When selecting the right auto insurance policy, you have to consider your coverage limits. Each state has a minimum coverage limit for auto insurance, and you must have at least that much coverage to legally drive in the state. However, the. Minimum coverage limit is not always enough to protect you, your vehicle, your passengers, and your wallet in the event of a loss or accident.
Your insurance agent will help create the right auto insurance policy for your needs, but it is important to understand the terminology beforehand. This knowledge can help you make the right decisions when it comes to coverage limits. Keep reading to learn what auto insurance coverage limits you need.
What are auto insurance coverage limits?
Coverage limits refer to the maximum amount your insurance policy pays in the event of a covered accident. If an accident is completely within your coverage limits, you will not have to pay anything out of pocket. However, if the accident costs more than your coverage limit, you could be left with hefty bills and expenses.
When you purchase an auto insurance policy or compare policy options, you can usually find the coverage limits written as three numbers divided by slashes. For example, 30/60/20 refers to a $30,000 limit per person for bodily injury coverage, a $60,000 limit for the total bodily injury in an accident, and a $20,000 limit for property damage during an accident.
If you have the coverage limits above and are in an accident, what is covered and what is paid out of pocket? If the other driver has $10,000 worth of damage and the passenger has $8,000 worth of damage, both amounts fall under your bodily injury limit per person and your total bodily injury limit. However, if there are four people in the car with $20,000 worth of damage each, you are over your total bodily injury coverage limit. Any remaining amount will be your responsibility.
While your coverage limits may not seem like a big deal when selecting an auto insurance policy, they become very important in the event of an accident. Just because a loss is covered by your policy does not mean the full amount of damages is covered. Coverage limits that are too low can leave you stuck with tremendous out of pocket expenses.
Types of auto insurance coverage
There are several types of insurance coverage within your auto insurance policy. You can select coverage limits for each type of insurance on an individual basis. When selecting a policy, make sure you are within the coverage limit requirements for your state. From there, you and your insurance agent can make judgements on how much additional coverage is needed.
Liability insurance for an auto policy can refer to property damage liability and bodily injury liability. These amounts are typically separated and there are specific coverage limits for each. Some state require as low as $10,000 per person for bodily injury coverage while other states require more.
Property damage liability coverage limits also vary by state, but the minimum requirement is not likely to cover all of your assets. Liability insurance protects your assets if you are in an accident. A lawsuit combined with insufficient auto insurance can result in the loss of property, including your home. Your insurance coverage limits should be high enough to protect your assets.
While liability insurance protects another person’s vehicle in the event of an accident, collision insurance covers your vehicle. Determining how much collision insurance is needed is simple. The type of vehicle you drive will determine your coverage limit for collision insurance. Not all states require collision insurance, but it is wise to carry if you drive a new or valuable car.
Bodily injury liability insurance covers potential medical expenses for passengers of the other vehicle involved in an accident, and medical expenses coverage protects you and your passengers. Your limit for medical expenses is the maximum amount your policy will pay per passenger in the event of an accident. After your coverage limit is reached, you are responsible for remaining expenses.
If an accident is the fault of the other driver but they do not have enough insurance coverage, you could be left with out of pocket expenses. Uninsured or under insured motorist insurance provides coverage to fill in the gap between what the driver’s insurance covers and your total expenses. For many states, this type of coverage is optional. However, it is a smart addition to your policy that can potentially save you thousands.
Personal injury protection
Some states have coverage limit requirements for personal injury protection insurance. This type of coverage pays for medical expenses for both you and your passengers. This coverage differs from medical expenses insurance because it is available regardless of who is at fault for an accident.
Finally, comprehensive insurance is available to cover a range of miscellaneous damages to your vehicle. These damages are typically not caused by an accident and often include fire or theft. You can often find a policy that bundles collision and comprehensive coverage.