Hoping to Save on Auto Insurance?
Picking the minimum required coverage could end up costing you a lot more than you’d expect.
Minimum car insurance requirements are intended to protect you and your assets. While they vary from state to state, it’s important to recognize that state-mandated minimums are often not enough.
Many states only require liability coverage, while others mandate additional coverages like personal injury protection, underinsured/uninsured motorist coverage, collision, comprehensive, and gap coverage. No matter what your state requires, you should have a clear understanding of your risk before you select your coverage limits.
Liability insurance pays others for the harm you may cause behind the wheel. It covers damage to other vehicles and property, and medical expenses for those you injure.1
Because vehicle repairs and medical bills can be incredibly expensive, liability insurance is designed to protect your assets if you are sued. By covering some or all of the costs associated with an accident, liability coverage can literally be the buffer between an accident and financial ruin.
Experts recommend setting your liability limits at the highest amount you can afford so you’ll be protected in the event of a serious accident. Your net worth is a good proxy for the maximum coverage you need. If you are just starting out and have few assets, you may not need much more than the state-mandated minimum, but if you have considerable assets, make sure you have adequate liability coverage.
Comprehensive and Collision Coverage
States don’t require collision and comprehensive coverage, but these protections are important, and if you have an auto loan or lease, they’re most likely required.
- Comprehensive covers damage from anything other than a collision. It includes but is not limited to damage from deer, fire, theft, vandalism, and weather.
- Collision covers damage to your vehicle from a collision whether it is with another vehicle, or something else like a tree or pole.
In years past, experts used to suggest that car owners drop their collision and comprehensive insurance when their car’s value depreciated beyond a point worth repairing. Today, damage repair costs can be exorbitant even on older vehicles, especially if you have one armed with sophisticated computer technology, so give some serious thought to your comprehensive and collision coverage options.
When selecting your auto insurance coverage, be sure you’ve adequately insured your financial risk. Instead of skimping on liability or property protection, you’re better off investigating other ways to save.
Maintaining a safe driving record and a good credit score can reduce your premiums. You may also be eligible for discounts for anti-theft devices, low mileage, multiple cars, good student grades, or safe driving classes. Savings with these discounts can be used to increase your liability and property limits.
Click here to see how much you could save.
1Important note — your liability insurance does not cover the cost to repair your own car or pay your medical bills.
The Insurance Information Institute recommends at least $100,000 of bodily injury protection per person, $300,000 per accident and $100,000 for property damage (known as 100/300/100).2