Basic Car Insurance Coverage: How Much Do I Need?

When it comes to basic car insurance coverage, the standards will vary for just about everyone. Liability coverage requirements differ by state and collision or comprehensive coverage levels are up to each individual person. The type of vehicle you are driving, and its value will help determine what type of coverage you want or need. Below is a quick primer on minimum auto insurance coverage and recommended levels.

Bodily Injury Liability - This insurance covers all injuries to others that you are responsible for in an accident. This insurance is required by almost every state and something everyone should have. The minimum levels required by most states are inadequate. Industry experts recommend 100/300 coverage. This means you are covered for $100,000 per person and $300,000 per accident.

Medical Payments or Personal Injury Protection - Usually required by most states, it covers the medical costs of the passengers and driver in your vehicle. If there is a death, funeral expenses are covered, as well as lost wages.

Property Damage Liability - This coverage is also required by most states. It covers any damage that you cause to third party property. This would include items such as fences, yards, houses and vehicles. Coverage requirements vary by state so check with a local agent to determine your state's limits.

Collision - This insurance is not required and depending on your vehicle, may not be necessary. Collision covers the cost of repairs to your vehicle as the result of an accident. If you have an older vehicle that is worth less than the cost of the annual premiums, then it makes no sense to carry this coverage. On the other hand, if you have a new vehicle, or one that is being leased, this insurance is necessary. Coverage levels should cover the total replacement value of the car. If you have a loan or a lease, the bank will require this coverage.

Comprehensive - This insurance covers any damage to your car that is the result of things other then an accident or collision. Fire, hail and flood damage would fall under this insurance. This is a coverage that can be dropped if you are driving a vehicle with a low resale value or you would not bother having fixed if it were damaged. New or leased vehicles should definitely carry comprehensive.

Uninsured/Under Insured Motorist Coverage - This coverage is a good idea if you live in a tort state. This coverage makes up the difference if the driver who hits you is uninsured or does not have enough insurance to cover your claim. If you live in a no fault state where everyone deals with their own insurance company, this coverage is unnecessary.   

Insurance can be tricky but with the proper understanding of the various types of insurance and recommended coverage levels, you can start shopping for a new policy with confidence.