If you are puzzled about how much auto insurance coverage is enough, then your concerns are addressed in this article.
Auto insurance can be complicated with a wide range of coverage. This article will address the different types of auto insurance coverage, the minimum auto insurance coverage that we need, how much auto insurance coverage you need, and how to go about having the right amount of coverage that is enough for you.
Deciding how much auto insurance coverage is enough can be knotty. It will help if you do proper research before you need the coverage. You need to understand how much coverage is required by law for you to have, and make sure you have the coverage relevant to protect you and your car content. It would be best if you also kept up with the latest trends in the industry. Seeking advice from a professional and other insurance agents will put you on the right track to determine how much auto insurance coverage is enough.
What Auto Insurance Coverage Is About
Your auto insurance coverage is a bunch of different kinds of insurance designed to protect you and your stuff if you are involved in an accident. Perhaps you may be wondering how much auto insurance coverage is enough and you will start by knowing the types of coverage available; The types of car insurance coverage are discussed below.
Types of Auto Insurance Coverage
In deciding how much auto insurance coverage is enough, there are three basic insurance types you cannot, as a matter of necessity, do without.
If a collision is deemed to be “your fault,” liability insurance will cover the costs for the third- party that you are automatically responsible for—medical care, repair or replacement costs, cost of buildings affected by the accident and other incidental damages that occurred. However, this does not cover damage or injury sustained by you.
There are two types of liability insurance:
Bodily Injury Liability (BIL) which covers expenses for injuries on the other party which may include medical bills, funeral expenses, and so on
Property Damage Liability (PDL)
Property damage liability covers damage done to the other party’s car, building, or property in general.
How Much Liability Insurance Is Enough?
To save money, you need to have a lot of liability insurance, even if it is not a statutory requirement in your state. It is ideal to have at least $400,000 worth of coverage covering both property damage and bodily injury.
If you don’t have liability coverage, you would have to pay out of your pocket. This situation poses a threat to financial risks. Hence you are driving a car, liability coverage is compulsory.
Comprehensive coverage protects your car from anything other than a collision, be it fire, natural disaster, something like a tree falling on your vehicle, act of God and other unprecedented and incidental occurrences.
The policy offers a coverage limit equal to the market value of your car. It is relatively inexpensive, so you may want to buy it.
Collision coverage covers repairs or replacement of your car if you’re involved in an accident where you collide with another vehicle or object, irrespective of whose fault it is.
Suppose you are involved in an accident (which is your fault), and your car is totalled. In that case, the other driver is not liable and, therefore, will not foot your repair, replacement or medical expenses. If you don’t have collision coverage, you will have to pay out of pocket. Conversely, if the collision is the other driver’s fault, his liability coverage will cover you.
If your car is too old, you may do without collision coverage because the insurance company will not pay more than the vehicle’s value.
After your primary coverage, you may need a bit more of insurance protection. You are advised to consult your insurance agent to get the best quotes for you. In Canada and the United States (US):
Medical Payments Coverage (MedPay)
This insurance covers reasonable expenses for you and the passengers involved in the accident, even if you are at fault.
Personal Injury Protection (PIP)
Personal injury protection (PIP) covers your medical expenses, that of your passengers, lost finances, the funeral costs, and any other expenses incurred from the injury. Ensure you study your health insurance before purchasing this because they may turn out to be the same.
Guaranteed Auto Protection Insurance (GAP Insurance)
As the cost of new cars increases every day, so does the length of time to pay back the loan for a car if you get one. GAP insurance, therefore, becomes handy.
If you buy a pricey car on loan, and it gets totalled while you are still paying for the car, your insurance company will only pay for the value of the car at the time it got destroyed and not the amount of the vehicle when you bought it. This situation will still leave you in debt.
GAP insurance covers the “gap” by filling in what is remaining to fulfill your loan.
You may want to stay away from gap insurance by buying a fairly used car and pay immediately instead of purchasing a brand new car and being in debt.
Uninsured Motorist (UM) and Underinsured (UIM) Motorist
Uninsured motorist coverage (UM) covers you if an uninsured rider hits you, or if it is a case of a hit-and-run.
There is the Uninsured Motorist Bodily Injury (UMBI); The coverage takes care of medical expenses (for you and your passengers). It could also be an Uninsured Motorist Property Damage (UMPD). Here your car is wrecked by an uninsured driver or a hit-and-run driver or an uninsured driver.
Underinsured motorist insurance (UIM) covers you if you’re involved in an accident, and the other driver’s insurance is lower than your expenses.
Are you an uninsured driver or injured by an uninsured or unknown driver in Alberta? The Motor Vehicle Accident Claims Program has you covered.
Check out the premium auto insurance coverage below.
This covers the cost of a rented car while your car is being repaired for by your insurance company. Rental reimbursement becomes handy if staying without a car will affect your work and family times. If you can navigate your way without a car, you may forget this insurance.
If you barely use your car, pay-per-mile coverage may be the ideal coverage for you. With this coverage, a GPS device will be installed in your car, and you pay according to the mile you run, other than the standard yearly estimate. You could also save yourself the stress of thinking of how much auto insurance coverage is enough.
This insurance covers you when you are stranded by the roadside. It covers towing your car, fuel supply, fixing your battery, towing your car for repairs, or fixing your car till you get to your destination.
Original Equipment Coverage
If you get into an accident and your vehicle needs repairs, your insurance company will often repair your car with “aftermarket” parts that will serve as your company’s original equipment. This is done to save money as it is cheaper than using original equipment. Original equipment coverage ensures that the mechanic repairs your wrecked car with parts from the vehicle’s original manufacturer.
Your insurance rates can escalate to an average of 41% if you’re at fault for a car accident. If you have had safe driving for at least a year, you may be eligible for a discount on your insurance policy. Forgiveness coverage functions like these discounts, offering forgiveness if you cause an accident within a period stated in your policy. This essentially wipes your record and keeps it clean. It enables coverage cost increment relief. You can only use this coverage once.
With a glass coverage policy, you can replace your broken or cracked window at no cost. Insurance companies mostly offer these with no deductible. You can have it as part of your comprehensive coverage in some places, but in other parts, you may have to get a separate policy. You may need to speak with your insurer to avoid unnecessary expenses for a different policy.
Rideshare insurance offers additional coverage for riders of ride-hailing services like Uber and Lyft, cab. Here riders will not have to worry about how much auto insurance coverage is enough because this coverage is quite affordable. Each insurance company offers different policies depending on the situation.
What Your Insurance Agent Should Know
A lot of factors affect how much auto insurance coverage is enough for you. It is imperative for you to speak to your insurer to decide which auto insurance coverage is best for you and help you save money.
- Being married could help lower your premium!
- If you use the car for both business and personal purposes, even if it’s a small side business.
- If you are a frequent traveller.
- Where you have a teen driver rider who has completed driving lessons.
- Who you want to add to your policy
- You could get a discount if you have a degree from college.
- If your car is on a lease, or you’re still on loan for it
- If you have a house, you may get a discount.
- Your line of job and that of others on your policy
- If you are or have been part of the military
- If you hardly drive
- If you installed anti-theft devices in your car
- If you exclude some members of your home from the insurance
How Much Auto Insurance Coverage Is Enough for You?
At this stage, it is ideal to understand how much auto insurance coverage is enough for you. You likely don’t need to spend much on a Personal Injury Protection policy. You are safe if you have health insurance and disability insurance from your employer. It is okay to buy the required minimum.
You need to ensure you have subsequent coverage against uninsured and under-insured drivers. It’s relatively cheap in most states (around $40 a year for $100,000 coverage), and if you collide with an uninsured driver, this will help cover costs for the part your health insurance won’t.
Collision and comprehensive coverage are important to have if you would like to fix or restore your car after an accident. These policies come with deductibles (the fee you have to pay out-of-pocket before coverage starts), and they payout based on the value of your car at the time of the accident and not what you paid for it.
Use the highest deductible you can pay for, because the higher the deductible, the lower your premium will be. You’re looking for coverage for a substantial impact on your car and not for every little problem that occurs. It’s better to spend $400 out of pocket on minor, occasional repairs than pay an extra $40 a month when you may most likely not use it. Leave collision insurance for when you have car repairs that cost you thousands, not hundreds. Don’t forget that if you always file claims, your premium will increase.
Frequently Asked Questions on How Much Insurance Coverage Is Enough
How Much Coverage Do I Need for Full Coverage?
Full coverage responsibility of $100,000 for each person injured in an auto crash that is your fault. About $300,000 for each car accident and $100,000 going to at-fault property damage, with a $500 deductible for comprehensive and collision coverages.
What Is a Good Amount of Coverage for Bodily Injury?
It is best to purchase bodily-injury coverage of at least $100,000 for one person, $300,000 for each accident, and coverage for property damage coverage of $50,000, or a minimum of $300,000 for single limit insurance.
What Is the Difference between Liability and Full Coverage?
The difference between liability and full coverage is elementary. Liability coverage insures against the at-fault damage to other people or their property while driving. Full coverage pertains to wear to your vehicle.
What Is the Difference between Bodily Injury and Medical Expenses?
Bodily injury liability coverage covers injuries you or anyone under your insurance becomes legally liable for due to an auto accident. On the other hand, Medical payments coverage applies to reasonable medical expenses incurred by you or passengers in your vehicle, irrespective of who is at fault for the accident.
When Should I Drop Full Coverage?
Your agent may advise that you drop full coverage insurance on your car if the value of the insurance premiums is equal or exceeds the possible payout, should an insured event occur. For instance, an old car with high mileage may not be worth expensive repairs, and you may consider saving for a new vehicle than paying for extra insurance.
Is Liability Insurance Cheaper Than Full Coverage?
The difference in cost between liability and full coverage is moderately significant. Minimum liability insurance is usually cheaper, but full coverage saves you against the amount of damage to your car, not just that of others.
Should I Carry Collision Insurance on an Older Car?
If your automobile is older, it may be best to drop comprehensive and collision coverages and save money to buy a new car when your current one expires. Applying the 10 percent rule, if your collision and comprehensive premiums are at $250 or more annually, then consider dropping the coverage.
Do You Need Full Coverage for a Financed Car?
If the car is totalled or written off in a crime or auto accident, and you do not have sufficient coverage, the lender’s investment is not secured. Therefore most lenders need financed vehicles to have minimum limit comprehensive and collision coveragoo
Final Words on How much Auto Insurance Coverage Is Enough
This is insurance for you. It could be the one thing you never want to spend your money on. We hope you do not get involved in an auto crash, or getting involved in a lawsuit for third party injury or cause injury to yourself and your family. However, if this happens, your auto insurance coverage will definitely come to your rescue. The question, “how much auto insurance is enough,” will be met by different answers. Get acquainted with your state’s minimum insurance requirements and the value of your car. You may consult an independent agent to help you out.
The related article on How To Make A Car Insurance Claim After An Accident will be useful. Read on!