When choosing auto insurance, you might be inclined to simply stick with your state's mandated minimums for liability coverage. However, sticking to the minimum insurance coverage required by your state may not fully protect you, your passengers or your property if you're involved in an accident. The following goes in-depth about how much auto insurance coverage you'll really need to keep yourself protected.
Mandatory Minimums May Not Be Enough
Every state has its own minimum amounts for bodily injury and property damage liability. However, these mandatory minimums are deliberately set to relatively low amounts to encourage drivers of all income levels to carry auto insurance coverage. For instance, Delaware drivers need $15,000 in bodily injury liability per person, $30,000 in bodily injury liability per accident and $10,000 in property liability. Florida law requires $10,000 in personal injury protection (PIP) in lieu of mandatory bodily injury liability.
A serious auto accident can involve damages that greatly exceed the state-mandated minimum coverage amounts. If you're found at fault for an accident and don't have enough insurance to cover the other party's injuries and/or property damage, you could very well end up selling your home or draining your savings account to cover those unexpected costs.
Covering Your Assets
Fortunately, you can expand your bodily injury and property damage liability coverage in order to reduce your financial risk in the event of an accident. Most experts recommend that drivers carry at least $100,000 in bodily injury liability per person, $300,000 in bodily injury liability per accident and $50,000 in property damage liability. If you have assets in excess of $300,000, however, you may want to supplement your liability coverage with a personal umbrella policy of $1,000,000 or more. This way, you won't lose your property if your liability auto insurance coverage isn't enough to cover the damages.
Increasing your liability coverage may also increase your premiums, usually by a small amount each month. Auto insurance costs tend to be highly variable depending on a variety of factors, including age, mileage and zip code. You may want to sit down with your auto insurance agent to see how an increase in your bodily injury and property liability coverage affects your bottom line.
Consider Additional Coverage
In addition to liability coverage, there are other coverage options that can help reduce your financial burden when it comes to repairing or replacing your own vehicle. Comprehensive coverage, for example, takes care of the cost of repairing or replacing your vehicle in the event it's damaged by theft, vandalism or natural disaster. Collision coverage takes care of the repair or replacement costs if your vehicle is damaged in an accident.
Many of these additional coverages require that you pay a deductible before your insurer steps in to cover the rest. If your deductible for comprehensive coverage is $500 and your vehicle's damages total to $3,000, for example, you'll need to pay the $500 deductible before your insurer covers the remainder.
Lowering your deductible or even eliminating it entirely through "zero deductible" coverage can lower your out-of-pocket expenses. However, a lower deductible usually translates to higher monthly insurance costs. A high deductible can help lower your monthly premiums, but it also means higher out-of-pocket costs. With a higher deductible, there's also the risk that the deductible costs more than the amount of damage caused to your vehicle, thereby negating the advantages of your coverage.
Deciding how much auto insurance coverage you need can be a balancing act between affordability and comprehensive protection. Your auto insurance agent may be able to give you options that help make your auto insurance more affordable without sacrificing adequate protection against the unexpected. For more information, contact an experienced agent from a company like Family Insurance Centers.