Many people purchase car insurance based on price and buy whatever policy is cheapest. With all of the information thrown at consumers to hook their insurance dollars, it is hard to know exactly which company or policy is right for you. Below is an explanation of car insurance options to help you better understand what insurance is available and how you are held responsible for it.
Minimum State Requirements
Automobile insurance requirements vary by state. Every state requires that you meet certain financial responsibility requirements to protect the property of the potential person you are in an accident with. This requirement is traditionally met through car insurance, with at least your states minimum liability coverage (which again varies by state). In some states this can be accomplished through bond or other financial means. In some states you can pay a fee of approximately $500 to drive without insurance. Be aware that these states still require the driver be financially responsible for any accident or injury, although they are not legally required to carry car insurance to drive.
According to the website Carinsurance.com, New Hampshire is the least restrictive state when it comes to car insurance requirements. However, even in New Hampshire if you are in an accident you must show immediate proof of financial responsibility to show how you are able to cover the damages incurred.
Most states require some form of liability insurance. Bodily injury liability insurance pays for the hospitalization or treatment of any you injure in an accident. Some states that use no-fault laws, where no party assumes fault and your damages are paid by your own insurance regardless of who caused the accident. These states may require personal injury protection to pay for your own medical expenses. You may also be required to purchase property damage liability insurance to cover the cost of repairs to the vehicle of the driver that you hit.
Bodily Injury Liability
Carinsurance.com recommends injury liability coverage of $100,000 per person and $300,000 per accident. This is written as 100/300 and means your insurance company will cover up to $100,000 of another person’s medical injuries or up to $300,000 for the accident. This does not include your own injuries or medical expenses, just those in the other vehicle that you hit.
I just recently lowered my coverage on my older vehicle to the Ohio state minimums for bodily injury liability. I now carry $25,000 per motorist and $50,000 per accident. This state minimum is significantly lower than Carinsurance.com’s recommended amounts. If your bodily injury liability coverage is too low and you cause a severe accident, you could be required to pay the extra hospital and medical expenses of the injured party. The more coverage you can afford, the more protected your personal assets are. Similarly, the more coverage you choose, the higher your car insurance monthly premium. Many people opt for the lowest minimum requirements because it is a cheap solution for insurance they are forced to carry and feel they hardly ever use.
Property Liability Coverage
Property liability coverage pays for damages occurred to another person’s property, including their vehicle, home, fence, guardrail, tree, pole, and many others. Again, your insurance will pay amounts based on the limits within your insurance coverage. My personal property damage liability is up to $25,000 for each accident.
Make sure you understand how your policy covers property damage and what is and is not included. I work at a collection agency and we receive people in collections often for damage they caused to city structures like road signs and utility poles. You don’t want to end up in collections and be held responsible for something your insurance should have covered.
Bodily injury liability does not cover your medical expenses, just those of the person in the other vehicle. Similarly, property liability coverage only covers damage caused to other vehicles. To protect your own vehicle, other insurance will need to be added, including personal injury protection and collision and comprehensive of physical damages. If purchasing a new car, the lender may require these insurances to ensure they are protected in an accident that wrecks the vehicle. Any increase in coverage mirrors an increase in price.
No matter what your required or desired insurance coverage, there are many insurance companies who want your business. Shop around to discover the best price available to you, but make sure that price includes all of the important aspects of insurance you need to protect yourself and those on the road around you.