Figuring Out How Much Auto Insurance You Need

Too Much Is Never Enough: Figuring Out How Much Auto Insurance You Need

We all look for ways to maximize our money, minimize our bills, and try to do as much with as little as possible. For the most part — there are a few lucky ones who don’t have to worry about such bothers, but for the most part we need to make the most with what we have.

In one area that isn’t so great to only choose the cheapest is with auto insurance. After all, why is it so important to carry higher limits of liability on auto insurance and other property and casualty insurance policies? Consider the costs of what can happen in even the most minor of accidents and how it will affect auto insurance and claims.

The National Safety Council 2010 results show the potential costs of accidents pertaining to injuries that occur in auto accidents.

  • A small accident is likely to cost approximately $9000 per person. Not too terribly bad unless you consider more than three or four passengers and potentially any of them being the elderly or children will likely increase that average.
  • Any accident that involves an injury that causes a temporary disability could cost more than $70,000 each disabled person. Again, consider more than one person being involved that might have disabling injuries.
  • An accident resulting in death could cost on average about one and a half million dollars. And for one last time, consider if more than one death occurred. Besides the emotional and psychological devastating toll it could have on everyone involved, the financial devastation is just as bad.

So considering the extraordinary expenses that can come along with an auto accident, how much insurance should you carry? What types of insurance coverage options do you need? Here are the things you need to protection for, how they work, and what you may need. Hopefully, they’ll also help you figure out the ultimate question:

How much is enough?

For Other People and Their Property

The liability portion of an auto policy will be what pays out to someone that holds you liable, in other words, responsible, for loss or injury. So the liability will pay out if you injure someone or cause damage to their property. Knowing you will be held responsible in the case of an accident that you cause, you know you are going to want to make sure you have good coverage on this because you do not want to be held responsible for something that your insurance cannot pay in full. Don’t pay attention to the state minimum guidelines, always start with a step above. Typically you are talking about a handful of change for the difference in price.

Consider costs of accidents and vehicles these days, and think about the coverage options that are on most auto insurance policies. The bodily injury liabilities options sometimes people choose the minimal amounts. In some states that could be as low as $15,000 or even lower. Even in the “best” accident scenario, that might not be enough to cover someone else’s injuries.

People should consider carefully all the optional limit amounts, coverage amounts, and additional benefits that the auto insurance policy would provide. For as little as a $20 a month difference, some people could have the difference between $25,000 and $100,000 of BI coverage on auto insurance. With higher BI, they can include a higher coverage for themselves for uninsured drivers on auto insurance. It’s not always the cheapest auto insurance that is the best auto insurance.

For People in Your Car

So you know that liability will pay out for the other party, what about you and the people in your car? This will be the medical payment part of your policy or some states it will be called PIP or Personal Injury Protection. It is also referred to as first party benefits. This will pay out for any injury regardless of fault. You can customize this as well in most states. No-fault states will require minimum amounts of PIP, so make sure you check with your agent or your state’s insurance department to find out what is required.

If you have health insurance through your employer and your family is also covered, you may not need much in the way of medical payments. However, keep in mind that your health insurance will have a deductible you will need to pay if you are hospitalized, so at least put enough in the coverage to pay for the deductible.

For Your Car

So you know that the liability will pay for the other person’s car if you hit them, but what happens to your car? How does that get fixed? If you have Collision coverage, it will cover your car if you cause damage to it. It could be in an accident with another vehicle or it could be just a one-car accident where you slide off the road in ice or back into a pole, or sideswipe the carport.

However, if you do not have a car that has a loan on it or if you have an older vehicle that isn’t worth much, you do not want to pay for collision insurance. There is a deductible that you will have to pay out of pocket first  before the insurance company pays to fix or replace it.

Comprehensive coverage also covers your car, but it covers things out of your control like theft, fire, storm damage, animal impact, and glass breakage. This is typically not very expensive and many insurance companies will allow you to have Comprehensive without Collision.

Shopping for automobile insurance can seem like a huge, unpleasant task, but it really does not have to be. Taking a moment to consider the three major parts of an auto policy will help you understand what it means, what it’s protecting, and will help you in determining how much insurance you need to have.

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