Considering liability, comprehensive, collision, and state legal requirements, choosing how much car insurance you need is difficult. You don’t want to overpay, nor do you want to have too little coverage and end up losing one of your most valuable assets. Fortunately, many insurance companies offer several levels of coverage that also allow you to tweak your policy. So, whether you have an old clunker or a brand-new INFINITI, this information should sort out just what you need.
The deductible is a reasonable place to start when it comes to insurance coverage. This dollar amount is the portion of repairs you’ll have to pay before your insurance kicks in. For example, a $500 deductible will leave you responsible for any repairs at $500 or less, while a $1,000 repair would mean that you and your insurance company will split the difference.
If you spent a decent sum on a new car or you don’t have the capital for a large repair, a lower deductible is a sound choice. However, a CNN Money report states that most motorists file a claim only once every three years. This means that raising your deductible from $200 to $500 can save you 30 percent annually — even if you file a claim.
Liability insurance is the legal minimum insurance required in 49 states and Washington, D.C. (Here’s looking at you, New Hampshire). While it doesn’t protect your vehicle if you’re at fault in an accident, it will protect your bank account from paying for the medical and repair bills of the other motorist.
However, liability insurance is perhaps the most complicated of the bunch, simply because it has so many options, caveats, and addendums. Typically, you’ll see something that reads as a three-number slash: 250/500/25. This means that you have $250,000 of coverage for bodily injury per person, $500,000 of coverage for bodily injury during an accident, and $25,000 coverage for property damage. If you’re in an accident, your insurance covers you for all those amounts, keeping you out of crippling debt.
Unfortunately, liability insurance only covers your medical and vehicle expenses if the other driver is at fault. If you have a documented lead foot, have teen drivers, or just purchased a new car, you may want to opt for collision insurance.
When you purchase collision coverage, your insurance company pays for all repairs on your vehicle minus the deductible, no matter who’s at fault. Without this policy, you’d have to pay out of pocket, putting a serious damper on your finances.
Do you live in an area with inclement weather or you’re prone to bad luck? Then you may want to think about comprehensive insurance. For only slightly more than liability insurance, a comprehensive policy covers any expenses incurred, provided that they aren’t the result of a collision. Whether it’s a fire, hailstorm, a tree limb, deer hit, or theft, you won’t be responsible for shouldering the entire amount for repairs.
With so many insurance options, choosing the right coverage is no easy matter. All it requires is a budget, planning, and a bit of knowledge, and you’ll choose the perfect policy to suit your needs.
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