How Much Car Insurance Do I Need – I am not an insurance agent. I don’t sell insurance. Honestly, I don’t like insurance companies. And if there is a car, this is a necessary evil. My advice: When shopping for auto insurance, buy as much as you can. This seems counterintuitive, but let me explain.
If you want to drive legally in the United States, the law requires two things (1) a license and (2) insurance. think about it. Every state in the country has laws that require drivers to purchase insurance. Don’t you want to be able to sell a product or service that the vast majority of adults are legally obligated to buy? Not surprisingly, we see a lot of car insurance ads (think Gecko, Flo, Discount Double Check, Mayhem).
How Much Car Insurance Do I Need
Back to my point, why do I say buy as much as you can? Well, when you’re shopping for car insurance, there are several different types of coverage. Indiana law requires:
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My recommendation to everyone is to include $100,000/$300,000 in personal liability, uninsured and underinsured motorist coverage, and $10,000 in medical bills – at a minimum.
However, the best insurance package would be $250,000/$500,000 personal liability, uninsured and underinsured motorist insurance and $10,000 medical bills PLUS a $1,000,000 umbrella policy, liability, uninsured and underinsured insurance policy ($2003 per umbrella).
What you can see when comparing the two examples above is that uninsured, underinsured, and medical bills coverage is relatively inexpensive, and this insurance will cover you in the event of an accident with someone who is uninsured or underinsured.
I see too many tragic cases where my clients are in no-fault accidents where they are seriously injured or even killed and the at-fault driver has no insurance or the state minimum. This happens every day. My worst nightmare is someone running a red light and seriously injuring or killing me. If the other driver has no or insufficient insurance, I want my family to be covered by my policy. That’s why I buy insurance whenever possible. And it’s relatively cheap. You need at least $50,000 in bodily injury liability auto insurance and at least $25,000 in property damage liability insurance. Some states require drivers to have uninsured motorist insurance and PIP or MedPay.
How Much Liability Insurance Do I Need?
A good rule of thumb is to supplement your state’s required auto insurance with enough additional coverage to match your net worth. This may include increasing your liability coverage limits, as well as adding additional types of auto insurance coverage, such as collision and comprehensive coverage.
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Liability insurance includes bodily injury liability insurance and property damage liability insurance, which pay the costs of other drivers after accidents you cause. Liability insurance can also cover your legal expenses if you are sued after an accident.
For example, say you were at fault for an accident in which driver A was injured and driver B wrecked. Your bodily injury liability insurance pays for the driver’s medical expenses, including hospital bills, doctor visits, and medications. Your property damage insurance will pay to repair Driver B’s car.
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However, liability insurance pays up to your predetermined coverage limit, so your policy may not be enough to cover all the costs associated with an accident, especially if multiple drivers are involved and you have the state minimum coverage.
PIP covers medical expenses for you and your passengers after an accident, regardless of who was at fault. It can also pay for lost wages and other expenses related to the accident, such as child care.
MedPay is similar to PIP and covers medical expenses for you and your passengers after an accident. MedPay can be used for a claim regardless of who was at fault for the accident, but it does not cover lost wages and usually has a lower policy limit than PIP.
Underinsured/underinsured motorist coverage can help you if you’re hit by an uninsured driver, hit-and-run, or collided with someone who doesn’t have enough coverage to pay for all the damages they cause.
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Collision insurance covers damage to your car after an accident. Collision insurance also comes with a deductible, which is the amount you have to pay out of pocket before paying the rest of the insurance bill. You can choose a lower deductible, but lower comes with higher premiums.
If your car is damaged in something other than a collision, you will need comprehensive coverage for a claim. This includes vandalism, theft, weather and wildlife damage. As with collision insurance, you must choose a deductible.
Cars depreciate quickly and you can easily pay more on your loan or lease than the car is worth. Gap insurance bridges the gap and pays the difference if your car is a total loss.
Emergency Roadside Assistance is a coverage option that provides assistance if you find yourself locked out of your vehicle, need to tow or jump start, have a flat tire or run out of gas. If your car breaks down, you can tow it to any nearby garage and get it within a certain distance.
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Mechanical breakdown insurance (MBI) can cover the cost of repairs to a car’s mechanical parts and systems, such as the engine, transmission and powertrain. This coverage is similar to extended warranties and service contracts, but unlike those products, you pay a monthly premium instead of a one-time upfront payment. MBI also covers more vehicle systems than most extended warranties.
If you don’t have collision or comprehensive coverage to replace the damaged windshield, you can get windshield coverage instead. Otherwise, a standard liability insurance plan will not pay to repair or replace your windshield. However, if you are involved in an accident in which you are not at fault, the other driver’s liability insurance will pay for your windshield repair.
Rental reimbursement insurance can cover the cost of a rental car while your car is being repaired after an accident. It may also cover other transportation costs, such as Uber and taxi fares or public transportation costs, depending on your insurer. However, if another driver is at fault for an accident that damages your car, their liability insurance will cover the cost of the rental car.
Driving without minimum car insurance is very dangerous. It can even have potentially life-changing consequences. If you get hit and don’t have insurance, you could face fines, license and registration suspensions, and expensive insurance premiums. If you’re uninsured or underinsured and you’re in an accident, you could end up paying thousands out of pocket to cover the costs of property damage and medical bills. And if you can’t pay, your wages can be garnished and your assets can be seized.
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Going with the bare minimum can also be a risky choice, as you’ll still be liable if something catastrophic happens. Remember, insurance only pays up to your coverage limits, so the auto insurance offered depends on your net worth.
A panel of experts were asked the following questions to find out the extent of car insurance. Click to see the biographies and answers of the experts below.
Assistant Professor of Insurance and Risk Management, Department of Economics, Finance, Insurance and Risk Management, College of Business, University of Central Arkansas
You need enough liability insurance to cover your net worth. Having coverage equal to the value of the assets you own and all the money minus your debt will protect you financially in the event of a serious car accident.
How Much Should Car Insurance Cost?
Although almost every state requires drivers to carry liability insurance, the minimum coverage is not always enough to cover the costs of an accident. It’s always best to have as much liability coverage as possible, especially if you have a high net worth. If you want to save, you can generally avoid liability for property damage, but property damage liability claims are usually less expensive than bodily injury liability.
If you don’t have many assets or feel the risk is worth it, it may be convenient to carry only the minimum coverage. But either way, carry enough insurance to meet state law and avoid paying fines for driving without insurance.
Auto insurance liability limits are the maximum amount your insurance company will pay for injuries and property damage in accidents you cause. Liability limits are usually written as three numbers separated by dashes.
For example, Arizona’s liability coverage requirements are 50/30/10. This means that drivers must pay $50,000 per person for bodily injury and $30,000 for bodily injury.
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