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Coverage Levels of Car Insurance

As you consider different coverage levels, you can change the coverage limits and deductibles for your needs, this allows you to compare how coverage levels affect your monthly insurance premium.

Liability coverage is the minimum state requirement in most states and covers damage you may cause to other people's property and injuries to people themselves, including your passengers. It offers protection from lawsuits, too. Usually each state designates a minimum level of coverage that everyone is required to have, something in the neighborhood of $25,000 per person, $50,000 per accident, and $5,000 property damage. How much you need depends on how much wealth you have, as well as your earning potential. Medical bills and lawyers suing you can easily reach into the hundreds of thousands of dollars. You can get sued even if the accident is not your fault. But, if you are a college student, with $200 in your checking account and $8,000 in credit card debt, you may be fine with the minimum. Buy as much as you can afford (to loose).

This is the most critical part of a auto insurance. Insurance spreads the risk, in essence. If you are involved in an accident with someone who can't pay for the damage or injury caused, your insurance company will pay all you claims or the difference between your damages and what the other person's insurance covers. Otherwise, you'll have to sue the other party, and chances are if you skimp on car insurance, there won't be much to sue for. About 14% of all drivers are driving without car insurance. This level can be even higher if you live in an area where there are higher levels of illegal immigrants who are scared or unable to purchase insurance. These policies protect you against damage costs including lost wages, medical bills pain and suffering.

Collision insurance will cover costs related to repairing damages to your car due to an accident t with another car. Usually this type of coverage is only required when you lease or have a loan on your car. In most cases, if you do get in an accident and make a collision claim, your rates will go up. Some companies will "forgive" the first accident if you have a certain length of accident-free history. So, what should you set your deductibles to be? First, you need some important information. Would you be greatly affected if you had a sudden $100 repair bill? How about $500? $1000? If loosing $500 would cause you to be late on other bills, rack up more credit card debt, etc, you may want to set a lower deductible and pay the slightly higher premium. Set it as high as you are comfortable with, especially for collision.

Comprehensive covers everything else not a collision. That usually means fire, theft, but can also include natural disasters, riots, explosions or falling objects. This is also required for a leased vehicle or a loan. According to latest reports, rates will not go up due to a comprehensive claim. Presumably this is because these events are beyond your control. However, there are companies that can still decide to drop you completely if you make too many overall claims. This is where Kelly's Blue Book and Edmond's comes in. You'll need to establish the Private Party Value of your car to help in determining the level of coverage you'll need. If your car is totaled, you'll only get the "replacement value" of the car. If your annual collision+comprehensive premium is more than 10% of the value of your car, you may be better off dropping coverages completely. Most people can not take a $1000 hit and survive. Lowering comprehensive deductibles from $1,000 to $100 will only raise the premium about $50 per year. Since making a comprehensive claim will not raise your rates, it might be worth it to keep the comprehensive deductible low.