Auto insurance is ultimately about weighing your risks and rewards. It’s also about choosing to spend a smaller amount today to potentially avoid a huge financial hit later. Deciding on the right amount of auto coverage starts by asking yourself a few key questions:
- What types of insurance are you required to have?
- How much insurance are you likely to need if you have an accident?
- How much insurance can you reasonably afford?
It’s always wise to get answers to these important questions by talking with your independent auto insurance agent.
What coverage is mandatory—and what’s optional?
Your car insurance policy combines several types of coverage: liability (which includes property damage and bodily injury protection for others), personal injury protection for you and your passengers, uninsured/underinsured motorist coverage, collision, and comprehensive coverage.
In most states, liability insurance is a legal requirement for drivers, and many also mandate extra protections such as personal injury protection (PIP) or uninsured/underinsured motorist coverage. These requirements vary widely from state to state, but no state currently mandates collision or comprehensive coverage — although your lender or lease agreement might. Your independent insurance agent can explain the specific rules in your state.
Breaking down auto liability coverage
A policy limit is the highest amount your insurer will pay for a covered claim. Auto liability coverage is often listed in a format such as 100/300/50. Here’s what it means:
- 100 = up to $100,000 for bodily injury per person, per accident
- 300 = up to $300,000 total for all injuries in a single accident
- 50 = up to $50,000 for property damage per accident
If you cause an accident, bodily injury liability can cover medical bills, lost income, and pain and suffering for others. Property damage liability covers damage to other vehicles, personal property, and public structures like signs or guardrails.
Why the bare minimum often isn’t enough
Every state has minimum liability requirements, but as The Wall Street Journal points out, “You’re on the hook when costs exceed your coverage limits.”
If you carry only the minimum property damage coverage, it might not be enough to cover repairs or replacement of another person’s vehicle — especially given the high value of many cars on the road today. When costs exceed your policy limit, you’re personally responsible for the difference.
Medical costs can escalate just as quickly, from emergency care to rehabilitation. And if a lawyer gets involved, the total can increase even more.
Think about what you have to protect
The financial fallout from having too little insurance can be devastating. Drivers have faced wage garnishment, lost retirement savings, or even foreclosure after serious accidents. Having adequate coverage can protect you from those worst-case scenarios.
Coverage levels that make sense
Many seasoned auto insurance agents recommend policies with at least $100,000 in coverage per person, $300,000 per accident, and $100,000 for property damage — the 100/300/100 standard. While some choose less, many agents avoid writing smaller policies because they leave clients financially vulnerable.
A smart move is to request quotes at different coverage levels from several insurers. You might find that higher coverage isn’t much more expensive. Most importantly, these decisions should be made before a claim occurs. People rarely regret having extra protection — they appreciate the peace of mind it brings.
Never just assume your current policy is enough. Contact your Leavitt Group insurance advisor, and we’ll walk you through all your options to help keep you and your family safe.
