Car insurance is one of
most dreaded chunks in your budget. And depending on which state you live in, it could be a smaller or larger chunk of your budget than your neighbors across state lines. How much insurance should you buy? Any insurance agent worthy of their salt will tell you that you should buy as much as you can afford. While this is a good rule of thumb, it's about as useful as a stock broker's tip to buy low and sell high. It might be sound logic but it doesn't get you any closer to an educated decision. There are a few filters that need consideration in order to make that educated decision. First, what is state required minimum coverage where you live? Second, what does minimum cover? Third, what other coverage is available and can you afford it? And fourthly, what are you protecting?
What do minimums cover?
Now that you know what your state requires, what are you actually covered for once you purchase minimum? Using coverage definitions that follow, find types of coverage required and see what your state says is accepted minimum.
Coverage Definitions
Bodily Injury Liability Covers other people's bodily injuries or death for which you are responsible. It also provides for a legal defense if another party in accident files a lawsuit against you. Claims for bodily injury may be for such things as medical bills, loss of income or pain and suffering. In event of a serious accident, you want enough insurance to cover a judgment against you in a lawsuit, without jeopardizing your personal assets. Bodily injury liability covers injury to people, not your vehicle. Therefore, it's a good idea to have same level of coverage for all of your cars. Bodily Injury Liability does NOT cover you or other people on your policy. Coverage is limited to terms and conditions contained in policy.
Comprehensive Physical Damage Coverage Covers your vehicle, and sometimes other vehicles you may be driving for losses resulting from incidents other than collision. For example, comprehensive insurance covers damage to your car if it is stolen; or damaged by flood, fire, or animals. Pays to fix your vehicle less deductible you choose. To keep your premiums low, select as high a deductible as you feel comfortable paying out of pocket. Coverage is limited to terms and conditions contained in policy.
Collision Coverage Covers damage to your car when your car hits, or is hit by, another vehicle, or other object. Pays to fix your vehicle less deductible you choose. To keep your premiums low, select as large a deductible as you feel comfortable paying out of pocket. For older cars, consider dropping this coverage, since coverage is normally limited to cash value of your car. Coverage is limited to terms and conditions contained in policy.
Medical Payments Covers medical expenses to you and your passengers injured in an accident. There may also be coverage if as a pedestrian a vehicle injures you. Does NOT matter who is at fault. Coverage is limited to terms and conditions contained in policy.
