Your Auto Insurance Coverage-How Much Do You Really Need?

Written by Clive Bristol

If you are trying to save money on your insurance premiums, you are not alone. According to a recent study that was conducted by the Insurance Research Council, many other individuals are doing the same. Economic times have required many drivers to reevaluate their insurance premiums to save money and better their financial situations.

Unfortunately, this growing trend has created two problems. The first problem is that more individuals are dropping their insurance completely because they cannot afford to pay it. The other problem is that reduced coverage amounts are inadequate for drivers, leaving them unprotected in the event of an accident. Pair the two problems together and the situation can be devastating.

Understanding how much insurance coverage you need to protect yourself and your vehicle can help you to avoid a costly mistake. Additionally, understanding the importance of insurance coverage may help you to avoid the temptation to drive without auto insurance.

The purpose

Auto insurance is intended to protect you, your vehicle, as well as any third party individual or property that you may damage in an accident. Without coverage, you are unprotected. Your medical bills will not be paid and your vehicle will be a total loss. You may be sued for damages that occur from an accident, even if the accident was not your fault. This is because you failed to meet legal requirements by not carrying auto insurance. You can also be subject to serious legal penalties including having your license suspended, having your vehicle impounded, and even jail time for repeated offenses. Carrying auto insurance is responsible and it can keep you out of trouble.

Meeting the state requirements

You are required to carry a minimum amount of insurance on your vehicle. The amount of coverage varies from state to state and some states. All states require you to carry liability insurance. This includes property damage liability and bodily injury liability.

Property damage liability allows your insurance company to pay for any property damaged if you are considered at fault for an accident. This includes but is not limited to third party vehicles. Property damage liability does not include the cost of repairing or replacing your vehicle.

Bodily injury liability allows your insurance company to pay for the medical bills of a third party individual that is injured in an accident for which you are considered at fault. This does not include your medical bills.

Some states require additional types of insurance coverage. These coverage types can include PIP insurance, no fault insurance, or underinsured and uninsured motorist coverage. In the states that this type of coverage is required, you are not able to remove them from you policy. Your insurance company should be familiar with your state’s requirements and can help you to determine which types of insurance you need to carry.

Your coverage and its limits

All insurance types have limits. Limits are the maximum amount of money that your insurance policy will pay out. For bodily insurance, your limits will determine how much your insurance company will pay towards the injury of another person.
If you have inadequate coverage and the third party individual’s medical bills exceed your coverage limit, you may be responsible for the remaining balance. Limits on your insurance policy are chosen when you originate the policy. While lower limits are less expensive, it is usually a good idea to pay for higher limits. This protects you from being sued personally for additional expenses that your insurance policy does not cover.

Removing what you don’t need

When shopping around for policies, take the time to familiarize yourself with the different types of insurance policies. In some cases, you may be able to remove items that you don’t need. One example may be removing medical coverage from your insurance policy, as long as it is not mandated by state, because you already have medical insurance.

If you have an older vehicle, you may also consider dropping the full coverage insurance. The amount you pay into your premium is not worth the amount that your insurance company will pay out if you are in an accident and your vehicle is totaled. Instead, consider using the money you would have paid for full coverage into savings. This will give you money to purchase a new car instead of throwing it away on a full coverage policy.

The importance of underinsured and underinsured motorist

Because of the rising number of individuals that are driving without insurance or have inadequate insurance, underinsured and uninsured motorist is definitely a wise investment. The amount for the coverage does not usually increase your policy very much and it will ensure that you are protected, should you be in an accident in which the individual was uninsured or does not have adequate coverage. This type of insurance does not pay for any damage to your vehicle but it will pay your medical bills and any loss you experience if you lose work because of your injury.