Get $50 Cashback Bonus | Lending Club vs. Prosper Free Report                         

Loan Calculator | Mortgage Rates

About Me | Contact Me | My Ramblings  


How Much Auto Insurance Do You Really Need?

October 25, 2010 | Guest Post | Insurance | 1 Comment

With the national uninsured rate rising at a steady pace, having adequate auto insurance coverage has become more important than ever. If you get into an accident with someone who is either underinsured or driving without insurance, you could suffer both fiscally and physically. On the other hand, you don’t want to buy too much insurance. Auto coverage isn’t cheap, and you could end up spending way more than you have to if you purchase coverage you don’t really need. The following info will help you sort through coverage options, required minimums, and recommended asset protection.

Coverage Options

Every auto insurance policy consists of a collection of coverage options that protect you from different things. You can choose to purchase all of these coverage options or a select few.

  • Liability – Liability policies cover other people’s expenses when you are at fault in an accident. There are two types of liability coverage: bodily injury liability, which pays for other people’s medical expenses, and property damage liability, which pays for damage done to the other car.
  • Personal Injury Protection – Also known as Medical Payments or Med Pay in some states, PIP covers your medical expenses regardless of fault. PIP also covers the medical expenses of your passengers. Other costs that may be covered include lost wages due to injury and funeral expenses.
  • Uninsured or Underinsured Motorist – This type of auto insurance coverage is designed to help cover costs that may be incurred by you if you are hit or injured by someone who either has no insurance or has only minimal coverage.
  • Collision – Collision covers damage done to your car in an accident.
  • Comprehensive – Comprehensive covers costs if your car is stolen, vandalized, or damaged by something other than a traffic accident, such as fire or falling objects.


Required Minimums

Every state in the nation requires motorists to have liability insurance. Minimum liability limits can vary from state to state. For example, in Alaska, the minimum requirements are $50,000 of bodily injury liability for one person, $100,000 bodily injury liability for all people, and $25,000 property damage liability. In Florida, minimum requirements are much lower–$10,000 of bodily injury liability for one person, $20,000 bodily injury liability for all people, and $10,000 property damage liability.

Some states also require motorists to carry personal injury protection and uninsured or underinsured motorist coverage. Additional requirements may also be set forth by your lender if you lease or have a current loan on your vehicle. The amount of insurance or types of coverage your lender will ask you to buy may vary but will almost always cover the actual cash value of the vehicle or the amount of the loan.

Deciding How Much Insurance to Buy

The amount of auto insurance you need is very dependent on your individual situation. First and foremost, you will need to purchase the minimum amount of insurance required by the law in your state. After doing that, you will need to decide how much your vehicle is worth and whether or not you need to protect your assets in the event of a lawsuit.

If you are driving a junky car you may be able to get by with minimum coverage. If you drive a nice car, you will want to make sure you have enough coverage to recoup the full cost of repairs or replacement of your vehicle after an accident.

You may also want to consider protecting your assets in the event of a lawsuit. The minimum amount of liability insurance required by law may not be enough to cover someone else’s medical expenses. If the accident is your fault, the injured party could come after your assets.

Many insurance experts recommend purchasing 100/300 limits of bodily injury liability for additional asset protection, but this is just a general rule of thumb. To determine your individual needs, you should calculate your net worth and make sure you are covered for an amount equal to the total value of your assets.

Guest post from Bailey Harris.





 & get new posts delivered to your in-box!


One Comment to “How Much Auto Insurance Do You Really Need?”

  1. Linda
    3:51 am on December 13th, 2012

    i agree with you that a complete auto insurance coverage is needed… it cover all your auto protection…

Leave a Comment

CommentLuv badge