The worst time to find out that your auto insurance is not enough is when you have to make a claim. Here's how to review your auto coverage and determine if the protection you have is adequate.
Nearly every state has a law that requires drivers to carry car insurance. Most states call these financial responsibility laws. These requirements establish the minimum amount of coverage that drivers licensed in the state must carry.
Bodily Injury and Property Damage Liability
Most states require Bodily injury (BI) and property damage (PD) liability coverage. These are sometimes called at-fault insurance coverage. They help you pay the amount you are liable to pay for injury or damage caused to another. This is not related to your own damage or loss because of the accident.
The amount established by a state is typically expressed in a policy as such: 10/20/10. The first two numbers, in this case, are $10,000 and $20,000. They represent the limits for bodily injury (BI) liability coverage. The third number is $10,000 and is the limit for property damage (PD) liability coverage. 10/20/10, means a BI limit of up to $20,000 for two or more individuals involved in an accident. There is a $10,000 limit for one person in the accident. The $10,000 PD limit is a single limit.
Are the Minimum BI and PD Limits Enough?
Carrying the minimum liability coverage may not be adequate for your needs. This is especially true if you consider that these limits only protect the interests of others involved in an accident. They do not apply to your financial loss. This reason alone would require you to add protection that covers you in the event of an accident. You might determine how much coverage you need based on where you live, how much you drive, and the value of your vehicle. Your ability to pay for accident damage (either to yourself or others) is also a big factor.
Using these factors as a baseline will help you determine what amount of auto insurance is appropriate. You should first increase your required liability coverage to your greatest benefit. You might consider additional protection also. For example, personal injury protection (PIP) covers your medical costs associated with an accident as well as lost wages. You can also buy a simpler amount of coverage called medical payments coverage. You may also include protection from uninsured or underinsured motorists (UM/UIM). Additionally, coverage for your own vehicle damage, in the form of collision and comprehensive coverage might help you complete your policy.