How A lot Automobile Insurance Do I Want? [2021 buyers guide] – Market remark

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Each state has its own requirements for auto insurance. To drive legally, you need to get at least the minimum coverage limits, but if you don't know them right away, you may be wondering, "How much car insurance do I need?"

In this article, we'll look at how to find the appropriate amount of coverage and review the factors that affect the price of auto insurance. A shortcut to cheap auto insurance is getting prices from multiple insurance providers. You can use the following tool to get free quotes from the best insurers in your area.

In this article:

  • Which car insurance do I need?

  • Specify required coverage

  • How Much Car Insurance Do I Need For Financing?

  • Optional types of insurance

  • frequently asked Questions

  • Our methodology

Which car insurance do I need?

Estimating how much auto insurance you need is divided into two factors: where you live and how you drive. The minimum statutory insurance that you must bring with you in order for your car to be approved for road use is determined at your place of residence. This usually includes a certain level of liability insurance. In addition, the value of the car you drive and whether you own it directly will determine which optional insurance policies you choose to take out.

When you buy insurance, you have probably come across the term “comprehensive insurance” a couple of times. Although there is no general definition, it is usually a policy that combines motor vehicle liability insurance, collision insurance and fully comprehensive insurance.

Here is an overview of what each of these guidelines covers:

  • Liability insurance: Covers injuries and property damage to third parties following an accident for which you are responsible

  • Accident insurance: Covers damage to your own vehicle after an accident, regardless of fault

  • Fully comprehensive insurance: Covers repairs if your own vehicle is stolen or damaged in an incident other than a collision with another car, such as a car crash. B. in the event of a natural disaster or a collision with an animal

Neither collision nor fully comprehensive insurance is required by law in any state, but you may need them if you have an outstanding car loan. Lenders often require drivers to purchase additional coverage to protect their investment.

If a car is damaged and declared a total loss, the fully comprehensive or accident insurance will reimburse the policyholder for the actual cash value of the vehicle minus an agreed deductible, depending on the case of damage. When the car is financed, this payout goes to the pledgee.

Specify required coverage

As already mentioned, some form of liability insurance is required in almost every federal state. Liability insurance ensures that in the event of an accident, the medical bills and repair bills of the other parties are paid. It does not cover damage to your own car or your injuries after an accident for which you are responsible.

Liability insurance is divided into two parts:

  • Liability for injuries: Covers medical expenses and lost wages for persons other than the culpable driver

  • Property damage liability: Refunds another party for damage to their vehicle or property if the policyholder is responsible for an accident

How much liability insurance do I need?

Each state has its own minimum liability insurance requirements, which you often see broken down into three numbers. For example, California requires a minimum coverage limit of 15/30/5. That means drivers must have at least $ 15,000 in personal liability insurance per person, $ 30,000 in personal liability insurance per accident, and $ 5,000 in property damage per accident.

The risk of taking out the minimum amount of insurance is that a driver may not be fully insured after a car accident. If a California driver wearing the minimum coverage incurs $ 35,000 in property damage, they wouldn't have enough liability insurance to cover the cost. The remaining $ 30,000 would have to come out of their pockets, and if they were unable to pay they could be sued.

As a general precaution, insurance experts recommend choosing the largest possible liability limit that you can afford. This helps to save your wallet and to protect you from legal action in the event of a culpable accident.

According to the National Association of Insurance Commissioners (NAIC), the average price of liability insurance in 2018 was $ 644.11. Higher coverage limits usually mean a higher premium, but other factors such as your car, driving history, and creditworthiness also determine the price of an insurance policy.

Other coverage required

In addition to liability insurance for personal injury and property damage, states may also require additional coverage. Here are some other common types of insurance you may need to get depending on where you live:

  • Insurance coverage for uninsured / underinsured drivers (UM / UIM): The uninsured motorist protection comes into play if your car is hit and the person responsible is not or only insufficiently insured against liability. It offers help with medical expenses, lost wages and car damage.

  • Medical payments (MedPay): MedPay takes over the medical bills of the policyholder and other passengers regardless of fault.

  • Personal Protection (PIP): Similar to MedPay, the PIP insurance pays the medical bills. It also covers lost wages, funeral expenses and childcare in certain situations.

Each of these covers are required in certain states, but can be purchased as options elsewhere.

How Much Car Insurance Do I Need For Financing?

Getting auto insurance for a financed vehicle can mean getting more than just liability insurance. As mentioned earlier, lenders generally require car owners to purchase collision and fully comprehensive insurance as these types of insurance cover damage to a vehicle that the lender legitimately owns.

Newer cars can be more expensive to insure if they are of great value or expensive to repair, so a lender may ask for higher coverage limits. This usually means a higher insurance premium for the car owner.

Gap insurance

In addition to fully comprehensive and collision insurance, a pledgee can request that a driver also take out gap insurance. “Gap” stands for guaranteed asset protection, and the cover assists the policyholder in totaling a financed car.

If your insurer pays out the actual cash value of your car after a total write-off and does not cover the amount you still owe for the vehicle, the gap insurance pays the difference. For example, if you owe $ 15,000 and your insurer rates your vehicle at $ 10,000 after a total write-off, Gap will pay the remaining $ 5,000.

Optional types of insurance

In addition to liability and fully comprehensive insurance, there are a number of additional insurance policies that insurers offer to give drivers more safety on the road. These include:

  • Roadside assistance: Covers breakdowns, lockouts and towing needs

  • Rent Refund: Covers rental car or taxi services when your main vehicle is in store for an insured repair

  • New car replacement: Usually applies to newer vehicles only and will help you purchase a new vehicle if your car is classified as a total write-off

  • Umbrella insurance: Additional insurance over and above normal insurance limits that can be used to cover personal injury, property damage, and other liability claims

Not all insurance providers have these options. Therefore, ask about the coverage you want when getting a quote or when contacting an insurer for information.

frequently asked Questions

What is recommended for car insurance coverage?

To legally drive a car, you must have minimum public liability insurance as required by your state. Additional coverage depends on whether the vehicle is owned or financed, the value of the vehicle, your income, and your personal insurance preferences.

How Much Insurance is Required for a Financed Car?

Lenders usually require a car owner to take out liability and fully comprehensive insurance when financing a car to protect it financially against damage. The lender can also apply for gap insurance to ensure that a loan can be paid off if the car is totaled.

What does 100/300/50 mean in an insurance policy?

Liability limits are often represented by three numbers, for example 100/300/50. In this case, it means the driver has personal injury insurance worth $ 100,000 per person, personal injury insurance worth $ 300,000 per accident, and property damage insurance worth $ 50,000 per accident. These are the maximum amounts that your insurer will pay out after an accident that you have caused.

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