how much car insurance
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How Much Car Insurance Do You Need?

When you sign up for car insurance, you must determine how much coverage you need for the various types of insurance. Your sales agent may recommend amounts of coverage for you, but you don’t have to accept their suggestions. However, you need to make an informed decision about how much insurance to carry when you sign up for a new policy. Here are some guidelines to help you with that decision.

Know the state requirements

Your first consideration is what your state requires. Every state has a minimum amount of liability coverage, which is the type of insurance that pays for injuries to other parties and damages to other property in an accident where you are at fault.

Your insurance policy must meet the minimum requirements. Most insurers automatically default to the minimum. However, it’s a good idea for you to be aware of the legal requirements for your state.

Consider how much liability coverage you really need

Many people go with whatever the minimum amount of insurance they have to get. This may not be the best decision financially though. State requirements are often quite low compared to how much it would cost with a major accident.

For example, your state may require $100,000 for liability coverage. Just think about how much medical bills can cost if someone suffers a major injury. The total cost could be over $1 million, which would be significantly over your insurance coverage. You would have to pay the rest out of pocket. If you’re unable to pay, the other party could file a lawsuit against you.

Liability is one area you don’t want to underestimate. You could lose your assets if the other party prevails against you with a lawsuit. The cost of additional coverage is insignificant compared to how much it could save you if you’re involved in an at-fault accident.

Medical payments and funeral expenses

Medical payments cover injuries from an accident. Most medical payment coverage is between $5000 and $15,090, but it can be higher or lower. If you have health insurance to pay for your medical care, you may not require a lot of coverage with your car insurance.

While it’s illegal not to carry insurance, some drivers let their coverage lapse. In this situation, you would need your own health insurance to pay for your medical care. If you don’t have any, you would be reliant on the medical payments portion of your car insurance.

Some insurance policies include funeral expenses as part of the coverage. If you have life insurance or a burial policy, you wouldn’t necessarily need this coverage, but you should be aware that it exists.

Uninsured/underinsured motorist coverage

This type of coverage is designed to pay for damages if you’re hit by a driver with no insurance or not enough coverage with their policy. It prevents you from paying out of pocket the difference between the other party’s insurance and the cost of medical care.

This type of coverage kicks in if you’re hit by a driver who leaves the scene. Since you can’t get the expenses paid by their insurance, you would have to rely on the amount of coverage you have under this part of the policy. Most states require either uninsured or underinsured motorist coverage, and many states require both. They may have a minimum, but you can always add more if you feel that you want more protection.

Collision/comprehensive coverage

This part of your insurance policy is a bit trickier to understand as it relates to the cost of repairing your vehicle. You don’t choose the amount of coverage with this part of the policy. Instead, the insurer provides coverage up to a certain percent of the value of your vehicle. If the cost of repairs exceeds this percentage, the insurer may total your car and pay you a check for the value.

Your decision on collision and comprehensive coverage is how much you want to pay as a deductible. The deductible is your portion of the cost if your vehicle is damaged in an accident. You pay the deductible first, and the insurer pays the rest of the bill.

When deciding on the amount for your deductible, many people raise it as high as they can to get a lower rate for their insurance. However, it can be hard to come up with a high deductible. Choose an amount you can afford to pay, and make sure you have the equivalent in a savings account in case you have to cover repairs in a car accident.

Final thoughts on how much car insurance you need

Take the time to consider how much car insurance you need. In addition, know the minimum limits required. This will better prepare you for any damages or medical bills you’ll be required to pay.

 

 

 

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Joyce Morse Farinella
Hello! My name’s Joyce Morse Farinella and I’m a full-time writer who loves to research interesting and strange topics and explain them to others. I also enjoy hanging out with my daughter and being a foster parent. I love to travel and hang out at home, getting writing inspiration from both."

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