Buying auto insurance before you get behind the wheel is not only smart, it’s required in most states. Although each state has its own standards for the amount of auto insurance coverage you need to purchase, there are other factors to consider.
Collisions, whether with another vehicle or a stationary object, can be costly. If you don’t have adequate coverage, you could be stuck with huge expenses. however, how much you need depends on your specific situation, including where you live, how much you drive, and your particular personal and financial needs.
“Having adequate auto insurance coverage is smart and prudent to ensure that you and your family are financially protected from a catastrophic loss,” says Mark Friedlander, director of corporate communications for the Insurance Information Institute. “To have adequate financial protection for you and your family, buy as much as you can afford. Shopping around when shopping for insurance coverage is time well spent, as premiums can vary by hundreds of dollars between companies depending on numerous factors “.
Here’s what to consider when shopping for auto insurance coverage.
types of car insurance coverage
First, let’s review the main types of coverage you’ll see when you buy a policy.
Coverage types can be roughly divided into three categories:
- required
- often required
- optional
- a minimum of $100,000 in bodily injury liability protection per person.
- a minimum of $300,000 in bodily injury liability protection per accident.
- a minimum of $100,000 in property damage liability protection coverage.
Please note that this list does not include all types of coverage offered by providers; these are just the most common.
1. mandatory coverage
Almost all states require the two types of coverage below, whichdo notcover damage to your own car or property.
Bodily Injury Liability Protection: This coverage pays for injuries to others caused by the policyholder and other drivers listed on the policy.
Property Damage Liability Protection: This coverage pays for damage the insured causes to someone else’s property. This primarily includes other vehicles, but can also include personal property such as fences or mailboxes.
2. often required
many states also require this type of coverage.
Personal Injury Protection: This coverage pays for the medical costs and lost wages of the driver and passengers of the policyholder’s car if an injury occurs, up to the policy limits, regardless of fault. PIP may also include coverage for funeral expenses and essential services, such as childcare or dog walking, that you may not be able to perform due to physical injury.
pip is required in 14 states: delaware, florida, hawaii, kansas, kentucky, massachusetts, michigan, minnesota, new jersey, new york, north dakota, oregon, pennsylvania, and utah.
Uninsured/Underinsured Motorist Coverage: This coverage pays for medical expenses for you and your passengers, up to policy limits when an uninsured or underinsured motorist causes an accident . Uninsured motorist property damage insurance is available in some states to help cover repairs to your vehicle if it is damaged by an uninsured motorist.
medical payments: Similar to pip, this type of coverage helps pay the medical costs of the policyholder and their passengers up to the policy limit, regardless of fault. Unlike PIP, medical payments do not cover lost wages or essential services. med pay is optional coverage in most states, but is required in some states.
3. optional coverage
State-mandated insurance coverage is the minimum for driving and generally does not include damage to your car. If your car is financed or leased, your lender may require you to have comprehensive coverage, meaning comprehensive and collision coverage.
Collision coverage: This coverage pays for damage to your vehicle in an accident resulting from a collision between your car and another car or an object.
Comprehensive coverage: This coverage pays for damage to your car caused by an event other than a collision. this includes theft, fire, flood, hail, vandalism, and more.
know your state’s car insurance requirements
all but two states (new hampshire and virginia) require residents to purchase an auto insurance policy. However, even if your state doesn’t require you to purchase insurance, it’s a good idea to do so anyway, according to Friedlander. accidents can be costly, and collisions and injuries can happen anywhere while you’re on the road. That said, required coverages and limits vary from state to state.
for example, while massachusetts requires at least $20,000 bodily injury liability per person and $40,000 per accident, new york requires bodily injury liability limits of $25,000 per person and $50,000 per accident. Geico has a helpful tool that allows you to check your state’s minimum coverage requirements, as well as a breakdown of the laws in each state.
That said, most insurance experts caution that buying just your state’s minimum insurance requirement will leave you with seriously inadequate coverage.
“Whenever possible, we strongly encourage you to obtain insurance well above the state minimums,” Friedlander said. “Only buying the state minimums leaves you and your family financially vulnerable.”
so knowing your state’s requirements is only the first step. you’ll want to start with what’s required and add it to your policy from there.
how much coverage do I need?
triple-i recommends this amount of coverage for the two types of coverage required, according to friedlander:
From there, you can begin to consider other types of coverage. Policies cover a variety of risks and damages. therefore, the first step in determining what and how much coverage to purchase is to determine your risks and how you can offset them.
For example, insurance experts agree that you should consider purchasing uninsured or underinsured motorist coverage. Although it is illegal in most states, there is often a large percentage of people who drive without a policy. You can check the percentage of uninsured motorists in your state here.
friedlander recommends purchasing this coverage if your state is in the top 10 on this list, or if there are 10% or more uninsured motorists driving in your state. This coverage will help pay for medical expenses for you and your passengers if you are involved in an accident caused by an uninsured driver. Without this type of coverage, you may have to pay out of pocket in full if you are hit by an uninsured driver. That said, some states allow PIP to cover these types of losses, while others don’t, according to Friedlander.
You may also consider purchasing full coverage insurance (both comprehensive and collision). Collision will cover your vehicles for damage resulting from a collision with another car or object, and comprehensive coverage will cover you for many other types of non-accident related damage: flood, fire, or even a tree falling on your car.
Especially if you live near an area that experiences major flooding or experiences hurricanes during the season, it may be a good idea to add comprehensive coverage. And even if you don’t live near a coastal floodplain, Friedlander still suggests buying comprehensive coverage, since 90% of natural disasters involve flooding, meaning you can experience a flood almost anywhere in the country. /p>
the bottom line of car insurance coverage
Accidents are expensive. Whether it’s a collision or a natural disaster, damage to your car and bodily injury while driving can happen anywhere. Purchasing stronger insurance coverage will give you greater peace of mind that you’re financially protected if something goes wrong while you’re on the road. We recommend buying what you need based on your personal circumstances, but buy beyond your state’s minimum requirements if you can.
To make it more affordable, shop around and make sure you’re implementing the best strategies to save on your auto insurance, including combining your auto insurance with your life and home insurance.
“We recommend working with a good agent, getting a company that offers a variety of discounts, and finding ways to lower your premiums…instead of buying less coverage,” says friedlander.
