Auto policies come in many varieties. From what your state legally demands you carry to multimillion dollar policies that cover any form of injury or damage imaginable. Unless they’re still paying off a car loan, most drivers carry the minimum amount of insurance required by law. This leaves you and your assets up for grabs whether you cause an accident or not.
What does liability-only cover?
Most states require drivers to carry liability auto insurance policies, but if you cause an accident your car insurance company will pay for the damages or injuries to the people in the other car (or cars). They won’t pick up your expenses, or the expenses of your passengers.
Your insurance card should tell you what your insurance limits cover. A 25/50/10 policy would cover $25,000 of medical costs for one person, $50,000 of medical costs for all the people in the other car, and $10,000 worth of property damage to the other person’s car or surrounding structures. Obviously, if expenses run more than that, you can be sued for the difference. Just as importantly, if someone with low coverage rates hits you, all of your costs might not be covered (and if they’re driving illegally without insurance, you’re really in trouble).
Insurance policies that cover underinsured or uninsured motorists will pay for your injuries and damages when the other person is at fault. This is not the same as comprehensive coverage that will pay your expenses if you cause the accident, but it does provide extra protection on the road. The question is whether you should pay for full, comprehensive coverage or stop at separate car insurance policies for liability and under/uninsured drivers.
If you’re financing your vehicle, chances are you are required by law to have comprehensive coverage. If you aren’t financing, look at the value of your car. If your car was totaled, how much money would you get from your auto insurance company?
Look at your premium – the amount you pay for insurance each month – and compare those two numbers. Would it be worth it for you to get comprehensive coverage, or should you choose less expensive insurance and put the extra money away in case you have an accident and need a new car? Few people driving junkers make financial sense with comprehensive coverage.