Car Insurance Coverage: Not Too High, Not Too Low, Just Right

By: Yara Zakharia, Esq

Vehicle owners are required by law to have car insurance. How much car insurance they ought to buy is something that is within their discretion. Whether purchasing auto insurance online, over the phone, or in-person, drivers can make an educated decision by answering the following four questions:

1. What is the state's required minimum coverage?

2. What does the minimum requirement cover?

3. What supplemental coverage is available and is it affordable to them?

4. What are they protecting?

Each state has its own specific car insurance requirements. Drivers can consult Insure.com to find out their state's minimum requirement for coverage and determine whether they seek protection beyond the base figure. They should also discuss this issue with their agent to decide which options are best-suited for their situation and whether they should apply for supplemental coverage.

In almost every state, drivers are required to carry liability insurance. A number of prominent online auto insurance companies recommend that drivers take out a policy with coverage limits of at least $300,000 per accident and $100,000 per person injured. The reason, according to the Insurance Information Institute, is that lower amounts will not protect drivers since the average personal-injury award in such cases hovers around $323,000. Drivers are also advised to obtain at least $50,000 in property-damage liability coverage. Although state requirements are much lower, drivers have witnessed the substantial cost associated with repair bills vis-a-vis luxury automobiles and other expensive vehicles.

The big-ticket categories for online car insurance coverage are as follows:

1. Bodily injury liability: It is a good idea for drivers to obtain the same amount of bodily injury liability coverage for all of their cars. To protect themselves from a serious accident, drivers should have car insurance coverage that is adequate to satisfy a judgment against them and that does not expose them to forfeiture of their personal assets.

Online auto insurance experts recommend bodily injury liability coverage of at least $100,000 per individual and $300,000 per accident.


2. Property damage liability coverage: Drivers should obtain sufficient property damage liability coverage to protect them against the amount of damage their car might inflict upon another object or vehicle. States require drivers to be insured up to certain fixed limits, usually $15,000 per accident.

Online auto insurance companies recommend a minimum of $100,000 per accident.


3. Uninsured and underinsured motorist coverage: In a majority of states, drivers must have uninsured/underinsured motorist coverage, which ranges from $20,000 to $40,000. Even in states with no-fault insurance, this type of car insurance coverage is important due to the significant number of uninsured motorists.

Experts recommend purchasing at least $300,000 per accident and $100,000 per person.


4. Comprehensive physical damage coverage: To benefit from a low auto insurance rate, drivers should pay as large a deductible as they can afford.

Online auto insurance experts recommend a comprehensive deductible coverage in the amount of $100.


5. Collision coverage: Here again, to ensure a low auto insurance rate, drivers should select the highest deductible they are able to satisfy. Drivers with older cars (more than 7 years old) can avoid this form of car insurance since collision coverage is usually restricted to the vehicle's cash value.

A $250 deductible is recommended.


6. Medical payments coverage (also known as personal injury protection)
Drivers who lack adequate health insurance are advised to purchase this car insurance coverage.

In sum, drivers shopping around for car insurance should first find out what types of coverage are required and their state's minimum requirement. They should then familiarize themselves with the various coverage units, seeking out the right combination and amount of car insurance. There is no cut and dried formula for the determination of how much car insurance to purchase. Drivers should find the right balance between over insuring and underinsuring in order to obtain the optimal coverage to match their needs.



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