How much car insurance coverage do you need?
What insurance is mandatory?
In all but three US states, it’s a criminal offense to drive any vehicle on the road unless you have a valid liability insurance policy in place. This is intended to ensure there’s always some money to pay to anyone you injure if you drive badly. The minimum amounts to pay for the medical treatment of those injured or the repair of property you damage are low by modern standards. But this makes the premium rates low. Indeed, in some states, there are programs to help people with limited income pay for the mandatory policies. In fourteen states, it’s also mandatory to carry personal injury protection. This ensures there’s always some cash to pay your own medical expenses. With an increasing number of people unable to pay for health insurance, this basic minimum goes some way to covering ERs and hospitals for the cost of your treatment.
What insurance may be required?
When you borrow money to buy a new or more valuable secondhand vehicle, the only security the lender has is the right to repossess should you default. This security disappears if your vehicle is damaged or lost. So all auto loan agreements require you to pay for collision and comprehensive coverage. That way, there’s always money to pay for the repair of your vehicle or to buy a replacement if the vehicle is a total loss.
What insurance should you buy?
In the majority of states, the law of tort applies and courts order those at fault to pay for the loss and damage they cause. If the car insurance cover you have is not enough, this leaves you with a personal bill, the courts having the power to order everything you own sold to pay off the debt. It’s therefore advisable to carry additional insurance if you have assets to protect. But if you have no assets with stored value, it’s not cost-effective to pay for more than your state’s mandatory liability minimums. You have to decide whether to protect your own investment in the vehicle. If you are the owner and the vehicle is valuable, it will probably be worth buying collision and comprehensive coverage.
Deciding how much car insurance coverage to buy is always a balancing act. You may face liabilities if you injure others. You may suffer a personal loss if your own vehicle is damaged. What value to you put on peace of mind? Get multiple car insurance quotes to price all the different options. Then you can make an informed decision.