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Car Insurance 101: How Much Coverage Do You Need?
Besides being alert, practicing defensive driving, following traffic rules, and getting car insurance helps ensure drivers remain careful on the road. According to the World Health Organization, car accidents are the leading cause of death for persons aged five to 29. The WHO estimates up to 1.3 million people die annually in road collisions worldwide. This figure doesn't include the thousands of injured motorists, passengers, and pedestrians or cases of property damage caused by the crash. While far from actively preventing accidents, a car insurance policy coverage helps reduce upfront costs associated with car crashes. These include medical bills, car repair costs, and damaged property restorations. Most US states require car owners to have these basic coverages, while other territories have additional requirements. This article takes a closer look at car insurance basics to help you determine the coverage you need. Car Insurance Cost Factors As of 2023, the national median for annual full-coverage car insurance is USD$ 2,148 per year. However, it may be cheaper or costlier to insure your vehicle, depending on your state's requirements and the coverage types you want to add. An owner's insurance rate varies from person to person and is greatly affected by the following factors: Your location Your driving history Credit score Car make and model Coverage or inclusions For instance, a survey discovered that car insurance costs are highest in Florida because of its no-fault auto insurance laws, risk exposure to harsh weather conditions, and the high number of uninsured and underinsured drivers. You'll find out what underinsured means in the next section. Mandatory Car Insurance Coverage Almost all states require minimum auto loan insurance, especially liability coverage. This protection enables vehicle owners to cover medical bills and repair costs for the damaged car or property. Liability Insurance This type of coverage pays for bodily injuries and property damages, such as car repair costs incurred due to vehicle collisions. Some liability policies include the cost of legal fees in case of a lawsuit. As such, auto liability insurance is mandatory in most states. Besides liability insurance, other states will require additional coverage. Here are other types of vehicle insurance you may be legally required to have, depending on where you live. Uninsured/Underinsured Motorist (UM/UIM) Coverage Uninsured motorists refer to drivers who don't carry car insurance, while underinsured persons don't have enough coverage. Like liability insurance, this option covers payments for your car damages. These types of protection are vital if an at-fault can't pay for your losses. Personal Injury Protection (PIP) PIP is mandatory in no-fault states but can also be purchased for at-fault states. It covers medical and non-medical costs, like lost income and rehabilitation costs for the insurance holder and all the passengers inside the vehicle. Medical Payments (MedPay) Serious injuries may require higher medical costs, and in such instances, the added coverage offered by MedPay comes in handy. This often optional coverage is applicable even if the policyholder is found at fault for the accident. Minimum Auto Insurance Requirements Visit your local Department of Motor Vehicles (DMV) office or insurance agencies to determine your state's minimum requirements. Minimum liability insurance requirements can be classified into three categories: the amount the insurer pays for bodily injury to one person, multiple injured persons, and property damages. For instance, California's minimum liability insurance requirement stands at 15/30/5—meaning at least USD$ 15,000 for single injuries, USD$ 30,000 for multiple bodily harms, and USD$ 5,000 for property damage. Meanwhile, Arkansas has 25/50/25. Both states consider UM/UIM, PIP, and MedPay coverages optional. On the other hand, New Jersey's standard liability insurance is set at 25/50/25 as of January 2023, with a mandatory US$ 25,000 coverage for uninsured motorists, USD$ 50,000 for an underinsured driver, and USD$ 15,000 for PIP. These rates will increase to 35/70/25 for liability coverage in 2026 and 35/70 for UM/UIM. Umbrella And Comprehensive Insurance Note that state requirements are often lower than needed to cover medical costs and asset losses. A USD$ 5,000 allocation for car repair is often inadequate, as severe car damages usually cost more. The same holds for medical expenses. A good rule of thumb is to project the average losses an at-fault driver incurs in your state. It can be challenging to pinpoint, but not impossible, especially if you speak with financial advisors. Otherwise, consider getting comprehensive or umbrella insurance if the risks of damage due to disasters and crimes are high. Comprehensive insurance cover non-driving related incidents that damage your car other than collision. These include vandalism, theft, and acts of nature. Meanwhile, umbrella insurance covers the extra liability costs incurred for legal fees, injuries, car repairs, and other losses. Wrapping Up 
