Car Insurance You Need

Your auto insurance is a collection of different policies that cover you in different ways. Before you buy car insurance, it’s helpful to know how much car insurance you need.

Here’s how it’s broken down:

• Liability coverage – These policies help cover liability and expenses when you’re at fault in and accident. The money will go to the people you hit, but it won’t cover the people in your car.
• Bodily Injury Liability (BIL) – This policy pays for the medical expenses of people injured in a crash in which you’re at fault. You’ll often see BIL policies described as a “20/50” policy or a “100/300” policy. These numbers describe the maximum dollar amount the policy will pay for a single person’s injuries and the maximum for all the injuries sustained by all the occupants of the other car. For example, a policy will pay maximum of $20,000 for a single person’s injuries, and up to $50,000 total for the injuries of everyone in the car you hit.
• Property Damage Liability – This policy pays for damage done to the other car if you’re at fault in an accident. Property liability is sometimes referred to alongside BIL as a third number, so a 25/50/20 liability package will cover up to $10,000 for damages to the other car.

The following policies cover you and your car in an accident:

• Uninsured/Underinsured Motorist Coverage – This helps cover costs if you are hit by someone without insurance, or minimal coverage.
• Collision – This policy covers repairs to your car after an accident.
• Comprehensive – This policy covers costs if your car is stolen or damaged outside of an accident.

Minimum coverage isn’t necessarily all you should have. If you’re involved in a serious accident, it’s possible that an individual’s medical expenses could exceed $15,000, or a group’s expenses could total more than $30,000. In addition, $5,000 for car repairs isn’t a lot, considering that the average car now costs a little more than $20,000.

You’re on the hook when costs exceed your coverage limits. That’s why many people opt for policies that cover more than required minimums, particularly if they have assets that can be seized to pay for repairs and medical care.  A good rule of thumb: Make sure you’re covered for an amount equal to the total value of your assets (Add up the dollar values of your house, your car, savings and investments).

How much insurance do you need for yourself?

Collision and comprehensive coverage is worth having if you would want to repair or replace your car after an accident. These policies have a deductible (the amount you have to pay out-of-pocket before coverage kicks in), and they pay out based on the current value of your car, not what you paid for it.

Choose the highest deductible you can afford, because a higher deductible will significantly lower your premium. You’re seeking coverage for major damages to your car, not for every little thing that can go wrong. It’s better to spend $500 of your own money on minor repairs every so often than pay an extra $50 a month whether you need repairs or not. Save collision insurance for when you have car repairs that cost thousands, not hundreds. Remember, if you submit a claim for every little thing, your premium will increase.

Tips

• Check out your state’s minimum insurance requirements. It’s possible that the minimum coverage required might not be that different than what you really need.
• When deciding how much coverage you need, make sure you’re covered for an amount equal to the total value of your assets.
• To keep premiums low, choose collision coverage with a high deductible, and plan to pay routine repair costs with your own money.