The fact that most states require a minimum amount of insurance for all car owners means there’s not a whole lot of flexibility in prices. In order for drivers to keep their insurance costs as low as possible, many purchase only the minimum amount required by law. But is that always a good idea? How much car insurance do you really need? Continue reading for those answers and more.
If you need a policy, you can enter your ZIP code below and see side-by-side car insurance quotes online.
Even in states that allow drivers to self-insure, there are minimal amounts of protection every car owner must provide. Typically this minimum amount is reflected in a three-part number that looks something like 30/50/25. These three numbers represent liability coverage, personal injury protection (PIP), and property damage–in thousands of dollars.
Together they provide monetary compensation for other drivers/pedestrians you may injure, damage to other cars or property, and personal injuries sustained by you and your passengers.
Am I required by law to carry all three of these minimum coverages?
Though there are a small number of exceptions, the vast majority of U.S. states require minimum amounts of all three coverages. The idea behind this is to provide at least a minimum of protection in case of an accident. The minimums will vary from one state to the next, and some states even require a bit more coverage. For example, New York State requires minimum coverages of:
- $25,000/50,000 for injury
- $50,000/100,000 for death
- $10,000 for property damage
New York is also a no-fault state, meaning that each insurance company is responsible for covering its own drivers regardless of who causes an accident.
Furthermore, the insurance policy on a given vehicle must be in the name of the person who has registered the vehicle, regardless of whether or not he is the owner.
As long as the vehicle remains registered it must have valid liability insurance; seasonal motorcycles are an exception.
Are there any reasons I should consider more liability coverage than state minimums require?
According to the Wall Street Journal, it’s probably not a good idea to merely settle for state minimums, especially if you have valuable assets that need to be protected. The reason for this lies in the fact that the cost of today’s medical care could well exceed your minimum liability coverage even after a minor accident. And like it or not, each of us is personally liable for any amounts not covered by our insurance policies.
If you have valuable assets like real estate, securities, collectibles, and so on, most of them can be seized in order to pay for those things your insurance doesn’t cover. It would be a shame to lose your vacation property on the lake simply because you didn’t want to carry higher liability amounts.
If you have health insurance and a disability policy through your employer, you probably don’t need extra personal injury protection. Those things would be covered under your other two policies in most cases.
Should I worry about collision and comprehensive coverage?
As far as we know, there are no states that require drivers to carry collision and comprehensive coverage. However, if you take out a loan to purchase a brand-new car your bank may require you to purchase this coverage. If so, it is simply protecting its investment in your vehicle.
Without such protection the bank can lose a significant amount of money if your car is totaled in an accident, stolen off the street, or destroyed in a weather-related event.
Any comprehensive or collision coverage required by your bank can be dropped once your loan is paid off.
Even without an outstanding car loan you might consider these two extra coverages if you don’t have the financial resources to repair or replace your vehicle out-of-pocket. In other words, if your car has a Blue Book value of $7,000, and you don’t have that kind of cash sitting around, you may want to carry collision and comprehensive just in case your vehicle is destroyed. Otherwise you may be left to purchase something you can pick up for couple of hundred dollars.
One final thing to consider in terms of comprehensive and collision coverage is whether or not you have invested any money in customizing your vehicle. If you bought high-performance parts, restored a classic car to mint condition, or invested any other significant amounts of money in your vehicle, you most definitely want to get the extra coverage. Without that coverage, an insurance company will only repair or replace your vehicle up to its Kelly Blue Book or NADA value.
If you want to compare car insurance quotes online you can get started right now by entering your ZIP code below.
