The decision to purchase car insurance is relatively easy – it’s required by law. The question of how much to buy, on the other hand, is a little more difficult. While every state has a minimum purchase amount for personal injury and property damage liability, you’ll find that every company offers several higher options.
Why does the state set a minimum requirement?
Most states have a minimum requirement because they’re essentially forcing you to protect your assets. Whoever is found responsible for the accident is responsible for paying for all of the damages for both parties – both in terms of medical bills and property damage. Without car insurance, you would have to pay all of those bills out of your pocket.
The cost to pay for an accident can add up very quickly and the average person doesn’t have that type of money sitting around in a bank account. Repair costs for even minor vehicle damage can total into the thousands and even a quick trip to the ER to be checked out, with or without serious injury, can cost in the thousands as well. The minimum coverage requirement set by your state ensures there is at least some coverage available for a moderate accident.
Why you should I buy more?
The minimum amount of liability insurance set by each state is just that – minimal. If you were to cause a major accident with significant medical bills and property damage, the minimum on your policy wouldn’t even begin to cover the costs. You’d still end up paying a lot of money out of pocket. That type of debt could cripple you financially.
Let’s look at an example. A standard car insurance policy in Virginia requires you to carry $25,000 of bodily injury liability (for medical bills) and $20,000 of property damage liability (for cars and other property).
Assume you get into a car accident and hit someone driving a 2014 Toyota Camry. The average Camry with a few upgrades costs about $30,000. It’s a brand new car and the accident was severe enough to total it. Your policy only covers $20,000 in property damage coverage on a car that is still worth $28,000 after a tiny bit of depreciation. Without a higher policy limit, you will be responsible for paying the $8,000 your insurance doesn’t cover out of your own pocket.
That’s a pretty simple example and doesn’t even take into account bodily injuries to the driver(s) and passengers in the cars involved. The financial impact if you were to cause a 6-car pile-up, serious injuries, or even a death, would be staggering.
The general rule of thumb is to purchase as much liability coverage as you can reasonably afford. Ask your insurance agent to give you quotes for different coverage amounts. You may be surprised to find they’re not as expensive as you feared. Purchasing a higher liability limit will protect your family, your assets, and those you assume responsibility for when you get behind the wheel of your car.