What is good car insurance coverage?
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UPDATED: Jul 14, 2021
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- It’s the policyholder’s duty to compare coverage options and build a policy that includes sufficient coverage
- If you have a clear title on your car and it doesn’t it doesn’t make sense to pay premiums for comprehensive and collision coverage
- If you buy a basic auto policy with the coverage that’s mandatory in your state, you’ll have a limited amount of liability coverage that will leave your assets and your future wages at risk
- You should always consider raising your liability limits to what most experts recommend: $100,000/$300,000/$100,000 when selecting Bodily Injury and Property Damage limits
- If you’re financing your car, leasing your car, or you need protection to help you replace it if it’s totaled, it’s important to consider which deductibles are best
There’s a huge misconception that auto insurance is a one-size-fits-all type of financial product. While it is certainly a product that most people need and want, some vehicle owners need more coverage than others.
It’s up to you as a consumer to decide if you need a basic policy or a high level of protection before you get on the road.
If you’re wondering what good car insurance coverage is, you need to know that it’s all about perspective. Some individuals who want to keep their premiums low and who don’t need full coverage would classify a policy with only high limits of liability coverage as good.
Other individuals would only consider buying full coverage with low deductibles if they want a good policy.
Here’s what you should know when you’re building your insurance:
Every Vehicle Owner Has a Different Need
One of the main reasons why auto insurance companies give their customers the option to build their own policies is because needs can vary.
Some vehicle owners are only buying insurance to satisfy state laws and others are buying insurance for safeguarding and to add to their insurance portfolio.
The only requirement when you’re purchasing auto insurance is that the applicant must select at least a minimum amount of coverage as required by law.
All licensed insurers must offer consumers the option to buy specific coverage options like Medical Payments and Uninsured Motorist, but in most cases, the policyholder can decide to reject the coverage.
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Start By Selecting the Right Limits of Liability Coverage
If you’re trying to build a good policy that will protect you and your family, the first step is to choose adequate limits of liability coverage.
Every state has a different limit requirement for mandatory third-party coverage options like Bodily Injury and Property Damage. You should find out what’s required before you ever apply for insurance.
In some states, the limits you must carry are higher than others, but most of the requirements are pretty minimal. Since some states only require drivers to carry as little as $5,000 in coverage, it’s important to browse the options and choose a higher limit.
Liability limits are what protect you, your assets, and your income when you cause damages in an accident and when you’re sued. Here is what most experts recommend:
- $100,000 per person in Bodily Injury coverage
- $300,000 per accident in Bodily Injury coverage
- $100,000 per occurrence in Property Damage coverage
Decide If You Need to Carry Full Coverage
Full coverage is generally an auto policy that provides more coverage than what’s required. In most cases, someone referring to a full coverage policy is referring to a policy that includes both comprehensive and collision coverage.
While full coverage policies do afford a lot more protection, not every needs them.
You first need to know if full coverage is required. The state won’t require any type of first-party physical damage coverage but a lender will. If you’re financing your car or it’s being leased, there’s no question that you need full coverage.
It’s always a requirement in lease and finance contracts.
When you own your vehicle outright, the question becomes whether or not it’s worth it to carry full coverage. Owners of newer models or models that hold a lot of value should always consider carrying full coverage to help pay for repairs or total loss expenses.
The decision becomes more difficult when the car depreciates.
Most experts say to downgrade your insurer because it doesn’t offer a return on investment when the car’s value is less than 10 times higher than the cost of physical damage premiums.
If you’re paying $500 per year for comprehensive and collision and your car is worth less than $5000, experts say it’s best to go without the damage coverage.
Choosing the Right Deductible is Crucial
An auto insurance policy isn’t any good if you can’t use it. Your physical damage deductibles for comprehensive and collision will dictate if you’ll ever be able to file a claim after a damage loss.
This is why you need to put thought into which deductibles are best when you’re building a good car insurance policy.
There’s a lot of options when it comes to comprehensive and collision deductibles. You can choose from $0, $100, $200, $250, $500, $1000, and $2000 deductibles.
The lower the deductible, the more you pay during the term. The higher the deductible, the more you pay when you have a loss. Most consumers choose a deductible of $250 to $500.
Most states don’t require first-party coverage, but some do. If you’re not required to buy medical coverage on your policy, you should consider it. There are a few options that will help cover costs that you incur after being injured.
Some of the best policies include the following coverage options:
- Medical Payments
- Uninsured Motorist Protection
- Accident Death and Dismemberment
You can select a policy with all of the highest levels of protection but you need to be able to afford to pay your premiums. If you’re trying to stay budget-conscious, start by getting auto insurance quotes.