How Much Auto Insurance Do I Need?

Calculating the exact amount of auto insurance you need to buy can sometimes be a quiz fit for a mathematician! Every state has its own “must haves” and guidelines in their requirement for auto insurance. You can use this as a sort starting point, but there’s lot more that needs to be assessed and evaluated.

Basically, there are six parts in any auto insurance policy. These are: Property Damage Liability, Bodily Injury Liability, Comprehensive Coverage, Personal Injury Protection Collision Coverage, and Uninsured Motorist Coverage. In some US states, it is important to include the first two parts in the auto insurance policy while the others may or may not be mandatory.

* Property damage liability. The minimum recommended coverage is $50,000 and insurer stands a chance to lose his or her assets if not adequately covered.

* Bodily injury liability. Usually insurance companies recommend a minimum of $300,000 per accident and $100,000 per person for bodily injury coverage. Being uninsured can be harmful to you as you can even lose your assets in a lawsuit from a collision in which you are found at fault.

* Personal injury protection (PIP). Personal injury protection coverage ensures that insurance company pays for lost wages and/or medical expenses and other costs that may arise when the insured person is injured in an auto accident. The minimum coverage of $10,000 is usually recommended. In this, the insurer will pay death benefits and around 85 percent of the losses. It may also include passengers in the insured vehicle. There’s an expanded version of this coverage called “no-fault” coverage wherein you can get the insurance amount irrespective of whose fault it was. In some US states, this too may be mandatory in order to provide for lost wages and child care.

* Comprehensive coverage. Comprehensive auto insurance coverage pays for the damage of the car resulting from theft, fire, windstorm, vandalism, glass breakage, and the like. However, it is important to assess the value of your vehicle to make sure it’s worth the amount that this coverage will cost. This coverage comes with a deductible and insurer will not pay more than the worth of the car when it got wrecked.

* Collision coverage. Collision coverage pays for the repairs of the vehicle after the accident and is one of the most expensive component of the auto insurance. You can lower this amount by having a higher deductible. This means, if you are involved in an accident, then you will first pay a higher amount before the insurance company chips in. It is important to get your car’s market value assessed before deciding on the how much cover you’d like to take.

* Uninsured motorist coverage. This coverage will pay for the injuries of the insured even if he or she is hit-and-run by someone who doesn’t have any auto insurance or by another driver. As the number of underinsured and uninsured drivers is high, it’s recommended that a minimum amount of $300,000 per accident and $100,000 per person be allocated under this coverage. However, this coverage is not needed if the no-fault coverage is in action.

Consider all the above points and then assess your actual insurance needs. If required, take quotes from few companies before deciding on the exact insurance value you need.