Do You Have the Right Car Insurance?

Everyone knows they should have car insurance. But how much car insurance do you really need? It’s a complicated question, but we’re breaking it down for you.

Start at the Floor

Most states set a minimum level of mandatory insurance coverage. At the very least, you should make sure your current coverage is at that level.

This is especially important if you’ve moved recently or if you’ve transferred a family car from one state to another.

Consider Going Above and Beyond

If you can afford it, it’s probably a good idea to carry more than minimum coverage. Why? Accidents are expensive, and there’s no way to guarantee you won’t be involved in one.

Without adequate insurance, an accident could come with hefty out-of-pocket costs, and your personal assets could end up on the line.

How Much Is Enough?

In most cases, when people ask, “Do I have enough car insurance?” what they really mean is, “Do I have enough liability insurance?”

Car insurance plans include multiple kinds of coverage. Bodily Injury Insurance and Property Damage Liability Insurance will pay for the damages you cause to other people (i.e. victims who aren’t riding in your car) and their property — but only up to your policy limits.

If you cause damage in excess of those limits, you’re responsible for the remainder.

For example, if you accidentally drive your car through a house, destroying it and injuring two people inside, you could be looking at financial devastation unless you’re well insured.

So how much is enough? Ideally, your liability insurance policy limits should equal the combined value of all your assets (e.g. your house, car, savings account, investments, and any other valuable property).

What About My Own Injuries and Property Losses?

Your car insurance policy probably includes Personal Injury Protection, or PIP (which covers your own injuries in a crash), as well as coverage for your own vehicle losses (Comprehensive and Collision coverages).

If you have good health insurance, you’re probably okay to carry a smaller PIP limit, though you still need to meet your state’s mandatory minimums.

Policy limits for Comprehensive and Collision insurance are a personal judgment call, but keep your focus on major damages — the kind that would really hit your wallet.

These coverages come with deductibles, and lower deductibles lead to higher monthly premiums. Look at your budget and opt for the highest deductible that wouldn’t leave you stranded in the event of a serious crash.

Living in a No-Fault State?

A handful of states require motorists to carry no-fault insurance, which means your policy pays out regardless of who causes the crash. (These policies also generally limit — but do not necessarily prohibit — your ability to sue the other driver.)

No-fault rules vary from state to state, so talk carefully with a local, well-rated insurance agent. These policies tend to be expensive statewide, so shop carefully.

The Importance of Uninsured and Underinsured Motorist Coverage

If you take anything away from this email, let it be this: invest in Uninsured/Underinsured Motorist Coverage (UIMC).

Why do we stress UIMC protection? A growing number of motorists are driving without car insurance, but unless you have a UIMC plan in place, you’ll be completely vulnerable if they hit you.

UIMC is an affordable add-on to most auto insurance policies — often only a few dollars more a month. But many drivers don’t know to ask.

Call your insurance provider to make sure you have a good policy in place to protect you and your family.