to replace it, you should consider it.
Damage may happen to your car that isn’t due to an accident. Environmental threats and theft both pose serious dangers to your car. Comprehensive insurance may have a deductible as well. Just like with collision insurance, you choose the deductible you can comfortably afford.
If any damages occur to your car from hail, fire, wind, or theft, comprehensive insurance will help cover the costs. Like collision insurance, most states don’t require this insurance. However, it protects your financial situation should you experience a claim or complete loss.
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Medical claims can get expensive. Your insurance company may offer medical expenses coverage for a few extra dollars each month. Medical expense insurance covers both you and anyone in your car that suffers injuries in an accident. Medical expense coverage is on a per person basis, so each person has coverage for the maximum amount. For example, if you have $5,000 medical expense coverage, each person has coverage for a maximum of $5,000 in medical claims.
Insurance When Others Don’t Have It
Even though it’s the law, many people drive uninsured or underinsured. If you happen to get into an accident with them (you aren’t at fault), you could be without adequate repayment. You can pay for uninsured/underinsured coverage. It costs a little extra money each month, but it provides you with peace of mind. If someone without insurance hits you, you’ll be financially protected.
How Much Insurance do you Need?
Just how much car insurance you need depends on many factors.
- How much is your car worth?
- How much do you have in assets?
- How high of a deductible can you afford?
- How much premium can you afford?
Talk with your insurance agent about all of the details of your insurance policy. You don’t want to find out after the fact that you are underinsured and now face financial issues. Get the coverage you can afford while properly protecting you, your car, and others on the road.
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