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Auto Insurance Guide – How Much Coverage Do You Really Need?
This is one of the most important questions to answer correctly when getting auto insurance. Planning for everything and getting all the coverage you can will definitely cost you money because increased coverage will increase the cost of your insurance. On the other hand, not having enough coverage could potentially cost you a great deal more. If you cause a car crash that does some serious damage, you may be handed some enormous bills to pay, bills that insurance could have helped with if you’d had the right kind of coverage.
Ultimately, the decision is yours, but before you make it, get all the advice you can.
Here are some basic points to make your decision easier.
Meet Your State’s Minimum Requirements.
All 50 states require that drivers have at least a minimum amount of coverage before they get on the road. Make sure that you know the minimum of your state and get at least that.
Also consider your driving habits. If your job regularly requires you to visit nearby states, consider the legal requirements in those states when you’re investigating your auto insurance coverage. You don’t want to cause yourself additional problems just because you got pulled over on the wrong side of the state line.
Here are the auto insurance minimum coverage amounts for Texas and neighboring states.
Texas$30,000, the liability limit per injured person Louisiana$10,000, the liability limit per injured person Arkansas$25,000, the liability limit per injured person |
Oklahoma$10,000, the liability limit per injured person New Mexico$25,000, the liability limit per injured person |
Consider How Much You Stand to Lose
Keep in the mind that the main purpose of auto insurance is to protect you from major loss in the event of an auto collision. So when deciding how much coverage you need, it’s best to consider just what you may be losing.
If you’re tooking around town in a new car, you’d probably want gap insurance to help pay off what you’d still owe the finance company even if the car were totalled in a crash. If the car is older and either mostly or totally paid off, gap insurance would be a waste of money. If your state permits it, you might consider canceling collision and/or comprehensive coverages on older cars. It’s probably not worth is unless your car is worth at least 10 times the premium.
It is possible to get insurance coverage for every little thing that can go wrong, but it’s expensive. If you’re prepared to tolerate the odd scratch or ding here and there, or if you’re willing to pay out-of-pocket for some the smaller stuff, then you can save money on your insurance by only covering the big stuff.
When it comes to personal injury protection — either for yourself or someone else — it’s hard to put a dollar value on a living human body, but in buying insurance that’s exactly what you are asked to do. Consumer Reports recommends getting at least $100,000 per person and $300,000 per accident in liability coverage. If you happen to be wealthy, they raise their recommendations to $250,000 and $500,000, respectively. It’s not that wealthy people are worth so much more; just that everyone should have that much coverage, but it’s really only financially possible for some people.
Speaking of wealth, we should acknowledge the sad truth that there are those people who’ll try to take unfair advantage and seek to get rich off of the other guy’s insurance company. If you have assets to protect (property, savings, etc.), make sure your insurance amount covers them. For example, if you have $50,000 bodily injury liability, but the other party’s medical bills exceed that amount, attorneys could go after your personal assets to pay the difference. Consumer Reports recommends a separate “umbrella policy” to protect you from claims beyond the limits of your liability coverage.
Getting more than the minimum required coverage can affect the cost of a new car.
When I bought my last car, I added on extra insurance coverage, and every time I added something the salesman lowered the interest rates on my car. When I asked him about it, he said that his dealership considered a driver getting additional coverage to be a safer risk, financing-wise, because they’ve been shown to be more likely to keep up regular payments and take better care of the vehicle.