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Tuesday, February 8, 2011

How to assess if your car insurance provides adequate coverage

Auto insurance coverage protects drivers from financial liability
Car insurance coverage can mean the difference between solvency &  bankruptcy

The legal minimum insurance coverage requirements in the United States are determined on a State by State according to the Insurance Information Institute. For example, in some states, damages may be paid regardless of who is at fault in an auto accident; these are no-fault states.

Assessing if your auto insurance provides adequate coverage is consequently assisted by knowing your state's insurance laws. Some additional items to consider when evaluating how much car insurance coverage is adequate are listed below.

• Vehicle value(s)
• Bodily injury self, passengers, other motorists
• Non-vehicle property liability
• Natural hazard liability

Minimum state auto insurance requirements

Your State's Department of Insurance is a valuable consumer resource for assessing legal auto insurance requirements and personal auto insurance decisions. Legal requirements are the minimum amount of insurance car drivers are required to have. In some States only limited liability auto insurance is required whereas in other States liability and personal injury auto insurance are required.

This U.S. auto insurance requirements map illustrates what insurance must be purchased for vehicles registered in the corresponding States. In addition to minimum auto insurance requirements, personal factors such as vehicle value, regional auto values, fault Vs no fault States, and anticipated medical costs, and budget can be included in determining whether or not your car insurance provides adequate coverage.

Probability, personal preference and insurance coverage capability

Assessing the probability of such an event and balancing that with your personal auto insurance preferences and coverage capability is part of the function of assessing your car insurance coverage needs. For example, in your neighborhood, town or region vehicle values may average a dollar value different than in other areas. In such case, acquiring insurance for exorbitant liability amounts may be impractical or unnecessary. Statistical information pertaining to auto claims can be found to aid you with your car insurance coverage decision, the Insurance Information Institute being one such source of information.

Vehicle value(s) and bodily injury

Your vehicle may be a brand new luxury model or a used model that has attained a value lower than the insurance deductible for the cost of damage. Depending on the type of vehicle you drive, you may or may not want to have personal vehicle insurance coverage in excess of minimum liability requirements. Bodily injury involves your and other people's lives and not their property and is more valuable in the eyes of auto insurers. The out of pocket expenses for bodily injury can be massive, making bodily injury coverage a valid consideration.

To further illustrate bodily injury likelihood, according to the National Highway Safety Administration (NHTSA), over 16 thousand auto fatalities are estimated to have occurred in the first of half of 2009 alone. This does not include the million of accident involving some form of bodily injury that occur each year. Keeping this in mind, the probability of bodily injury is relatively high and thus may be a conscionable factor in your insurance coverage decision.

Real estate, public property and other liability

In some cases your vehicle may be damaged or destroyed from reasons other than collision such as natural hazard or vandalism. Your automobile may also be stolen or damage public or private property. In such cases a type of insurance coverage called comprehensive coverage may be purchased. This type of auto insurance coverage costs extra, but you may want to consider it more of a necessity if one or more of the following:

• Your vehicle model is among top 10 most stolen vehicles
• Vandalism and crime is high in your neighborhood and/or city
• Lightening strikes, earthquakes and tornadoes are common in your locale
• Road conditions near and around your residence are potentially destructive

Additionally, since not every auto owner and driver has the same kind of insurance, you may still be required to pay for damages inflicted on a person, persons or vehicle(s) not fully covered by insurance even if you are not at fault in an auto accident. This type of liability is covered by uninsured motorist vehicle and bodily injury insurance coverage. In some States uninsured motorist insurance is a requirement up to a certain dollar amount, however in other States this type of insurance is optional.

Researching your States insurance requirements, and assessing your own insurance needs through weighing probability with cost and preference and then consulting with an insurance agent can all help you assess if your car insurance provides adequate coverage. In the car insurance assessment some of the more important factors to consider are bodily injury, State laws, vehicle age and value and coverage amounts. The video below points out some of the key reasons and benefits to look for when reassessing or evaluating existing insurance coverage:

The more coverage and the lower the deductible for the coverage, the greater the insurance premium can be. As will all insurance, assessing adequate coverage is somewhat a personal decision beyond legal requirements, but this personal decision may be more informed after understanding the auto insurance variables discusses in this article.

Image license: FxJ, GFDL, CC BY-SA 2.0