The Best Auto Insurance Coverage for You

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Here's what you need to know...
  • The first step is to find out your state’s requirements for auto insurance coverage
  • Increasing your liability insurance limit would give you more protection
  • Additional coverage is available for any possible scenario that you think might happen to you

How much personal auto insurance coverage is enough will vary depending on whether you are looking to just satisfy state requirements or want enough coverage to protect you financially.

Technically, fulfilling the mandated state coverage is enough to keep you driving legally and from losing your license. Mandated coverage is considered basic coverage, will cost you a lot less, but will leave you vulnerable.

Determining what coverage will take away some vulnerability and protect your assets is a bit more complicated, as each situation is going to be different.

There are a lot of factors and considerations when it comes to auto insurance. You want to get enough coverage to cover your needs without wasting money on coverage that is unnecessary.

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State Requirements

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In order to have the very minimum in terms of personal auto insurance coverage, you will need to purchase the coverage that is outlined by your state insurance department.

In the bulk of states, liability coverage is the only type that you have to carry.

Liability coverage also includes liability for the other party’s damage of property and any bodily injuries sustained by the other driver or their passengers.

States will also lay out what liability limits are absolutely necessary for:

  • Individual bodily injury
  • Whole accident bodily injury
  • Property damage

If you only go with the stated requirements, you could be in financial trouble if you cause an accident and there is damage done to the other party.

Some states will require other coverage as well, such as medical insurance and/or uninsured motorist coverage.

These will help you be a little more protected, but it is worth looking into additional coverage in many instances.

Liability Insurance Considerations

Pros and Cons sign

Pros and Cons sign

Satisfying your state’s mandates is only part of the equation. If you only get a policy with basic insurance, you will probably be in some trouble if you were to cause an accident.

The costs associated with car crashes are usually a lot more than you would imagine, especially when it comes to medical costs.

Once your liability limits have been reached, you will be held accountable for the remainder of the expenses.

In some instances, these expenses could be hundreds of dollars, and in extreme cases, it could be in the high thousands.

To be more protected, it is a good idea to increase your limits for liability.

For most drivers, the Insurance Information Institute reports on recommendations that have been made by consumer groups and the insurance industry.

These amounts should be sufficient in most cases so that you do not owe anything on your own.

Collision and Comprehensive Insurance

Image of stressful man sitting in front of a broken car after traffic accident on the road

Once you are covered for liability, your next consideration should be for protection against damage to your own vehicle.

Liability will not pay one cent towards damage to your car so you will need to purchase separate coverage for that.

Both collision and comprehensive coverage are optional unless you are leasing or financing. Then you will probably be required to carry these coverage types.

With any newer car, it is recommended that you carry this extra protection.

If you are in doubt, as to whether or not you should get either one, reference the Kelley Blue Book. It will give you a pretty close estimate as to the market value of your car.

Since insurance companies will only fork out the amount of money that your car is considered to be worth, there is a time when collision and comprehensive coverage are not necessary.

Both have a deductible that needs to be met before the insurance kicks in. If the deductible that you want to have is close to your car’s value, then it is worth saving the extra money to skip this coverage.

If its value is higher, however, it is probably worth carrying the coverage so that you don’t have to pay for all of the repairs on your own.

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Uninsured Motorist Coverage

Some of the states necessitate that drivers carry insurance coverage for protection against uninsured motorists.

In reality, uninsured motorist coverage is not a bad idea, as almost 14 percent of drivers do not have insurance according to the industry investigators at the Insurance Research Council.

Even without it being a requirement, it is a smart move to purchase this type of insurance. It will pay for damages caused by the uninsured drivers on the road, including those who hit and run.

A big plus for having uninsured motorist coverage is that it also protects you from drivers that have insurance coverage but not enough to pay for all of the damage done.

These drivers are usually those who are carrying the basic insurance requirements. Your uninsured coverage would pay for any damage over and above what the other party’s insurance is able to pay for.

Medical Insurance Coverage

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Although your bodily injury liability will cover expenses of people in the other party, no one in your car will be covered by it. That is why purchasing coverage for medical expenses is recommended for most drivers.

In some states, this coverage is referred to as personal injury protection, which is also known as PIP. If you are in an accident and you are hurt and/or your passengers are hurt, this coverage will kick in to pay for:

  • ER trips
  • Hospital stays
  • Medication
  • Chiropractic care, etc.

It also helps pay for childcare, lost wages, or anything else associated with the injuries and your recovery.

You may live in a state that does not have PIP coverage. In this case, your medical protection is called medical payment coverage. This covers similar things as personal injury protection, such as medical expenses.

You also choose the amount of coverage that you want. As with liability coverage, once your medical coverage has been reached, the rest of the expenses are up to you.

Some states require you to carry this type of coverage and will outline the minimum amount to have.

Many states recommend carrying at least $10,000 in PIP coverage, which would be spread out among the number of people hurt in your vehicle.

If you have great health insurance, some say that there is no need to also carry medical insurance, unless it is required.

First, you will want to look closely at your health insurance policy and make sure that injuries from auto accidents are covered. Also, look at the deductible amount, copays, coinsurance, and your maximum allowed amount.

Keep in mind that if you choose not to carry medical protection through your car insurance, none of your passengers will be covered by your insurance if they are injured.

If they are not able to get coverage elsewhere, either through their own medical auto insurance or through health insurance, they may come after you to collect expenses.

In order to fully protect yourself if you are sued, there is additional coverage you may want to consider.

Personal Umbrella Coverage

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For those drivers who are concerned that their auto coverage is not enough protection, there is insurance called personal umbrella coverage. This insurance kicks in once all of the other auto insurance has been exhausted.

Personal umbrella coverage is not recommended for everyone, but for others it is important.

If you are just starting out and don’t own a house, a nice car, or any other thing of value, and you don’t have a lot of cash lying around, you do not need to spend your hard-earned money on personal umbrella insurance.

If you do have a moderate amount of assets, however, you may want to mull it over.

Personal umbrella insurance is recommended for those who own a house and/or earn a good income, as your wages can be garnered if you are sued and you suffer a loss.

Umbrella insurance is usually purchased in $1 million increments. In order to qualify for one million in coverage, you usually have to be carrying a certain amount of liability coverage.

Each insurance provider will outline its preference, but most require a minimum of $250,000 in liability for each million in umbrella protection.

Each type of protection will increase your insurance premium, such as:

Most people are interested in saving money, but sometimes doing so in terms of your auto insurance policy can hurt you financially in the end.

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