Auto Insurance Facts
Understanding the basics of car insurance can be difficult enough, let alone understanding the lesser-known intricacies involved with the guidelines, policies and procedures of today’s insurance providers.
Below, are some important, yet oftentimes obscure, insurance questions.
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Frequently Asked Questions
· $15,000 of bodily injury coverage per person injured in an accident caused by you.
· With a maximum of $30,000 for everyone injured in that accident.
· In addition, you must carry insurance covering at least $5,000 of property damage.
Many states require you to carry uninsured motorist bodily injury (UM) or underinsured/underinsured motorist (UIM) coverage. Some states require uninsured motorist property damage (UMPD).
While most but not all states require drivers to carry auto insurance – Iowa and New Hampshire are exceptions – all states do have financial responsibility laws requiring that drivers are able to pay for damages caused to others.
To be safe, consider carrying at least the minimum limits listed below.
|State||Minimum liability coverage limits||Other types of insurance required (if any)|
* Florida doesn’t require bodily injury liability coverage, but many insurers only offer policies with at least minimum amounts of 10/20 of BI coverage.
** In New Hampshire auto insurance isn’t mandatory, but if you choose to buy insurance these are the minimum amounts.
*** Rhode Island doesn’t require drivers to buy UM/UIM coverage if buying minimum liabiity coverage. If buy higher liability limits, UM is required.
|District of Columbia||25/50/10||UM, UMPD|
|Maryland||30/60/15||UM/UIM, UMPD, PIP|
|Michigan||20/40/10||PIP, property protection|
|New Hampshire**||25/50/25||UM/UIM, MedPay|
|New Jersey||15/30/5||UM/UIM, UMPD, PIP|
|New York||25/50/10||UM, PIP|
|North Carolina||30/60/25||UM, UMPD|
|North Dakota||25/50/25||UM/UIM, PIP|
|Pennsylvania||15/30/5||PIP – referred to as “First Party Benefits Coverage”|
|South Carolina||25/50/25||UM, UMPD|
|West Virginia||25/50/25||UM, UMPD|
You may obtain the cheapest insurance rate if you buy a minimum liability policy. However, minimum coverage levels are not recommended because it can leave you financially exposed in an at-fault accident. Increasing your limits above state minimums should give you better coverage and doesn’t cost much more – averaging approximately $5.00 per month above the cost of minimum coverage.
If you cause an accident that seriously injures the other party, medical bills, income loss, and pain and suffering claims could come to hundreds of thousands of dollars. If you have assets above the limits of your policy, the victim’s attorney is likely to pursue them. In addition, many insurance policies allow insurers to limit their legal defense expense to your coverage limit.
Drivers without home equity, savings or other assets
If you have little savings (outside of retirement accounts which are protected) and no home equity or other valuable assets, the state-mandated coverage may be enough. However, in states with very low minimums, the minimum is probably insufficient.
Drivers with significant assets
If you have accumulated more extensive holdings, like real estate, investments and expensive collections, your coverage should probably be broader, such as 250/500/100 ($250,000 bodily injury/$500,000 BI for all involved in an accident/$100,000 property damage), or higher if your insure offers greater limits.
Personal finance gurus routinely recommend that your liability coverage should be at least as high as your net worth. If you’re a top earner or have obvious wealth, your financial position could make you a target for lawsuits. For that reason, you might want to consider an umbrella policy, which kicks in when your homeowners or auto liability coverage is exhausted. Umbrella coverage is surprisingly inexpensive for the amount of coverage you can purchase ($1 million of coverage costs a few hundred dollars per year).
In most states, if you cause an accident, you will be forced to cover the resulting damages. This may drain your savings, and it is possible that a lien could be placed on your home and other assets. Up to 25 percent of your future wages could be garnished.
The Insurance Information Institute (III) reports that in 2014, the average auto liability claim for bodily injury was $16,640 while the average cost for property damage was $3,290. Without insurance, you’d have to cover this out-of-pocket. If you’re taken to court and lose, you could be forced to pay for your victim’s legal fees as well as your own. And you’d still have to repair or replace your own car.
If you don’t cause an accident but are pulled over and caught driving without insurance, you may face:
• Driver’s license suspension
• Registration suspension
• Fines ranging from $600 to $5,000
• Additional lapse fees due to your DMV
• Vehicle impoundment
• Jail time or community service
• Points on your license
• A requirement to carry SR-22 insurance
By driving without insurance, you’re gambling with your future.