UPDATED: Mar 13, 2020
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As with most large purchases you make in life, auto insurance is a very personal one. The amount of coverage you buy, the types of coverage you buy, and the company you decide to go with are all dependent on your own needs and wants. The insurance you end up buying will most likely be different than the insurance of your friends and family. To make the right decision when it comes to this purchase, you must shop around and do your diligent research. That is where we come in. Below, we will take a look at some of the more important factors in determining the car insurance coverage you choose to purchase.
Understanding The Types Of Coverage
Liability Coverage – This coverage will cover damage to the other party that you are deemed to be at fault for. Liability coverage pays for your liability and the expenses caused by you in a car accident. This includes vehicle damage, property damage, and medical expenses. This coverage will not cover damage you cause to your own vehicle or people injured in your car.
Bodily Injury Liability – This is the type of liability coverage that will pay for the medical expenses you cause resulting from an accident that you are at fault in. When looking to purchase bodily injury liability coverage, you will often see coverage amounts listed like “30/60” or “150/400”. To better understand these numbers, realize that they are the maximum dollar amounts covered for a single person in an accident and the maximum allowed to be paid out for the entire accident. For example, in a 30/60 coverage plan, your insurance company will pay for up to $30,000 dollars of medical costs for each person you injure in an at fault accident. It will also pay for up to $60,000 in medical costs for the total of all injuries you cause as a result of the accident.
Property Damage Liability – This type of liability coverage will cover the amount of property damage you are responsible for in an accident. Again, this is liability coverage, so it will not cover damage to your own vehicle or property, but it will cover damage you cause to others’ property. With property damage liability, you will often see the coverage amount listed as a third number (after the bodily injury liability numbers), for example, 30/60/15. With this amount of coverage, your insurance will cover $30,000 of medical expenses for a single person, $60,000 of medical expenses for the total accident, and $10,000 worth of property damage.
You And Your Vehicle
The previous three coverage types will cover you for damage you are liable for in an accident, but not damage you cause to yourself or your vehicle. The following four policy types will cover expenses caused to you and your car:
Collision Coverage – This coverage type will cover repairs to your vehicle after an accident. Whereas liability coverage will pay for damages you cause to another car, collision coverage covers your own car. In many states, this coverage is not required.
Comprehensive Coverage – This coverage type will cover damages to your car that are not related to an accident. Examples of things covered by comprehensive coverage include natural disasters, fire, theft, and vandalism.
Uninsured/Underinsured Motorist Coverage – If you are hit by a driver without adequate insurance coverage, this type of coverage will cover damage done to your vehicle. In some states, especially those with high numbers of illegal aliens or uninsured drivers, this coverage type is mandatory.
Personal Injury Protection – This coverage type will pay for medical expenses for you and your passengers if you happen to be injured in an accident. If you are not at fault for the accident, the at-fault party’s liability coverage will often pay for medical expenses. If you are at-fault or involved in an accident with an uninsured driver, personal injury protection will pick up your medical bills.
Your State Has Its Own Unique Requirements
Be aware that every state has their own insurance requirements. Some states will not even allow you to register your vehicle unless you have proper proof of insurance. Other states will punish you severely if you are caught driving without insurance or without enough insurance. To find out what your state’s minimum car insurance requirements are, check out this chart.
Although your state might set insurance minimums, realize that often times these coverage amounts are simply not enough. In California, for example, the liability requirements are set at 15/30/5. If you were to be driving in California and cause a severe accident with just the bare minimum insurance, chances are your bank account will take a hit. $5,000 for car repairs is not a lot, especially when you think about all of the expensive cars you see driving around on the California streets. Imagine if you totaled a Lamborghini or a Ferrari? You might have to file for bankruptcy!
To be safe, always make sure you are covered for at least the total amount of all your assets. To do this, add up the values of everything you own (cars, house, savings, retirement funds, etc.) and buy coverage for at least that amount. You wouldn’t want a car accident to wipe out your entire life savings, would you?
How Much Insurance Do You Need?
If you live in a state with lots of uninsured or underinsured drivers, uninsured motorist coverage is a must-have. The reason for this is that it is relatively inexpensive (usually less than $50 per year for $100,000 worth of coverage), and is well worth it. With the influx of population, uninsured drivers are also increasing. It would be a double slap to the face if you had to pay for damage in an accident that you aren’t even at fault for.
Personal injury protection coverage, on the other hand, is something that is not always necessary. If you have health insurance coverage, your healthcare provider should pay for all of your medical expenses in a car accident. Therefore, if your state does not require personal injury protection coverage, you might want to think twice about buying it.
Collision coverage and comprehensive coverage, however, are insurances that you should strongly consider. Unless you want to be on the hook for paying to repair your own vehicle, definitely by these coverage types. Both collision and comprehensive require deductibles to be paid first and then will pay for the rest of the damage you need to be repaired.
Speaking of deductibles, it’s best practice to choose the highest deductible you can afford. Higher deductibles mean lower monthly premiums. Chances are, you will not be involved in accidents on a regular basis. It’s better to spend a couple hundred dollars on minor repairs every now and then than it is to pay an extra $100 per month on your insurance payment if you don’t need it.
If you are in a “no-fault state”, such as Florida, Hawaii, Kansas, Kentucky, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Dakota, Pennsylvania, and Utah, you will have to buy a special insurance coverage known as no-fault insurance. This coverage will pay for damages regardless of who is at fault in an accident. The thought process behind this coverage is that it will limit the number of lawsuits resulting from collisions. Unfortunately, this type of coverage is quite expensive, so if you live in a no-fault state, expect your monthly premiums to be high.
How To Shop Around For Car Insurance
Once you’ve decided on the car insurance that you need to buy, it’s best to start shopping around. There are a myriad of factors that will contribute to how your rates are calculated, but not every auto insurance company treats each factor with the same importance. Therefore, it’s especially crucial for you to get quotes from as many companies as possible. You never know which company will offer you the cheapest rates for the same amount of coverage.
To begin getting quotes from different auto insurers in your city/state, enter your zip code at the top of this page. 4AutoInsuranceQuote will then present you with quotes from the top insurance providers in your area. Remember – the more quotes you get, the more likely you are to score a great deal!