Having car insurance is essential to being a responsible, legal driver. It offers financial protection in the event of a wreck or other situation where damage occurs. You may have asked yourself, is my car insured sufficiently?
While there are some coverage types that aren’t absolutely necessary, you’ll have to make sure you’ve got the right minimum coverage should you need it.
Ensuring that you’ve got enough insurance coverage on your car isn’t a difficult undertaking. We’ve pared the information down so you’ll know what’s essential and what you might consider if you want more coverage.
Read on to learn more.
Why Is Car Insurance Necessary?
Car insurance is required for you to drive legally. Being properly insured protects other drivers and property owners.
Driving without insurance comes with heavy consequences. Not having the minimum required coverage could result in the suspension of your license. You could also face stiff fines if you’re found to be driving uninsured.
The most basic insurance required for legal driving makes sure that others will be protected should you make a mistake that results in damage.
Is My Car Insured?
Sometimes understanding insurance policies can be confusing. When you’re talking about minimum coverage, “Is my car insured?” really means, “Can I pay for any damages caused by my vehicle?”
There’s quite a bit of extra coverage you can carry, but most importantly, you’ll need to understand the minimum coverage for your state that’s required to drive legally.
Each state has a requirement for minimum liability and property damage coverage. This coverage will ensure that any damage you cause will be covered.
Damage covered includes:
- Damage to another person’s vehicle
- Damage to public or private property
- Bodily injury to others
In order for you to drive legally, your insurance must cover these types of damages. This offers protection of others from any damage that may result from your mistakes.
Personal Liability and Property Damage Coverage
To drive legally, you must have liability and property damage coverage.
If you’re determined to be at fault for an accident that causes damage or harm, this insurance will cover repairs and medical treatment for other people involved.
You are liable for any damages caused by your negligence or actions. If you’re found to be at fault, your liability coverage will pay for the other party’s injury treatment, pain, and suffering.
This type of coverage is also called bodily injury liability coverage. It’s represented by a fraction, with the first number indicating the payout per person involved in an accident, and the second indicating the payout per accident.
Most states require a minimum of 20,000/40,000, or $20,000 of coverage per person and $40,000 of coverage per accident.
The Downside of Minimum Coverage
There is a downside to having only minimum coverage if significant damage or bodily harm is caused. If the injured party’s claims exceed the covered amount, you must pay the extra expenses.
Because of this, you may want to go beyond the legal minimum coverage. 100,000/300,000 is recommended for sufficient financial protection should you be involved in an expensive accident.
Property Damage Insurance Coverage
If you’re getting behind the wheel, chances are you’re wondering, is my car insured so I can legally drive? In addition to personal liability, having property damage insurance is an absolute must.
Property damage includes any kind of damage that occurs because of your car. This includes, but is not limited to:
- Damage to public property such as guardrails, roads, street signs, lampposts, fire hydrants, buildings, and dividers
- Damage to another’s vehicle and any other personal belongings within or on the vehicle
- Damage to a parked vehicle by the insured driver
- Damage to someone’s home or other personal property caused by your vehicle
Public and private property is protected financially when you carry insurance.
Understanding the Fraction
On an insurance policy, the amount allotted for property damage coverage is usually presented in the same fraction as personal liability. For example, if your policy displays 100,000/300,000/100,000, this means your insurance covers $100,000 for each claimant, $300,000 for the accident as a whole, and $100,000 for property damage.
Any costs beyond your coverage will be your responsibility. Like with personal liability, it’s often wise to have more than the minimum coverage for your car.
Bare-bones coverage may eliminate the “is my car insured” worry as far as legal driving is concerned, but it may not be enough. Even if you’re trying to save money on car insurance, you should consider the consequences of being under-insured.
Accidents can be extremely costly. Often there are extensive repairs that will be required for the other party’s vehicle. Sometimes vehicle replacement is necessary if the damage is bad enough.
In addition to vehicle costs, accidents frequently lead to enormous medical bills when people are injured. This is especially true for severe trauma or multiple injured people.
If these expenses are greater than your insurance coverage, you’ll have to cover the rest. This could be financially devastating, which may lead to you liquidating your assets or having your wages garnished until you have paid the debt.
Extra coverage may cost a bit more, but it’s sometimes recommended so that you won’t have to worry about paying hefty bills out-of-pocket.
Additional Benefits of Extra Coverage
Those who carry more than the minimum for car insurance will often find that there are some benefits to extra coverage beyond extra financial safety.
Extra benefits of better coverage can include:
- Free roadside assistance if your battery dies or you get a flat tire
- Coverage for the cost of a rental car should your car need repairs after an accident
- Discounts given by new insurance companies when you decide to switch
Depending on what your policy covers, extra coverage can be purchased that will cover the costs of repairing your own vehicle after an accident as well.
Minimum Coverage for Affordability
In some cases, drivers may not have much money or many assets. Minimum insurance coverage is a sensible choice for those who:
- Have recently come out of bankruptcy because of debts
- Are college students with debt from student loans
- Have no significant savings and do not have expensive assets
- Have low income
- Are struggling to get out of debt and living paycheck to paycheck
These drivers still need insurance to legally drive, so bare-bones coverage is enough. They don’t have assets to lose if their coverage runs out.
Protect Yourself and Others Financially
Accidents aren’t cheap. Having car insurance, even if it’s the minimum required, is the only way to be a legal driver.
Here at Bonzai Finance, we want to make sure you find car insurance that’s affordable and covers your needs. If you’re interested in learning more about car insurance policies and how you can get the most bang for your buck when purchasing coverage, contact us today.