Car Insurance Facts: How Much Coverage Do I Need and Why?

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Every year you remit your car insurance payments At the back of your mind, you wonder, “Why should I be paying this money anyway?”

The worst accident you’ve ever had is a fender bender, and you paid for repairs without involving your insurer. Couldn’t you have put the insurance money into better use?

If you have these questions, you are not alone. With over 272 million registered cars in the U.S, it is no doubt that the vehicle owners also feel the pinch of paying for car insurance.

Why do drivers need car insurance? How much coverage do you need? Is the minimum cover enough?

Keep reading to learn some fascinating car insurance facts plus tips on the amount of coverage that you need.

Car Insurance Facts: What Does the Law Say?

Obtaining vehicle insurance is not optional. Every state has set laws regarding the minimum amount of insurance drivers should carry. Failure to adhere to these laws will attract a fine, jail time, or registration suspension depending on your state.

All states instruct drivers to carry liability insurance. The following are the types of coverage included in the minimum liability insurance cover:

  • Bodily injury liability
  • Property damage liability
  • Personal injury protection (PIP)
  • Uninsured motorist protection

Most states require drivers to carry bodily injury and property damage liability covers only. The rest are optional. Thus, you should check with yours to make sure that you adhere to these minimum requirements.

How Much Coverage Do You Need and Why?

With each state prescribing the minimum car insurance coverage, it is natural to assume that the liability coverage is adequate. However, most times it’s not.

You need additional cover in your insurance package to hedge yourself and your loved ones against unforeseen events.

Here are some car insurance facts to help you understand why you need additional coverage and how much of it you should get.

Liability Insurance Covers Third Parties

We know what you’re thinking. Why am I not covered yet I pay for the insurance? Your liability insurance only covers you from the claims of others up to the set liability limits in your policy.

When a third party is injured in an accident where you are at fault, your liability insurance covers their medical expenses and property damage. It also covers any legal fees you incur if the individual files a lawsuit.

Liability insurance will not cover your property damages and bodily injury in an at-fault accident.

If you are not at fault, the at-fault driver’s insurer will pay for any damages you incur. Note that in no-fault states, both insurers cover the damages regardless of who caused the accident.

Additional Coverage is Essential

Getting additional coverage is essential to securing your finances and giving you peace of mind after a car accident. Here are the vital covers that you need to add to your auto insurance package:

1. Personal Injury Protection

A personal injury protection coverage is useful in an accident where you are at fault. The insurance covers any damages to your car and medical expenses incurred as a result of an auto accident

You don’t have to worry about footing your own expenses. Also, the policy can pay for lost wages and other costs incurred after the accident.

2. Collision Coverage

Have you ever accidentally hit a tree and broke your car’s windshield? If so, you know that such an accident is not covered by your liability insurance policy.

A collision cover is essential as it pays for any damages caused to your car due to a collision. It could be a collision with another vehicle, pothole, or an inanimate object such as a tree, garage door, or mailbox.

3. Comprehensive Coverage

A comprehensive cover protects you against unforeseen events such as theft, hail, vandalism, and fires. You should be particularly worried about car theft. Reports show there were 773,139 motor vehicle thefts in the U.S 2017.

Without comprehensive insurance, your insurer will not pay for any damages or losses incurred after car theft, vandalism, or fire. A comprehensive cover is the highest class of motor vehicle insurance.

4. General Liability Coverage

Drivers in the commercial trucking industry should consider getting general liability insurance. This is not to be confused with primary liability insurance.

The primary liability coverage works when you cause property damage or bodily injury while driving. General liability insurance covers you against off-road damages such as slip-and-falls at your trucking premises. 

Read more here about the differences between primary and general liability. You’ll also learn about the minimum policy requirements for commercial trucks.

You Need Adequate Coverage

All the above-mentioned types of auto insurance are essential for your peace of mind and financial security. However, how much of them do you need?

Each state sets its minimum liability requirements. For example, New York has a 25/50/10 rule. This means that you need to carry the following:

  • $25,000 bodily injury per individual
  • $50,000 total bodily injury per accident
  • $10,000 for property damage

If the liability surpasses these limits, you will be on the hook for the extra expenses. Thus, as a rule of the thumb, you should carry as much liability insurance as you can afford.

When it comes to other types of insurance, your insurer will use factors such as the type and model of your car, your age, driving experience, credit rating, and driving record to determine your insurance premiums.

Buying Car Insurance

Car insurance is a costly annual expense for drivers. The cost can be even higher if you are considered a high-risk driver. High-risk drivers are those who have had an accident in the recent past, have minimal driving experience, or have a poor credit rating.

If you are considered a high-risk driver, you will pay more premiums to hedge the insurer. However, this doesn’t have to be the case. You can save money on car insurance.

We recommend you shop around for insurance companies with affordable rates regardless of any limiting factors such as a poor driving record. Compare different companies and get a reliable insurer with the best prices.

Get Adequate Car Insurance Coverage

With these car insurance facts in mind, you now know why getting adequate coverage is essential. If you are in a car accident or your car gets stolen or vandalized, you’ll get compensation for the losses.

Are you ready to buy adequate car insurance for your vehicle? Remember to compare rates when choosing an insurance company. Also, check out our blog for more auto facts and tips on insurance, repairs, and maintenance.