What’s the Best Possible Insurance Coverage I Should Have?

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When considering auto insurance options and coverage levels, it is essential to ensure that you meet your state’s legal requirements to be on the road and that you and your assets are covered in the event of a collision. This guide will help you determine the right coverage for you.

What Are the Key Components of an Auto Insurance Policy?

The three key components of an auto insurance policy include:

  1. Bodily Injury Liability (Per Person)
    This coverage limit is per person for medical expenses and lost wages stemming from injuries you may cause to others in a collision.
  2. Bodily Injury Liability (Per Accident)
    This coverage covers expenses you cause to others due to injuries in total for the accident.
  3. Property Damage Liability (Per Accident)
    This coverage is for damage that you may cause to other people’s property in an accident, such as cars, fences, etc.

When looking at coverage limits, it is often written as 25/50/25. In this example, the liability coverage would be $25,000 for bodily injury (BI) per person, $50,000 for bodily injury (BI) per accident, and $20,000 in property damage coverage.

State Minimum Auto Insurance Requirements

Each state has laws and regulations determining which type of coverage it requires its drivers to hold and what coverage level for each. You must meet the minimum legal insurance coverage requirements for the state in which your car is registered, no matter how much insurance coverage you ultimately decide is appropriate for you. While some states, such as New Hampshire and Virginia, do not require auto insurance coverage at all, other states, such as Maine, require that you hold specific coverage in addition to liability insurance such as Uninsured/Underinsured Motorist (UM/UIM) coverage and MedPay.

Should I Purchase More than the Minimum Coverage?

In most instances, yes. When it comes to auto insurance coverage, you are paying to protect yourself and your assets, so don’t assume that the minimum coverage required by law is the same as being adequately covered. If you got into the accident, you’re likely to want to know that any damage you have unintentionally caused will be covered. Frequently, state minimum coverage isn’t enough – leaving you liable to pay out of pocket for any additional expenses. When reviewing optional coverages and coverage levels, it is essential to cover all financial assets that may be at risk from a large insurance claim and protect your net worth.

How Much Bodily Injury Liability Coverage Should You Have?

When injured in an accident, medical expenses can vary widely. For example, there could be very few to no costs in a fender bender. At the same time, severe accidents could range in the hundreds of thousands of dollars or even greater. Therefore, it is more important to ask how many assets you must protect when considering car insurance coverage. To determine how much bodily injury liability coverage you should hold, you should tally up your current financial assets, such as homes, cars, savings, retirement accounts, investment accounts, etc. You should also consider your career and income or earning potential and consider that wage garnishment could be possible if you were in a severe accident and your insurance coverage was insufficient to cover expenses.

How Much Property Damage Liability Coverage Should You Have?

When considering property damage and coverages, know that property damage stemming from an accident can vary widely from incident to incident. To determine the level of coverage that is best, you should ensure that the level of damage liability coverage is enough to make you comfortable for your assets and circumstances. Some things to consider are whether you live in an affluent area, a busy city, or a small rural town. In 2021, the national average property damage liability claim was around $4,000.

Do You Need Personal Injury Protection (PIP)?

Depending upon where you live, you may need personal injury protection or PIP. Personal injury protection is typically used in no-fault states. Your insurance will pay for your injuries up to your PIP limit in these states. Only after that threshold has been exceeded may you be able to sue the other party. Personal Injury Protection coverage will pay for you and your passenger’s medical costs and loss of income related to the accident, regardless of whose fault the accident was. Even if this coverage is not required, if available, this may be useful protection if you do not have excellent health insurance coverage to rely on, which may also cover some of these costs.

Do You Need Medical Payments Coverage (aka MedPay)?

Whether or not you will need MedPay depends on your other insurance coverages. MedPay is insurance coverage covering medical expenses you or your passengers have after an accident. This is a convenient coverage as it will be available immediately while your insurance company works other things out. This can also help pay for health insurance deductibles and PIP copay. However, it is crucial to remember that this coverage will not replace any lost wages. In the event that your health insurance does not cover medical expenses related to a car accident, MedPay would be valuable protection. It will also benefit you if you have a high deductible.

Do You Need Comprehensive and Collision Coverage?

Whether or not you need comprehensive and collision insurance largely depends on the value of your car and whether or not you lease or finance your vehicle. Comprehensive and collision coverage are coverages that protect the value of your car. Collision coverage will pay to repair or replace your vehicle if you are at fault in a collision. In addition, comprehensive coverage will pay to repair or replace your car if it is damaged by something outside of an accident, such as from inclement weather, or if your vehicle is stolen.

If you finance or lease your car, you will likely be required to hold these coverages. If you have paid off your vehicle or purchased it outright, it will be your choice whether or not you would like to add this protection. This decision will likely be based upon the value of your car, the cost of coverage, and what you are comfortable paying out of pocket if damage occurs to your vehicle or it is stolen. According to NAIC data, 77% of consumers purchased comprehensive and 73% purchased collision coverage in 2016.  It is suggested that when considering collision coverage, you should decline when six months of coverage exceeds 25% of the car’s value; it is no longer worth purchasing collision coverage, as collision coverage would cost more than replacing the vehicle. It is also advisable to drop collision coverage if your vehicle is older than ten years or worth less than $4,000.

Do You Need Uninsured/Underinsured Motorist Coverage (UM/UIM)?

It is generally highly recommended to hold uninsured or underinsured motorist coverage to protect you if the other at-fault driver doesn’t have enough insurance to cover your expenses. This coverage will also cover you after a hit and run. When choosing a coverage amount, when it comes to UIM/UM limits, it is suggested to match the coverage limits that you have selected for your liability insurance.

Contact an Attorney

We at Tatum & Atkinson, PLLC are here to help you in the event that you are ever involved in a car accident. Our personal injury attorneys are experienced in helping car accident victims get the medical care they need and getting medical expenses managed. Contact us today by giving us a call at 800-LAW-0804 or click here to receive a free case evaluation.