How Much Car Insurance Do You Really Need?

From Edmunds.com


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Ah, car insurance - you can't stand paying for it every month; you can't get away with not having it. And really, it would be unwise (read: incredibly stupid) not to have insurance. Okay, we don't mean to be belligerent here; perhaps you have a perfectly valid reason for not having auto insurance coverage, although we personally can't think of any. But who are we to get all self-righteous on you?

Let's focus instead on remedying the situation. If you're like many people, your first priority is to get the bare minimum requirements down. We'll start with that, and work from there. Most states require that you have liability insurance. This covers your arse when you're at fault in an accident. (Remember all those near misses in parking lots and while changing lanes on the freeway when you were blabbing on the cell phone, trying to change the CD, or pushing the slobbering dog/significant other out of your face? Well, your luck won't hold out forever, honey.) If you live in New Hampshire, South Carolina, Virginia or Wisconsin, you aren't required by law (yet) to have liability coverage. For the rest of us, the mandatory coverage varies according to state. In the chart below, minimum liability limits are read as follows (in thousands of dollars): bodily injury liability for one person in an accident/bodily injury liability for all people injured in an accident/property damage liability for one accident. So, for Alabama, the minimum requirements are $20,000 of bodily injury liability for one person, $40,000 bodily injury liability for all people and $10,000 property damage liability.

Personal Injury Protection (PIP), or Medical Payments (MedPay) in some states, pays for your own medical expenses, any lost wages and whatever other costs may arise when you're injured in an accident. It usually pays about 80 percent of your losses, and it also pays a death benefit. PIP is required in Colorado, Delaware, Florida, Hawaii, Kansas, Kentucky, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Dakota, Oregon and Utah.

Some states also require you to purchase car insurance that will cover your own medical expenses, pain and suffering losses and, in some states, car damage in the event that the other motorist is at fault and is either uninsured or underinsured. See the chart below to find out if this applies to you.

State

Liability limits
(in thousands of dollars)

Uninsured/Underinsured motorist coverage required?

Alabama

25/50/25

No

Alaska

50/100/25

No

Arizona

15/30/10

No

Arkansas

25/50/25

No

California

15/30/5

No

Colorado

25/50/15

No

Connecticut

20/40/10

Yes

Delaware

15/30/10

No

D.C.

25/50/10

Yes

Florida

10/20/10

No

Georgia

25/50/25

No

Hawaii

20/40/10

No

Idaho

25/50/15

No

Illinois

20/40/15

Yes

Indiana

25/50/10

No

Iowa

20/40/15

No

Kansas

25/50/10

Yes

Kentucky

25/50/10

No

Louisiana

10/20/10

No

Maine

50/100/25

Yes

Maryland

20/40/15

Yes

Massachusetts

20/40/5

Yes

Michigan

20/40/10

No

Minnesota

30/60/10

Yes

Mississippi

25/50/25

No

Missouri

25/50/10

Yes

Montana

25/50/10

No

Nebraska

25/50/25

No

Nevada

15/30/10

No

New Hampshire

Not required 25/50/25

Yes

New Jersey

15/30/5

Yes

New Mexico

25/50/10

No

New York

25/50/10

Yes

North Carolina

30/60/25

No

North Dakota

25/50/25

Yes

Ohio

12.5/25/7.5

No

Oklahoma

25/50/25

No

Oregon

25/50/10

Yes

Pennsylvania

15/30/5

No

Rhode Island

25/50/25

Yes

South Carolina

25/50/25

Yes

South Dakota

25/50/25

Yes

Tennessee

25/50/10

No

Texas

20/50/25

No

Utah

25/65/15

No

Vermont

25/50/10

Yes

Virginia

25/50/20

Yes

Washington

25/50/10

No

West Virginia

20/40/10

Yes

Wisconsin

Not required 25/50/10

Yes

Wyoming

25/50/20

No

Even though each state has minimum (or no) requirements for bodily injury liability, it is probably in your best interest to purchase higher limits. If someone else is injured and you're at fault, the minimum liability coverage may not cover their medical expenses, in which case their attorney will most likely come after your assets. It is generally recommended (by insurance companies - who else?) that you purchase 100/300 limits of bodily injury liability. On the other hand, if your personal assets don't amount to much (you don't own a home, struggle from paycheck to paycheck, violins are wailing), you don't have a whole lot for them to bother about, so the minimum requirements might actually suit you, not to mention save you some much-needed cash.

Besides bodily injury liability, personal injury protection, property damage liability and uninsured/underinsured motorist coverage, you have collision and comprehensive auto insurance coverage to consider. Collision covers damage to the policyholder's car resulting from running into anything, be it another car, a fire hydrant, a light post, whatever. Comprehensive coverage takes care of your car in the case of theft, fire, falling objects, missiles, explosion, earthquake, flood, riot and civil commotion, among other things (like what? Alien invasion, we guess). rehensive and collision coverage are required on most lease contracts, and are essential if you own an expensive car. If you're driving an old POS, on the other hand, and the cost of the sum of your premium and your deductible nearly or in fact exceed the worth of your vehicle, you might want to consider doing without this coverage.

Before you purchase any type of auto insurance coverage, be sure to study your other insurance policies so you don't end up paying for something you don't need. If you have a decent health insurance plan, you might get away with purchasing the bare minimum personal injury protection coverage, or none at all. However, you might end up paying a co-pay and deductible that wouldn't apply with PIP or MedPay. Uninsured or underinsured motorist coverage might also be a wise buy, even if you have full medical coverage, because they can pay for your pain and suffering damages. If you belong to an organization that offers roadside assistance, you don't need to purchase that through your insurer, natch. Same goes for mechanical breakdown insurance if you own a newly financed or leased vehicle which is still covered under warranty.

Hey, we're all resentful about having to shell out a bunch of cash every month for something we may never need, but what're ya gonna do? The fact is that car insurance will most likely come to your rescue at some point, so it's imperative to purchase a worthwhile policy. Know what you must have and know what you should have and just pay the man, alright?


© Edmunds.com, Inc. All rights reserved. First published on Edmunds.com and reprinted with permission. Edmunds and the Edmunds.com car logo are proprietary trademarks of Edmunds.com, Inc.

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