Almost all states require you to have a car insurance. Most states also have required minimum values for different policies. Depending on which state you live in, your insurance could be a smaller or larger piece of your budget. If you have a tight budget, it might be tempting to drop your insurance or to go with the minimum.
Dropping the insurance is, of course, not very smart and usually illegal. If you don’t carry insurance, you might have your driving privilege suspended and your vehicle impounded.
But how much insurance do you really need? Is the minimum coverage enough?
Bodily Injury Liability covers other people’s bodily injuries or death for which you are responsible. In Pennsylvania, as an example, the minimum coverage is $15,000 for one person, and $30,000 for two or more persons. If you’re involved in a serious accident, it’s very likely that an individual’s medical expenses exceeds $15,000, or that a whole family’s expenses total more than $30,000. You should also remember that claims can be made for other things than medical bills, like loss of income or pain and suffering.
Property Damage Liability pays for damage done to the another vehicle or property if you’re at fault in an accident. In many states the minimum coverage is $5,000-$10,000. $5,000 for car repairs isn’t much if you damage a new car.
The Collision policy covers repairs to your own car after an accident, and Comprehensive policy covers costs if your car is stolen or damaged outside of an accident. Personal Injury Protection (PIP) policy is only available in certain states. It pays for your and your passengers’ medical expenses after an accident. It may also cover loss of income.
Sit down and think about what you need to protect and what other coverage is available.
Deciding on how much insurance do you need for yourself and your car is usually the easy part. These policies have a deductible and choosing a higher deductible will lower your premium. With a good health insurance plan, you should perhaps consider the minimum personal injury protection coverage.
However, in the event of a serious accident, you want enough insurance to keep your personal assets safe. Not having enough insurance can be the difference between financial stability and financial ruin. When liability coverage does not cover all expenses, some lawyer will most likely come after your assets.
A good rule is to evaluate your driving habits, risks and how much you can afford. In general, you can get more coverage for a very low cost.
A handful of states require car owners to carry no-fault insurance, policies that pay out no matter which driver is at fault in an accident and limit your ability to sue other drivers. The rules vary by state. These policies also tend to be expensive, so be sure to shop around for the best deal if you live in a no-fault state.