Car Insurance is unavoidable, but how much policy coverage is necessary? Depending on a few of factors, you may find dishing out a little extra money on your automotive policy every month could save you money in the long run.
When it comes to bare minimums, each state has a different level of coverage it would prefer its drivers adopt. These could range from Alaska and Maine's substantial 50/100/25 to Oklahoma's flimsy 10/20/10.
No, these aren't the combinations to the insurance company's piggy banks. The first number represents the maximum amount of bodily injury, or medical expense, the insurance company will pay per person in an accident. The second digit signifies the total amount of bodily injury the company will pay, and the final number is the amount of property damage the policy covers.
So, in Oklahoma, drivers are only required to carry $10,000 of bodily injury for a total of $20,000. That means if you are carrying liability insurance in the Panhandle State, and there are three people in the car you rear end while looking for your Beyonce CD, if each of them accrue $10,000 worth of medical bills, the insurance company will only pay $20,000. That leaves you to foot the remainder of the bill.
The same goes with the last number. The insurance company agrees to pay $25,000 worth of property damage in any accident that's your fault. So if you sideswipe a new Ferrari 599, the insurance company will pay for the first three inches of damage and you'll have to cover the rest of the car.
Alright, so you're a dirt poor artist driving a 1993 Ford Festiva. What happens if you bounce off that piece of Italian engineering and you can't pay for the hefty repair bill? The owner of the prancing horse can sue you for your Festiva and any other assets else you own, sending you scrambling for the Chapter 11 papers.
Ok, but we still haven't covered exactly how much coverage you need. Kip Diggs, a spokesperson with State Farm, says it's a tough call.
"Each person that walks in our doors has different needs," he said. "If you have a lot of assets you need to protect, maybe it's better to go with higher coverage."
Diggs also said that there are a few other things to consider. Maybe you live a little too close to Beverly Hills for your own comfort. If your neighbors' cars are worth more than everything you own combined, higher personal property coverage might not be a bad idea.
Maybe you know you're not the most careful driver in the world. That might be an indication to consider more coverage than the average person.
The bottom line is most minimum coverage is just that-minimum. Take the time to evaluate your own driving tendencies, how much time you spend on the road and the cost of vehicles around you and settle on a level of coverage you're comfortable with.
"Sometimes not having enough coverage can be just as dangerous as not having any insurance at all," Diggs said.