How Much Car Insurance Do I Need?

Posted by: Derrick    Tags:  , , , , ,    |  No comment

There is not a “one size fits all” insurance policy to answer that question, and each policy needs to be tailored to the individual vehicle operator. Your legal requirements for what type of insurance you need to carry will vary by state. Most states require a certain type, and those that do stipulate that a minimum value be associated with that coverage. There are seven types I will be discussing here.

Liability
Liability is required by most states. This coverage essentially means that if you have an accident and the police judge it to be your fault, your policy will pay for the damages. The costs incurred may be from property damage or other vehicles, as well as any medical bills from your accident. It is best to have a higher than required liability amount, because any damage above your insurance limit will have to come out of your own pocket.

Gap
Anyone who has purchased a new vehicle in the last few years has undoubtedly heard of gap. After you sign the papers, work out the financing and drive away, you may get into an accident. You will now owe more than your car is worth. Gap insurance takes care of the difference between the loan amount and the value of the car in case it is totaled.

Collision
This type of coverage may be necessary depending on your financial situation. With liability insurance, the pay out may still leave you without the funds to pay for repairs to your own vehicle, after paying the other damages. Collision coverage makes it so your insurance company will pay for the repairs to your vehicle.

Comprehensive Insurance
This is basically all around protection for you and your car. For a driver that has only liability, or even collision as well, the insurance company will only pay for vehicle accidents. Certain damaging situations, such as a tree falling on your car or a theft can be covered with comprehensive coverage. While it sounds good, and generally is, it can be cost prohibitive to carry this type of coverage.

Under/Uninsured Motorist
Let’s say a driver that has only minimum liability coverage, or even no coverage at all, crashes into your vehicle. Their insurance company or individual financial situation may prevent you from receiving the money needed to repair your car. There are few avenues available in this situation, which makes this an attractive type of insurance to have.

Medical/Personal Injury Protection
You may not need this type of insurance, depending on how good your healthcare coverage is. In case it is not as good as it can be, this type of insurance may be for you. Medical bills can be very high, especially with long hospital stays.

No Fault
Only available in a handful of states, and is normally fairly expensive. No fault will cover both property and personal injury, regardless of who is at fault. If you have a relatively inexpensive vehicle, this may not be a good choice for you.