home | about us | privacy policy | contact us

Index | Auto Insurance | Assessing your Auto Insurance Needs

Assessing your Auto Insurance Needs

Acquiring Auto Insurance is sine qua non of being a driver. Car Insurance is your financial protection in case your car is damaged or stolen or if you are involved in a traffic accident and injure someone else. Though the states' laws require that you have certain Auto Insurance coverage, your Auto Insurance needs may differ from your neighbor's depending on a number of factors.

First off, your Car Insurance policy ought to meet your state's laws. Determining the minimum Liability coverage or financial security requirements of your state when you are trying to assess your Car Insurance needs is a must. Once you are adequately covered according to your state's requirements, you should think what additional coverage you need. Purchasing only the minimum coverage that your state provides without giving a thought to full coverage can put you at risk in the event of an accident. Cutting on Car Insurance expenses may be tempting, but it turns out a great deal more expensive to drive around not fully covered.

The most common types of Auto Insurance coverage are Collision and Comprehensive, Liability, Medical, Personal Injury Protection (PIP), Uninsured and Underinsured Motorists coverage, and "No Fault" coverage. Your task is to estimate your Car Insurance needs taking into consideration your current situation, driving experience, assets you want to protect, etc.

You are recommended to thoroughly study your other insurance policies before you make up your mind what Automobile Coverage supplement you need. For instance, according to your existing Health Insurance plan, you may not need any Personal Injury Protection coverage.

If you already have separate Health, Life and Disability policies, you can give up Personal Injury Protection (PIP).

Basically, the major factors you should take into account when deciding how much coverage you need beyond your state's minimum are the following: the year, make and model of your car, where, why, how and how often you drive, and what you have to protect.

Liability coverage (Bodily Injury and Property Damage) is required by law practically in every state. However it is in your interests to purchase higher limits of Liability. If you get in a traffic accident and someone else is injured, you will need Liability coverage to cover their medical expenses.

Property Damage Liability is an important part of coverage which in the event of an accident pays for the repair and replacement of somebody else's car or property. If you total somebody's luxurious car, the state-required minimum of $5,000 won't help much to cover the damage. Therefore, a minimum of $50,000 for each vehicle you own or a total of $100,000 coverage seems a reasonable decision.

In addition to Liability, you may need Comprehensive and Collision insurance coverage. Collision covers any loss to your vehicle resulting from running into another car, a fence, a wall, a light post, etc. Comprehensive covers loss to your car from theft, fire, natural disasters such as an earthquake, flood, or hurricane, vandalism, falling objects, etc.

When you are buying or leasing your car, your bank or finance company will want to protect their interests by requiring you to carry Comprehensive and Collision coverage. If you already own your car, you may choose to skip Comprehensive and Collision in case your car's resale value is less than $3,000.

Uninsured or Underinsured Motorist coverage is very important to obtain since it pays not only

for medical costs for you and your family in case of an accident with either a hit-and-run driver or a driver who is underinsured, but also covers bike and pedestrian accidents. It will normally make up for what your medical insurance doesn't cover.

Among all the numerous extras offered by insurance companies Full Glass coverage is truly worth considering. Motorists are well aware of high auto glass costs and the ease with which it can be damaged.

When deciding how much coverage you need, it is very important to consider the area you live in, as well as where, how far and why you normally drive. Big cities and high risk areas logically have higher theft and accident rates. Comprehensive and Collision coverage sounds like a way out in such a situation.

If you use your car for work, you most likely drive more miles than someone who uses a car for occasional trips only. Business use of your vehicle involving business trips on a daily basis (work as realtors, in delivery, as drivers, etc) means greater use of your car and greater chances of getting in a road accident accordingly.

Your driving habits come forward as an important factor in assessing your Auto coverage needs as well. With a good driving record and low chances of getting in an accident, but having fear that your car may be stolen, you might have a greater need for purchasing Comprehensive rather than Collision, and vice versa.

Now we have come to the issue of your assets protection. Having an adequate coverage is important, because if you are sued, the court could order you to pay more than your limit of Liability coverage. It is natural that you would hate to appeal to your personal assets to cover the amount the court ordered to pay. The more valuable assets you have, the more you need to protect. At the same time, if you have no assets, you don't need to purchase excess coverage.

If you have a home, bank accounts, etc, you should purchase more Liability coverage, since the minimums required by law won't be enough. In the language of figures, if you make about $30,000 a year and rent your apartment, $50,000/$100,000 can be enough coverage for you. However if you make around $80,000 a year, own a house which is worth $150,000 and have $40,000 in mutual funds, you are recommended to consider at least $100,000/$300,000 of coverage.

In order to estimate your net worth and help you determine how much Auto coverage you need, you may total the equity of your home and property, the value of your possessions, your savings and investments, plus any retirement benefits you might have.

Having got the result, plus an added amount for safety, you get the total value you would want your Liability coverage to protect. Consider Umbrella Coverage to add to your minimum Liability. Once your existing Liability Coverage runs out, your Umbrella Coverage will pick up and protect you. With Auto Insurance, it usually pays to follow the rule of the more coverage the better.