Recommended Auto Insurance Coverage Levels

Many people are befuddled by the details when it comes to car insurance, and too many are left wondering how much coverage they should purchase. Instead of just winging it, use the following coverage levels that are recommended by experts when you plan to buy auto insurance coverage.

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Coverage levels are not set in stone for every driver, but most recommendations hold true for the bulk of drivers on the road. If you plan to ignore experts’ suggestions at any time, make sure that you are not leaving yourself open to financial hardships down the road. Auto insurance is meant to protect you and your assets, so it is not an area in which to skimp.

Bodily Injury Coverage Levels

Bodily injury liability pays for medical bills from injuries that you cause to others from an at-fault accident, and it is required by law in most states. It is broken into two parts: a coverage limit in dollars per person and a coverage limit for the entire accident.

Every state has its own lowest amount of liability insurance coverage that you need to drive your vehicle on the road. All experts recommend buying more than your state’s minimum amount of liability coverage. In most instances, you will be responsible for paying any bills beyond what your car insurance provider will pay.

The amount of bodily injury liability that you buy determines how much your provider will pay. Once that limit has been met, you can be sued to cover the rest. Having less than the amount recommended by car insurance experts could cause you to lose your assets and financial stability as you struggle to pay for someone else’s medical bills, as ruled by the courts.

According to the experts at the Insurance Information Institute, you should buy no less than $100,000 in bodily injury liability per individual and $300,000 for the entire accident.

Such amounts would ensure that you have enough coverage in the event of a serious accident.

Say, for instance, that you have $25,000 in coverage for each individual and $50,000 for the entire accident, and you cause an accident with a minivan that is carrying seven individuals. On average, each person has $10,000 worth of medical bills, which really isn’t a stretch after an ambulance trip to the ER where some tests are run.

The medical bills just for the people that you injured then would total $70,000. Your car insurance provider will pay $50,000 and not a dime more. That leaves you with $20,000 in medical bills that are your financial responsibility.

Certainly, the people in the minivan may have health insurance or another form of insurance that will cover the difference, but state laws differ as to when it has to be utilized. They may have no other form of insurance, or choose not to use it, and you can be sued in court for the difference.

Again, state laws differ, but it is also possible that you could be sued for lost wages, pain and suffering, etc. A judge could order you to liquidate your vehicles, home, or other assets to pay for a judgment against you, or they could choose to garnish your wages until the debt is paid.

Property Damage Liability Levels

The liability car insurance that is mandated by just about every state also includes a portion for property damage liability. This portion pays for the damages to the vehicles that you cause in an accident; it also pays for damages to other structures, signs, and posts that were a result of your accident.

Similar to bodily injury, each state has a minimum amount that you must purchase, and it is recommended that you buy more than your state’s minimum amounts.

According to the website Wiser Drivers, the average cost of repairs at a collision center in 2005 was over $2,000; costs are likely much higher today.

Also as with bodily injury liability, you can also be held accountable for costs that your insurance won’t cover because they have already reached the property damage limit. Many vehicles these days are worth well over $30,000, so it is important to have enough coverage. You have to be prepared for a worst-case scenario, so it is recommended that you have at least $50,000 in property damage liability, though $100,000 would be better.

When referred to, liability insurance is written with the three amounts divided by slashes, so the recommended amounts would be written as bodily injury liability limit per person/ limit per accident/ property damage limit, or 100/300/100. All states and insurers write the coverage limits in this manner.

State Minimums

Each state has its own minimum amounts of bodily injury and property damage liability, and they are far from the levels recommended by experts. State levels are no sort of recommendation, they are a bare minimum amount of coverage that drivers are expected to have.

Some states are much lower levels than others, however. Florida has the lowest minimum coverage requirements at a mere 10/20/10, meaning just $10,000 per individual and $20,000 for a whole accident for bodily injury and $10,000 for property damage liability. Ohio is not far behind with 12.5/25/7.5.

California, Massachusetts, and New Jersey have the lowest property damage liability limits with $5,000, which would barely pay for the simplest fender-benders.

The highest is Wisconsin with $55,000 required for coverage.

Most states require at least 25/50/10, though you can find many states that are higher or lower by $5,000 or $10,000. The states with the highest liability minimums are Alaska and Maine at 50/100/25, and Wisconsin with 50/100/55. To find your state’s lowest amount of liability insurance, you need to visit your state’s department of insurance, which can be found using the map provided by the National Association of Insurance Commissioners (NAIC).

Full Coverage

Another recommendation from insurance experts concerns full coverage options such as collision and comprehensive. These options are not required by state law, but they are usually required by your auto loan lender. The only time that experts recommend dropping full coverage is if your vehicle is worth so little money that the coverage actually costs more than the value of the vehicle.

Collisions pays for the damages to your vehicle from an accident, and comprehensive pays for damages and losses from other events such as theft, weather, and natural occurrences like flooding or fire. Both collision and comprehensive allow you to utilize a deductible, which is your responsibility to pay if you file a claim for damages or loss. For instance, if you have a $500 deductible, then your insurance will only pay $1,500 towards $2,000 worth of damages.

Figuring whether or not the coverage will cost more than your vehicle is worth is relatively simple, but you need to know your deductible amount first. Choosing a higher deductible will lower the cost of your coverage, but it will also make you responsible for paying more during the claims process. Experts also recommend that you choose a deductible amount that you can pay comfortably.

First, find the fair market value of your vehicle using a website such as kbb.com (Kelley Blue Book) or NADA.com. Fair market value is the worth of your vehicle depending upon the age of the vehicle, the mileage, and the condition; not what you paid for it. Fair market value is also the amount that your insurance company will give you if your vehicle is totaled, minus your deductible.

Then, choose a deductible, keeping in mind that a higher deductible will lower your settlement amount. Add your deductible to the cost of your coverage for collision and comprehensive. If the sum is higher than the fair market value of your vehicle, you likely won’t benefit from the coverage; you will actually be paying more!

Uninsured/Underinsured Motorist Coverage Levels

Uninsured and underinsured motorist coverage is a requirement in some states, though not all. It pays to fix your damages and pay your medical bills if you are hit by a driver who has no insurance or not enough insurance to cover your bills. This coverage ensures that you will have a prompt and responsible option for returning things to normal after a crash.

Unfortunately, many drivers on the road have no insurance coverage whatsoever.

According to recent data from the Insurance Research Council, one in seven drivers in the U.S. has no insurance on average, though in some states the ratio is higher than one in four.

This can leave you holding the bill for your accident, regardless of the fact that it wasn’t your fault.

State laws vary about when and for how much you can sue an at-fault driver, but your prospects for receiving swift compensation for your losses are slim to none. Such legal proceedings can go on for years, and you have no guarantee that you will see a dime to cover your losses. Due to the inexact nature of such cases, all experts recommend that you carry uninsured/underinsured motorist coverage to protect yourself.

Medical Payment Levels

Another insurance coverage level that you should consider is medical payments insurance, sometimes referred to as personal injury protection, or PIP. This coverage pays the medical bills for you and your passengers, regardless of who was at fault in an accident. While this option may be like double coverage if you have good health insurance, you don’t always know the health coverage status of those who might ride in your vehicle.

Some states make PIP insurance a requirement alongside liability, but not all do. Most states have a minimum level and suggest that you buy more. The amount of coverage you should buy will vary depending upon how much health insurance you have, how often you have passengers in your vehicle, and how often you travel in high-injury crash areas such as highways.

It is always a safe bet to err on the side of caution and purchase more than you think you might need. Even average accidents can result in thousands of dollars in medical bills, and you want to be prepared for a worst-case scenario.

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