- Most states require you to have at least a minimum amount of insurance coverage for any injuries or property damage you cause in an accident.
- Collision coverage, which is optional, covers damage to your own car in an accident.
- Comprehensive coverage, also optional, protects against other risks, such as theft or fire.
- Uninsured motorist coverage, mandatory in some states, protects you if you’re hit by a driver who doesn’t have insurance.
Reading: How Much Car Insurance Do You Need?
How Car Insurance Works
An automobile policy policy is actually a box of several unlike types of policy. The most common ones are :
- Bodily injury liability
- Property damage liability
- Medical payments or personal injury protection
- Collision coverage
- Comprehensive coverage
- Uninsured/underinsured motorist coverage
Depending on the state you live in, some of these coverages may be compulsory, others optional. If you have an car loan or lease, your lender may besides have sealed requirements. But beyond what your state or lender requires, you may want to purchase extra indemnity to protect yourself. hera ‘s a nearer look at each type of coverage and how to decide how much you in truth need .
Bodily Injury Liability
What it covers: Bodily injury indebtedness is the part of a car policy policy that will pay for injuries you or family members who are listed on your policy cause to person else in an car accident .
How much you need: about every state of matter requires drivers to purchase bodily injury liability coverage, although the amount varies from state to state. On an car insurance policy, your liability coverage is typically expressed as a series of three numbers, such as 25/50/20. The first count represents the utmost your insurance company will pay per person if you injure person in an accident— $ 25,000 in this example. The moment number is the utmost it will pay per accident, in encase more than one person is injured— $ 50,000 in this case. The third count refers to property damage liability .
You will need to purchase at least the minimum amount of bodily injury coverage that your country requires. For many states, that ‘s $ 25,000 per person and $ 50,000 per accident, although some states are lower or higher .
Your state of matter ‘s minimum requirements might not be enough, however, specially if you are involved in a good accident. You ‘ll need to consider your assets and whether they ‘d be adequately protected in the event of a lawsuit. For example, if you own your home or have a solid come of money in savings, a costly accident could put them at risk. In that case, you ‘ll want to buy more coverage. The nonprofit organization Consumers ‘ Checkbook, among others, recommends buying coverage of at least 100/300/50, good in case. The difference in monetary value between that coverage and your state ‘s minimal will probably not be very much .
You can buy even more coverage than that—250/500/100, say—if you have more assets to protect. You can besides purchase an umbrella policy, which will raise both your car and home insurance liability coverage to $ 1 million or more .
property damage indebtedness
What it covers: Property damage liability covers the price when you or members of your family damage another person ‘s car or other property ( such as a tree or fence ) in an accident .
How much you need: As with bodily injury liability, virtually every state requires you to have some sum of property damage coverage. It ‘s represented on your policy as the third base count in that sequence, so a 25/50/20 policy would provide $ 20,000 in coverage. Some states require you to have american samoa little as $ 10,000 or even $ 5,000 in property damage liability coverage, but $ 20,000 or $ 25,000 minimums are most common .
again, you may want to buy more coverage than your express ‘s minimum. But unless you find yourself in a collision with a Lamborghini or Rolls-Royce, you credibly do n’t face a much fiscal risk as you would in an accident in which people are seriously injured. A normally recommend charge of property damage coverage is $ 50,000—or more if you have substantial assets to protect .
checkup Payments ( MedPay ) or Personal Injury Protection ( PIP )
What it covers: Unlike bodily wound liability coverage, medical payments ( MedPay ) or personal injury protection ( PIP ) covers the price of injuries to the driver and any passengers in your car. In some cases, it will besides cover any confused wages resulting from injuries sustained in an accident .
How much you need: Whether checkup payments or PIP coverage is compulsory, optional, or tied available will depend on your state of matter. In states with no-fault policy laws, such as Florida and New York, PIP coverage is compulsory. In Florida, for exercise, drivers must carry at least $ 10,000. In New York, the minimal is $ 50,000 .
If you and your family members already have good health indemnity, you may not need to buy more than the want minimum of PIP coverage. If you do n’t have health indemnity, however, you might want to purchase more. That ‘s specially true in a country like Florida, where $ 10,000 in coverage could be inadequate if you ‘re in a dangerous accident .
What it covers: Collision coverage will pay to repair or replace your car if you ‘re involved in an accident with another cable car or hit some other aim .
How much you need: States do n’t require drivers to have collision coverage. however, if you have an car lend or are leasing the cable car, your lender may require it. When you ‘ve paid off your loan or returned your rent car, you can drop the coverage .
even if it ‘s not required, you may want to buy collision coverage. For example, if you ‘d have trouble paying a adult compensate bill out of air pocket after an accident, collision coverage could be good to have.
Read more: The Best Car Insurance Companies for 2022
You ‘ll besides want to consider what your cable car is worth. The monetary value of collision coverage is based on the value of your car, and it typically comes with a deductible of $ 250 to $ 1,000. indeed if your cable car would cost $ 20,000 to replace, you ‘d pay the first $ 250 to $ 1,000, depending on the deductible you chose when you bought your policy, and the insurance company would be responsible for arsenic much as $ 19,000 to $ 19,750 after that .
As your car ‘s value depreciates over prison term, however, you may want to consider dropping collision coverage. Between the monetary value of your annual premiums and the deductible you ‘d have to pay out of pocket after an accident, you could be paying a distribute for very little coverage. even insurance companies will tell you that dropping collision coverage makes sense when your cable car is worth less than a few thousand dollars .
What it covers: Comprehensive covers damage to your car from something other than a collision. That might be, for exemplar, a fire, a flood, or a falling tree. It besides covers car larceny .
How much you need: As with comprehensive coverage, states do n’t require you to have collision coverage, but if you have an car loanword or lease, your lender may require it. And again, when you ‘ve paid off your lend or returned your rent car, you can drop the coverage .
In deciding whether to buy comprehensive coverage if it is n’t required, you ‘ll want to weigh your ability to pay out of pocket if your cable car is stolen and you have to buy a new one or damaged and you ‘re stuck with the rectify bills. You ‘ll besides want to consider how a lot your car is worth compared with the monetary value of covering it year after year .
Uninsured/Underinsured Motorist Coverage
What it covers: Just because state laws require drivers to have liability coverage, that does n’t mean every driver does. As of 2019, an estimated 12.6 % of drivers—or about one in eight—were uninsured. many other drivers have some indemnity but not adequate to cover the costs of a serious accident. That is where this type of coverage comes in. It can cover you and family members if you ‘re hurt or your car is damaged by an uninsured, underinsured, or hit-and-run driver .
How much you need: Some states require drivers to carry uninsured motorist coverage ( UM ). Some besides require underinsured motorist coverage ( UIM ) .
Maryland, for model, requires drivers to carry uninsured/underinsured motorist bodily injury indebtedness indemnity of at least $ 30,000 per person and $ 60,000 per accident. It besides requires at least $ 15,000 in uninsured motorist property damage coverage .
If your state of matter requires uninsured/underinsured motorist coverage, you can buy more than the want measure if you wish to. You can besides buy this coverage in some states that do n’t require it .
If you are n’t required to buy uninsured/underinsured motorist coverage, you might want to consider it if the coverage you already have would be insufficient to pay the bills if you ‘re involved in a dangerous accident. For exemplar, if you lack adequate health policy or aesculapian coverage through your car policy policy, adding it could be worth it .
other Types of coverage
When you ‘re shopping for car insurance, you may see some early, wholly optional types of coverage. Those can include :
- Roadside assistance, such as towing
- Rental reimbursement, if you have to rent a car while yours is being repaired
- Gap insurance, which covers any difference between your car’s cash value and what you still owe on a lease or loan if your car is a total loss
Whether you need any of those will depend on what early resources you have ( such as membership in an car club ) and how much you could afford to pay out of pocket if you must .
The Bottom Line
An car indemnity policy is made up of multiple types of coverage, some of which your state of matter or car lender may require, while others are optional. Whether to buy more than the minimal required coverage and which optional types of coverage to consider will depend on the assets you need to protect deoxyadenosine monophosphate well as how much you can afford to pay. Your state ‘s motive fomite department web site should explain its requirements and may offer other advice specific to your state. An mugwump indemnity agent who is companion with the laws in your submit and can provide policy options from a numeral of different policy companies could besides be of help .