Auto Insurance Facts


Auto Insurance Facts

Understanding the basics of car insurance can be difficult enough, let alone understanding the lesser-known intricacies involved with the guidelines, policies and procedures of today’s insurance providers.

Below, are some important, yet oftentimes obscure, insurance questions.

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Frequently Asked Questions

Liability insurance does not cover damage to your own vehicle if you are at-fault in an accident, you need collision and comprehensive coverage to pay for those damages. Nor does liability insurance reimburse you for medical expenses if you are at-fault in an accident, your personal health insurance plan may be able to cover unreimbursed medical costs. It also does not cover claims that exceed the limits of your coverage, and it may not extend to legal defense exceeding your policy limits. Higher liability limits can help you to avoid paying out-of-pocket when damages exceed minimum limits, and an umbrella policy can offer limits of $1 million or more once your auto insurance limits are reached.
States set their own minimum liability coverage requirements for property damage and bodily injuries. Requirements are usually expressed as a group of numbers. For example, California’s requirements are 15/30/5. This means that in California, you must purchase a policy that provides at least:

· $15,000 of bodily injury coverage per person injured in an accident caused by you.

· With a maximum of $30,000 for everyone injured in that accident.

· In addition, you must carry insurance covering at least $5,000 of property damage.

The list below indicates liability insurance minimums for every state. As of 2015 there are 12 “no-fault” states that require all drivers to carry personal injury protection (PIP) to pay for their medical expenses if involved in an accident. A few states, such as Maine and New Hampshire, require medical payments (MedPay), which also gives you some medical coverage if your or your passengers are injured in an auto accident.

Many states require you to carry uninsured motorist bodily injury (UM) or underinsured/underinsured motorist (UIM) coverage. Some states require uninsured motorist property damage (UMPD).

While most but not all states require drivers to carry auto insurance – Iowa and New Hampshire are exceptions – all states do have financial responsibility laws requiring that drivers are able to pay for damages caused to others.

To be safe, consider carrying at least the minimum limits listed below.

State Minimum liability coverage limits Other types of insurance required (if any)

* Florida doesn’t require bodily injury liability coverage, but many insurers only offer policies with at least minimum amounts of 10/20 of BI coverage.

** In New Hampshire auto insurance isn’t mandatory, but if you choose to buy insurance these are the minimum amounts.

*** Rhode Island doesn’t require drivers to buy UM/UIM coverage if buying minimum liabiity coverage. If buy higher liability limits, UM is required.

Alabama 25/50/25
Alaska 50/100/25
Arizona 15/30/10
Arkansas 25/50/25
California 15/30/5
Colorado 25/50/15
Connecticut 20/40/10 UM/UIM
Delaware 15/30/10 PIP
District of Columbia 25/50/10 UM, UMPD
Florida* 0/0/10 PIP
Georgia 25/50/25
Hawaii 20/40/10 PIP
Idaho 20/50/15
Illinois 25/50/20 UM
Indiana 25/50/10
Iowa 20/40/15
Kansas 25/50/10 UM/UIM, PIP
Kentucky 25/50/10 PIP
Louisiana 15/30/25
Maine 50/100/25 UM/UIM, MedPay
Maryland 30/60/15 UM/UIM, UMPD, PIP
Massachusetts 20/40/5 UM/UIM, PIP
Michigan 20/40/10 PIP, property protection
Minnesota 30/60/10 UM/UIM, PIP
Mississippi 25/50/25
Missouri 25/50/10 UM
Montana 25/50/10
Nebraska 25/50/25 UM/UIM
Nevada 15/30/10
New Hampshire** 25/50/25 UM/UIM, MedPay
New Jersey 15/30/5 UM/UIM, UMPD, PIP
New Mexico 25/50/10
New York 25/50/10 UM, PIP
North Carolina 30/60/25 UM, UMPD
North Dakota 25/50/25 UM/UIM, PIP
Ohio 25/50/25
Oklahoma 25/50/25
Oregon 25/50/20 UM, PIP
Pennsylvania 15/30/5 PIP – referred to as “First Party Benefits Coverage”
Rhode Island*** 25/50/25
South Carolina 25/50/25 UM, UMPD
South Dakota 25/50/25 UM/UIM
Tennessee 25/50/15
Texas 30/60/25
Utah 25/65/15 PIP
Vermont 25/50/10 UM/UIM, UMPD
Virginia 25/50/20* UM/UIM, UMPD
Washington 25/50/10
West Virginia 25/50/25 UM, UMPD
Wisconsin 25/50/10 UM
Wyoming 25/50/20

Depending upon where you live and what coverage limits you purchase, your annual premium for liability car insurance can vary significantly. acquired data indicates that the average annual liability premium for a driver purchasing minimum coverage limits to be $723.26 in California, versus $890.72 in New York.

You may obtain the cheapest insurance rate if you buy a minimum liability policy. However, minimum coverage levels are not recommended because it can leave you financially exposed in an at-fault accident. Increasing your limits above state minimums should give you better coverage and doesn’t cost much more – averaging approximately $5.00 per month above the cost of minimum coverage.

Most experts agree that the legally-mandated minimum coverage is not enough for many drivers. The amount of coverage you should purchase depends on your assets and your tolerance for risk.

If you cause an accident that seriously injures the other party, medical bills, income loss, and pain and suffering claims could come to hundreds of thousands of dollars. If you have assets above the limits of your policy, the victim’s attorney is likely to pursue them. In addition, many insurance policies allow insurers to limit their legal defense expense to your coverage limit.

Drivers without home equity, savings or other assets

If you have little savings (outside of retirement accounts which are protected) and no home equity or other valuable assets, the state-mandated coverage may be enough. However, in states with very low minimums, the minimum is probably insufficient.

Drivers with significant assets

If you have accumulated more extensive holdings, like real estate, investments and expensive collections, your coverage should probably be broader, such as 250/500/100 ($250,000 bodily injury/$500,000 BI for all involved in an accident/$100,000 property damage), or higher if your insure offers greater limits.

Personal finance gurus routinely recommend that your liability coverage should be at least as high as your net worth. If you’re a top earner or have obvious wealth, your financial position could make you a target for lawsuits. For that reason, you might want to consider an umbrella policy, which kicks in when your homeowners or auto liability coverage is exhausted. Umbrella coverage is surprisingly inexpensive for the amount of coverage you can purchase ($1 million of coverage costs a few hundred dollars per year).

According to the latest Insurance Research Council (IRC), 29.7 million U.S. car owners do not carry legally-required auto insurance. Driving without insurance could save money in the short run, but it can result in serious penalties.

In most states, if you cause an accident, you will be forced to cover the resulting damages. This may drain your savings, and it is possible that a lien could be placed on your home and other assets. Up to 25 percent of your future wages could be garnished.

The Insurance Information Institute (III) reports that in 2014, the average auto liability claim for bodily injury was $16,640 while the average cost for property damage was $3,290. Without insurance, you’d have to cover this out-of-pocket. If you’re taken to court and lose, you could be forced to pay for your victim’s legal fees as well as your own. And you’d still have to repair or replace your own car.

If you don’t cause an accident but are pulled over and caught driving without insurance, you may face:

• Driver’s license suspension

• Registration suspension

• Fines ranging from $600 to $5,000

• Additional lapse fees due to your DMV

• Vehicle impoundment

• Jail time or community service

• Points on your license

• A requirement to carry SR-22 insurance

By driving without insurance, you’re gambling with your future.

The urban legend about the color of your car affecting how much you pay for auto insurance is false. While the color of your car is an indicator of your personality and driving habits, “despite the mistaken belief by 25% of drivers that color affects your car insurance rates, it really has no effect on your insurance at all.”
YES, your credit score affects your auto insurance rates. Research has proven that there’s a link between your credit score and the likelihood that you will file a claim. Plus, car insurers know that if you pay your bills on time and you’ve had the same credit accounts for a long time, then you’re generally more stable and far less likely to pay late or open & close accounts a lot. Auto insurance companies use all of this information to come up with an “insurance risk score” for you. That is one of many factors which are used to determine your auto insurance rates.
You should insure your cars and your home with the same company for a multi-policy discount. In addition ask for an abstainer from alcohol discount (if you don’t drink) and a discount if you use an anti-theft device.
If you live in Alaska, Arizona, Arkansas, California, Connecticut, Florida, Georgia, Hawaii, Illinois, Indiana, Kansas, Kentucky, Maryland, Minnesota, Missouri, Nebraska, Nevada, New Jersey, New York, North Dakota, Ohio, Oklahoma, Oregon, South Dakota, Vermont, Washington, West Virginia and Wisconsin be sure to ask for a reimbursement.