September 23, 2009

The Minimum Amount Of Auto Insurance Coverage You Are Allowed To Have

Auto insurance can cost a lot of money, so there are many people trying to lower their auto insurance coverage in hopes of trying to save money. The cost for insurance will depend on different things, like how much coverage you want. The question is, how much coverage is actually necessary. Understanding your state's minimum liability coverage and whether that will be enough to cover you in case of an accident is important to determine what you will want to seek when looking for your insurance policy.

According to Ezine, the definition of "minimum auto insurance" is the minimum amount of insurance a state requires all drivers to carry before they will be classified as "insured." The website states that the "minimum insurance requirement is stated in a/b/c terms."  "A" represents the "amount of bodily injury liability insurance" that's required to have "per person" when an accident occurs. "B" is the amount of "bodily injury liability insurance" needed in that situation, and "C" is the amount of "property damage liability" you need per accident covered in your policy. Typically this amount varies from state to state.

Liability insurance is what's going to cover expenses when an accident occurs; the payout takes care everything for the person you hit. Many insurance companies will recommend that your auto insurance policy cover $100,000 in bodily injury and $300,000 per accident. In addition to liability coverage, there's collision and comprehensive auto insurance that should be considered. Collision will cover any damage to the car, and comprehensive coverage takes care of your car in the case of any "unexpected problems."

According to Insurance Information Institute (III), drivers often need more liability insurance than what's required because accidents can easily cost more than what the minimum will cover. With the lowest coverage, if an accident occurs, you could be legally responsible for bills totaling more than what you're covered for. This means money will be coming out of your pocket to pay the balance. It's good to talk to your agent or a representative about higher liability limits. III also recommends purchasing an "umbrella" or excess liability policy. This type of policy will pay when "your underlying coverage is exhausted." When choosing your policy, you must also choose a deductible – the amount you pay on a claim before the insurance company reimburses you. Most deductibles are $500 or $1,000. However, the higher your deductible, the lower your premium.

Though you must always do research before deciding on a plan, investigating what your state requires and determining if that auto insurance coverage is enough for you is an even more imperative step when deciding on your policy.