While there are many types of insurance coverage available for auto insurance, you may wonder what is the most important? Arguably, the most important car insurance coverage is the kind you need at the time of loss, but we can never be certain what that coverage will be because each accident is different. What we do know is that some coverage is required by law, and other coverage is available to us depending on our personal circumstances.
Here are some things to consider when determining what coverage is required and where you can be more flexible.
- To drive legally, your car insurance must meet your state's requirements for minimum liability and property damage coverage.
- Without sufficient liability and property coverage, you can be sued for damage you cause to other people or property in an accident.
- Collision coverage is for damage to your car from another vehicle or stationary object, and comprehensive coverage is for other types of damage.
- Options like gap insurance and rental insurance are extra, and whether you need them will depend on your personal circumstances.
The Most Important Car Insurance Coverage
The most important coverage has to be your state's minimum liability and property damage coverage. More than anything else, you need to maintain car insurance to keep yourself legal to drive. You risk losing your driver's license and fines driving without it. Get into an accident without liability coverage and you could be facing enormous penalties including bills from the damages you caused.
Liability and property damage coverage is there to protect the other drivers on the road from the damage you cause. Your car insurance policy probably lists liability as bodily injury 20/40 as an example. The 20 is the placeholder for how much will pay out for medical expenses, pain, and suffering per person and is valued at $20,000. The 40 is the placeholder for how much will pay out for medical expenses, pain, and suffering per accident and is valued at $40,000.
Property damage provides coverage for other people's property. For instance, if you hit another person's car or damage city property like a guardrail or traffic sign, your property damage coverage on your car insurance will cover the damages up to the limit listed on your policy.
Having coverage protecting other people's property and medical expenses is important for your own financial protection. Without it, you can be sued for the damages.
Other Important Coverage
You want to protect your own property too. You will need to purchase physical damage coverage so you are protected against major expenses of car repairs if you cause damage to your vehicle or some other outside factor causes damage to your car.
Comprehensive coverage will payout for damage from anything other than a collision. It includes but is not limited to deer, rodent, glass damage, fire, theft, vandalism, and storm damage. A deductible usually applies.
Collision coverage pays out when you damage your vehicle in a collision whether it is with another vehicle, a tree, or mailbox; it does not matter. Collision will pay out minus your deductible.
Car Insurance Extras
Car insurance policies provide a lot of different optional kinds of coverage that can prove to be important. Extra coverages include Gap Insurance, Rental Insurance, Roadside Assistance, Custom Equipment, OEM Endorsement, Minor Violation Forgiveness and Accident Forgiveness. While it is very possible you would be able to cover these expenses out of pocket rather than purchasing the coverage, some of these optional coverages may provide significant financial protection.
Each car insurance coverage has its place on certain policies. It really depends on the driver and what their expectations are for their policy. It is fine to reduce your insurance cost by reducing coverage, but be prepared for the extra expenses when an accident happens.