Why You Want More Auto Insurance Than You Have
Unfortunately, there are so many variables that the result doesn't really tell you anything.
Since I don't know much about auto insurance, I contacted Melanie Hart, a USAA insurance expert, to help me comprehend the topic.
The amount of insurance you are actually purchasing is one of the most crucial factors. There are two key factors to think about when comparing insurance across states: the types of coverage you are carrying and the amount of coverage you are carrying.
You may not be protected in the event of an accident or other loss if you do not have the appropriate policy, or the appropriate level of coverage. It is crucial that you have adequate protection.
Auto Insurance Coverage Types
I consulted an authority on the topic because I frequently hear people refer to their vehicles as having "full coverage." Full coverage, in the eyes of the insurance provider, denotes the existence of collision, liability, and comprehensive coverage under your policy.
Liability insurance may have a few different components, but it often pays for other people's costs if you cause an accident. Property damage, such as harm to a car, trees, houses, etc., medical expenses, legal fees, and any other judgments rendered against you could fall under this category.
Insurance against liability is necessary. It safeguards your assets and income in the event that you cause an accident, and the majority of states require it. Liability insurance is unquestionably a "chief cornerstone of personal financial security," as stated by Hart.
The damage to your car caused by collisions is covered by collision coverage. Comprehensive insurance covers any damage to your car resulting from events other than collisions. Theft, vandalism, hail, water, fire, and animal strikes may all fall under this category.
If your automobile is financed, collision and comprehensive coverage is often needed, but people who own their cars outright have the option of carrying either coverage or not.
Amount of Coverage for Auto Insurance
How much coverage do you require or desire? The answer to this extremely personal issue depends on a wide range of variables, and choosing liability insurance is different from choosing comprehensive and collision insurance.
Amount of Collision and Comprehensive Insurance
Despite the fact that they cover separate risks, comprehensive and collision coverage are frequently combined. You are generally required to have both comprehensive and collision coverage if your car is financed.
Comprehensive and collision insurance are not required if your car is free of liens (loans). Do you desire it? Depends, really. Hart emphasizes the significance of weighing the worth of your car against the cost of insurance. Every circumstance will have a different break-even point, in part because the monetary value of your automobile may not be comparable to the value you place on it and in part because different areas have varying costs for insurance. The size of your deductible, your capacity for loss, and your likelihood of filing a claim are further factors to take into account.
Liability Coverage Amount
Most states have minimal liability requirements in place to give others some protection from harm you may cause. These state minimums, nevertheless, are usually quite low. You most likely don't have enough insurance if you merely have the minimum coverage allowed by the state.
Let's take a look at California as an example. The mandatory state minimum insurance is 15/30/5. This indicates that your insurance will provide up to $15,000 in benefits for each individual hurt in an accident, a maximum of $30,000 for the incident as a whole, and $5,000 in benefits for property damage. Even a small accident could cost more than what your insurance will pay for. These meager amounts of coverage would undoubtedly be exceeded in a significant accident involving several automobiles and/or critical injuries.
If you cause an accident and there are more damages than your liability insurance can pay for, you are personally liable for the remaining costs, including any court judgments, medical expenses, and car replacement. If you don't have enough insurance, you'll have to pay the amount out of your assets, savings, and possibly even future wages.
Let's say you drive a brand-new Honda Civic with four people inside and you have the bare minimum required by California law for auto insurance. Your insurance will only pay for the first $5,000 of vehicle damage; any additional costs are your own. You only have a combined $30,000 in coverage for injuries for the four occupants; as stated before, you are responsible for any further costs.
We are all aware of how expensive medical care is. If even one individual sustains more severe injuries, the medical coverage would likely exceed $30,000 without much difficulty. If the other parties sue you, they can take your savings and possessions, and you might be forced to make payments for years to come.
Although every scenario is unique, I'll share the specifics of my insurance with you so you can compare. My family has additional insurance that I'll discuss below in addition to the liability coverage of $300,000/$500,000/$100,000.
According to Hart, a person should have adequate liability insurance to cover both their existing assets and potential future income.
You must think about your current assets, your potential for future earnings, how much risk you are willing to face, and how much liability insurance to buy. The cost of liability insurance is not prohibitive, so don't cut corners here.
Liability Insurance Underwriting
You can buy extra liability insurance on top of your vehicle, homeowners, or renters insurance if you're particularly worried about your own personal culpability. This insurance, often known as umbrella liability insurance, offers extensive protection at a reasonable cost.
Each person has unique insurance requirements, but it's critical to comprehend how the coverage you choose could lead to increased out-of-pocket expenses in the event that you are involved in an accident or suffer another loss. Many consumers erroneously believe that the state minimums will give them adequate coverage, but this is very rarely the case.
