Auto Insurance... Is state minimum coverage enough?

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Auto Insurance… Is state minimum coverage enough?

If you are a licensed driver, it is mandatory that you carry auto insurance in order to drive legally. Generally, a driver must carry at least the state minimum auto insurance coverage.  This minimum amount of required coverage can vary widely from state to state.  You may believe that this mandated auto coverage is all you need, but this is not the case.  The minimum required coverage means that you must purchase at least that amount of auto insurance in order to be able to drive. However, the minimum amount of coverage does not mean that it is all that you need in order to be properly covered and protected.  It is better than not having any insurance at all, but it may not be in the best interest for drivers to only carry state mandated amount of coverage.  When deciding on the right auto insurance coverage for you and your family, it’s important to remember this simple principle: You get the financial protection you pay for.

What is state minimum auto insurance?

State minimum insurance exists to keep you accountable to the other drivers with whom you share the road, and this is why it’s mandated in most states. Even in the states that don’t require state minimum coverage, you’re still required to show proof of financial responsibility. If you can’t, you then must purchase state minimum coverage.

Auto accident case study

If you’re deemed at-fault in an automobile accident that injures another party, you’ll probably have to pay damages.  Your insurance may kick in, but with minimum coverage you most probably will quickly exhaust its limits.  Moderate-to-severe auto accidents can easily reach costs of $100,000 or more, depending on the number of vehicles involved, number of people injured and the severity of those injuries and property damage. This far surpasses policies with very low state limits.

If your insurance payout doesn’t cover the total amount you owe, the injured party can pursue damages against you until the debt is paid.  As the at-fault party, you may have to pay to defend yourself in court and you also could be forced to liquidate your assets, including your home, cars and some bank accounts to satisfy this debt. In addition, your wages could be garnished until the debt is satisfied.

What additional coverage options are available?

Although you are required to carry basic state mandated coverage, it is highly recommended that you purchase additional coverage. Even if your vehicle is not financed, it is often smart to purchase collision and/or comprehensive coverage.

Collision insurance coverage will help to cover damage to your own vehicle, even if the accident was your fault. This includes not only colliding with another vehicle but also if you hit another object, flip your car, or hit a pothole.

Comprehensive covers damage caused by anything not related to a collision.  If your car is stolen, it is covered under your comprehensive policy. It also covers you if hail, fire, flood, wind, falling objects, earthquake, riots, vandalism, animal contact, or explosion damages your car.

Even if it is not required in your state, it is always important to include uninsured/underinsured motorist coverage. Although most states require insurance, the Insurance Information Institute reports that almost 14% of drivers on the road do not carry it. This means that if you are in an accident with on of them and it is their fault, you will need to either sue them for damages or pay out of your own pocket.  Uninsured/underinsured motorist insurance will help you cover the costs not paid for otherwise.  It also covers you in hit and run accidents. For accidents with drivers that do have insurance but do not carry enough, underinsured coverage will help cover the difference.

More coverage may not really be too costly

If you have a bare-bones policy and decide that you need more auto insurance, you probably won’t have to pay much more than you’re already paying.  With a good driving record, you may be able to double your coverage for less than $10 per month more in some cases.

If you have financial constraints and need to lower your rates, it might be wise to raise your deductible instead of reducing your coverage. Take the highest deductible you can afford, in the event of an accident, to reduce your premium.  That way, you will have better coverage, but still lower you monthly premium costs.

To find other ways to save, contact an independent insurance professional at Foundation Insurance Group.  Our agents can look at your overall financial picture and help decide the best types of auto insurance you can afford that will fit your situation.  Call us today to adequately protect yourself and your family.

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