STATE REQUIREMENTS
First and foremost, determine what your state requires as the minimum insurance coverage. You can accomplish this online at websites such as those listed at the end of this article.
TYPICAL POLICY ELEMENTS
Next, understand the typical elements of an auto policy. These might include:
Liability: This is the most important element. It covers the costs when you injure someone or damage their property, including their car, when you are driving. This may include: -Bodily injury liability: For injury you cause someone else. -Property damage liability: For damage to someone else's property, i.e. car.
Medical coverage: This element will pay for medical treatments for you and your passengers in the event of an accident. Personal Injury Protection (PIP) is sometimes a state requirement and covers injuries to the driver and passengers of the policyholder's car.
Collision/Comprehensive: Collision: Covers damage due to an actual collision accident, up to the book value of the car. This usually does not include collisions with animals. Comprehensive: Covers other kinds of loss and damage, including theft, vandalism, flood, earthquake and riot. Animal collisions would typically fall under this category. Know your own policy's limitations on what is and is not covered.
Uninsured/Underinsured: This element covers you have a collision with an uninsured or underinsured driver. Without this coverage, you could get left footing the bill for an accident, even if it is not your fault!
THE RIGHT AMOUNT OF COVERAGE Now, how much coverage do you really need?
LIABILITY: In insurance terms, this is the biggie. Purchase at least as much coverage as your net worth, and some agents will recommend you double that amount. If, on the other hand, you do not own a home, a retirement or other savings account, and generally have a tough time making ends meet, the state minimum might suffice. A typical policy might cover $50,000 for damage to property, $100,000 per individual with a $300,000 cap per accident.
MEDICAL: Do you have medical insurance? If so, does it cover injuries from automobile accidents? If you can answer "yes" to both of these questions, you might not need additional medical coverage on your automobile policy. Even if you don't, you might be better off purchasing your own medical policy with the amount you would be paying on the auto policy. In this case, you would be covered no matter the injury or illness.
