Buying the Right Type and Amount of Car Insurance

Auto insurance is necessary for every driver no matter how good his or her driving records are. Buying the right type and amount of car insurance can make a big difference in your life, especially if you have an automobile accident and need to make a claim. Most insurance agents will advise you to get as much insurance coverage as you can afford. While this may sound like good advice, the choice of the right car insurance policy is crucial. Before making your choice, take your time to read several tips that help you choose the right type of car insurance policy.

Several factors should be considered before making an informed decision on the matter.

• What is the minimum coverage allowed by law in the state where you live?
• Does the policy you are considering meet those minimum requirements?
• What exactly do you want to protect with your policy?
• What options for additional coverage are available and what are the costs?

Only two states (Wisconsin and New Hampshire) do not require you to have liability auto insurance, but the consequences of an accident where you are at fault in these states could lead to financial ruin for the uninsured motorist. Both New Hampshire and Wisconsin have financial responsibility laws on the books and so most drivers in those states opt for getting insurance. All other states have different minimum insurance requirements, although they generally require that you carry bodily injury and liability insurance to cover claims against you.

All states have financial responsibility laws that require that you be responsible and have sufficient assets to cover any liability that you may cause in a traffic accident. In some states, you cannot even register your vehicle without having first obtained the minimum level of insurance coverage.

Once you find out what the minimum coverage is in your state, then you need to ask whether the policy you are considering meets those requirements, and what else does it cover? In most states, the minimum coverage is for “Bodily Injury Liability”, which protects you against claims resulting from any injury or death to the other party when you are found to be at fault. It can also provide you with a legal defense if you are sued by the other party.

This type of policy covers medical bills, pain and suffering, and loss of income of the other party. If it is a serious accident, then you should have enough insurance to cover an adverse judgment in case a lawsuit is filed against you. Bodily Injury Liability covers injury to other people, but it does not cover you, other people listed on your policy or damage to your vehicle.

Comprehensive insurance covers damage to your vehicle, and sometimes damage to other vehicles that you may be driving, when the damage results from incidents other than collisions with other vehicles. For example: damage to your vehicle from theft, flood or animals. This type of insurance pays to fix your vehicle, less the deductible you choose when you purchased the policy.

Collision insurance covers damage to your car if you hit or are hit by another vehicle. This policy option pays to fix your vehicle, less a deductible, but the amount paid is limited to the cash value of your car. Choosing to pay a large deductible will keep your premium for collision insurance low.

Medical insurance covers medical expenses that you or your passenger(s) may incur as a result of an accident, and it does not matter who is at fault.

Uninsured Motorist Bodily Injury covers you and your passengers in the event that the other motorist has either no insurance or not enough insurance in a crash in which you are not at fault. In some states this coverage may extend to repair damages to your vehicle. Personal Injury covers medical, hospital and funeral expenses of the insured party as well as others in their vehicle and also pedestrians that may have been struck, regardless of who is at fault. This coverage is only available in certain states.

Property Damage Liability covers damage caused by your car and can include property besides another car, such as a house, fence or any other property damaged in an accident.

After you have determined what you want to insure against, it is important to consider what assets you need to protect in the event of an accident where you have caused injury or damage. The first asset would be your car, for which you will need comprehensive and collision insurance if it is a valuable car. The next asset would be your net worth. If you do not have a high net worth, then you can probably manage with less insurance and still remain financially responsible.

Finally, whenever purchasing insurance it is always wise to ask your agent about the next level of coverage, since it often offers significantly more coverage for only a small increase in cost, and the additional options may be especially helpful for your particular situation.