When you are in the process of purchasing car insurance, you have the opportunity to get better protection against accidents, unexpected vehicular losses and claims against you. It is legally required virtually everywhere anyway that you may as well check all your coverage options and prices when you are shopping for a policy. Spare a little time to determine what is enough for your circumstances and budget, and identify areas where you can economize without compromising essential coverage.
Several obstacles hinder individuals from securing adequate auto insurance coverage. These hurdles include misconceptions, a lack of understanding, and financial constraints. Regrettably, having inadequate coverage is just one facet of the issue, as the Insurance Information Institute reports that there are approximately 28 million (12.6%) uninsured drivers in the US. To assist drivers in making informed decisions regarding the appropriate coverage and policy limits, let’s examine various scenarios, the protections offered, and premium costs:
Liability Coverage
Virtually every state requires liability and other state-mandated covers to be able to drive legally. If you have been driving without insurance because you cannot afford it, this would be the level to start as it would be the cheapest auto insurance you can buy. The best advice to such drivers would be not to give up after the first or second quote and try to find affordable price by getting as many quotes as it takes.
As a reference point, the average cost of state-required minimum car insurance in the US is $622 but it can change substantially from one state to another. The average premium can go as low as $223 in Iowa and as high as $1,371 in New York. Your rates will depend on your zip code, age, gender, driving history, credit score, details of your automobile and many other factors.
Liability vehicle insurance covers possible injuries and damages you may cause to other motorists and road users in an accident you are at fault. It is usually shown as 25/50/20 in which $25,000 is the maximum Bodily Injury coverage per person, $50,000 the upper limit for all injured persons and $20,000 is the maximum amount payable for property damages. These figures may be higher or lower in your state.
General consensus in the industry is that these limits aren’t enough to cover possible damages you may cause to others and should be increased. A good liability car insurance policy might be structured as 50/100/50 and 100/300/100 is more comfortable. About 60% of motorists buy more liability coverage than what is required by their state, according to Progressive Insurance.
It is important to recognise that you bear legal responsibility for any injuries and damages you may cause to others. With adequate liability automobile insurance, your insurer can cover the costs for injured third parties and their damages, effectively relieving you of this financial liability. However, if you are uninsured or don’t have sufficient coverage, you may be personally responsible for covering any outstanding losses, which could result in significant out-of-pocket expenses.
Moreover, if you possess assets like a home, car, or other valuable properties, the court can take steps to seize these assets to fulfill your financial obligations. In cases where your assets are insufficient to cover the damages, the court may impose wage garnishments to settle the debts, further emphasizing the importance of having appropriate insurance coverage to protect both your assets and your financial well-being.
Personal Injury Protection (PIP): No-fault states also require PIP, which pays for your and your passengers’ medical expenses and lost wages if you are injured in an accident regardless of fault. You can also arrange this coverage where it is not required or increase limits. If you have no health insurance, this may be a good and fairly affordable option to pay for your and your passengers’ (often a family member) injuries resulting from a vehicular accident.
Uninsured Motorist Bodily Injury Coverage (UM BI): Around 20 states require UM BI coverage, which pays for your and your passengers’ medical expenses if the accident is caused by an uninsured driver. If it isn’t required in your state, you can arrange this coverage. If you have PIP or good health insurance you may consider leaving it out (where allowed).
Uninsured Motorist Property Damage (UM PD): It may not be required by your state but you can include UM PD in your vehicle insurance policy and it pays for your property damages if it is caused by a driver without insurance. If you have collision coverage you may not need this because collision pays for damages to your automobile regardless of fault.
Protection for Physical Damages
The next step is to consider if you want to insure your own vehicle for possible damages it may sustain. Anything you add on top of liability coverage is optional if you own your automobile. If you have an expensive automobile you would want to insure it properly to protect your investment. And your lender or leasing company would normally contractually require you to buy the following coverage:
Collision coverage protects your own car against accident related damages.
Comprehensive coverage pays for other damages like fire, theft, vandalism and acts of nature, except for collisions.
GAP insurance is often necessary when you have a loan or lease on your vehicle. It serves to bridge the gap between the amount your car insurance provider would pay if your vehicle is deemed a total loss and the remaining balance you owe to your lender or leasing company.
Full coverage auto insurance policies typically come with Liability, Collision and Comprehensive covers and are very popular in the US.
On the other hand, if you own an older automobile and have enough savings to pay for repairs or replacement, you may decide to have liability-only vehicle insurance and save some money.
The average cost of a full coverage car insurance policy is $2,014 in the US and it is 3.2 times higher than the average for a liability-only policy. Full coverage vehicle insurance premiums fluctuate widely depending on your state as costs can range from $941 on average in Maine to $3,183 in Florida. Other factors such as your age, credit score, driving history, details and value of your automobile affects costs as well.
Other Additional Coverage
Roadside assistance is a very handy solution offered by automobile insurance companies at a fraction of cost to independent Recovery services. They usually cost about $10 – $20 to add to your policy that gives you the option to call your insurer’s roadside assistance if you run out of gas, lock yourself out, have a flat battery or need towing, depending on service level offered.
Rental Car Reimbursement pays for rental cars you have to hire because your vehicle is being repaired by insurance after a damage. You need to consider if you can or cannot do without a car for a while in such cases and costs.
When purchasing or renewing your car insurance policy, you’ll need to make choices regarding the coverage you require. It’s essential to keep in mind that each added coverage comes with a cost, so you must also consider your budget. Striking a balance is crucial because inadequate coverage can leave you vulnerable, while unnecessary coverage can lead to wasted money. Therefore, it’s important to carefully assess your needs and financial situation to ensure you have the right level of protection without overspending.
Shopping around and comparing quotes from various insurers, either online or with the help of an independent agent, can help you find the most cost-effective auto insurance policy. Secondly, increasing deductibles for Collision and Comprehensive coverage can lower premiums without sacrificing the ability to make claims when necessary. Additionally, look for available discounts based on your circumstances, such as safe driving, marriage, and good credit, and explore payment options that can save you money.
Lastly, learn more about different coverage options, and tailor your policy to align with your unique situation and budget. Ultimately, your specific circumstances and financial situation should guide your choice of car insurance coverage. Take the time to assess your needs and budget to strike the right balance between protection and cost-effectiveness.