What Auto Insurance Do You Need?

Buying auto insurance can be confusing, particularly for first time buyers. It can be challenging to know what kind of coverage you need, how much coverage you need, the risks and rewards of purchasing certain types of optional coverage, and other auto insurance related questions. Many drivers choose to go with the minimum amount of coverage that they can legally purchase. All states have minimum insurance requirements that all motorists must meet. The amount and type of minimum insurance required varies by state.

Those who are looking to buy auto insurance for the first time should check to see if their policy covers bodily injury liability. This is a type of insurance that covers injury or death caused to other people in an accident at which the insured is at fault. Most bodily injury liability coverages specify two different amounts–one amount for a single person injured and another amount to cover all people involved (the insured excluded). Most states require bodily injury liability coverage, but as the amounts required tend to be quite modest, motorists may wish to purchase additional coverage.

In the same vein, property damage liability coverage protects the insured from liabilities that may occur to property because of an accident. This includes damages to vehicles, structures, and other pieces of property. Most states require a minimum amount of property damage liability coverage.

While bodily liability and property liability coverage helps insure the driver from monetary damages caused to others, they do not take into account injuries suffered by the insured. This is where personal injury protection (sometimes called MedPay) comes into play. Personal injury protection pays for expenses incurred due to an injury to the insured when covered by the policy. Personal injury protection is "no fault" which means that the protection becomes available regardless of whether the accident was the insured's fault or not. This allows payments to begin immediately, particularly in cases where fault is contested. It is possible that the kind of coverage offered by personal injury protection is covered under other plans, such as an existing medical plan. For this reason, it may be possible to get by with the minimum personal injury protection auto insurance policy.

One of the most trying situations that motorists can find themselves in is when they are involved in an accident in which the other party was at fault but the other party has limited or no auto insurance coverage. Oftentimes uninsured drivers are those who have let their coverage lapse because they were unable to pay the premium. It is likely that trying to get money from someone with such limited means through the court system will be fruitless, so the motorist is often left footing the bill. This situation can be avoided by purchasing uninsured/underinsured motorist coverage. This coverage kicks in when the insured is involved in an accident with an uninsured driver.

Comprehensive and collision coverages are optional but you will definitely want to consider them. Comprehensive coverage covers all damage that could occur to your vehicle (i.e. vandalism, hail damage, etc.) Collision coverage covers damage to the vehicle from an accident in which the insured was at fault. Another term often encountered is automobile insurance endorsements. These plans cover extras such as towing, roadside assistance and other bits of coverage that offer the insured piece of mind. Endorsements are never required, but collision or comprehensive coverage is often required by leases.

To summarize, determining the amount of insurance you need includes determining the minimum amount required by the state. If possible, you will want to increase the amount beyond the state minimum, but clearly your budget will dictate that. Comprehensive and collision insurance are usually optional, but you should consider how much you would be able to pay for out of pocket repairs. Always look for overlapping coverage to avoid having redundant coverage. Be sure to think about the cost of health care and consider the financial risk you are willing to take should expenses occur that are not covered by your insurance.