July 4th, 2010
What's Required By Law?
Every state (except for New Hampshire) requires drivers to carry a certain amount of liability insurance coverage. This provides you and other people involved in an accident that you cause, financial protection from damages (both to people and property). Every state has slightly different required limits, You'll typically see these limits represented as a set of three numbers like 25/50/25.
The first number is the "per person" coverage amount for bodily injury that you cause someone else. The second number is the per accident limit that the coverage affords for total bodily injury damages. Finally, the last number is the property damage liability coverage that would pay to repair or replace damages that you cause with your car to someone else's property. Here's a more in-depth look at what those numbers on your car insurance policy mean.
It's very important to note just because you carry the minimum amount of car insurance required by law in your state, that doesn't mean that you might not end up being on the hook for a lot more damages if you cause more bodily or property damage. Those limits are where the insurance company stops paying, you'd personally be on the hook for anything in excess of that.
What about Comprehensive Coverage?
Comprehensive car insurance coverage provides you financial protection if your car is stolen, damaged by falling trees, or damaged while you're not driving it.
According to the National Association of Insurance Commissioners (NAIC), about 76% of drivers in the United States buy comprehensive coverage on top of the liability coverage required by law.
What About Collision Coverage?
Collision coverage pays to repair or replace your car in the event that you cause an accident. Remember that in most cases if you're involved in an accident deemed to be someone else's fault, his or her property damage liability coverage is going to pay for your damages (though that driver may not be able to cover the entire amount). So collision coverage mostly applies just to accidents you cause and pays to get your car back on the road. The NAIC estimates that about 72% of drivers today buy collision coverage in addition to the required liability car insurance.
What Does This Mean For You?
Most people buy higher liability limits than what is required by law, 76% buy comprehensive coverage, and 72% buy collision coverage. So there's a good chance that buying more than the car insurance required by law is a good move for you. Figuring out what those limits need to be to leave you financially protected is a little more complicated so it's best to have that conversation with a licensed car insurance rep. They'll ask questions about your personal financial situation.