Bare-bones auto insurance: Your out-of-pocket risk
You probably know that each state sets a required minimum amount of auto insurance coverage that you must purchase in order to legally drive. These liability limits are in place to make sure that you have insurance to help you reimburse another party should you be involved in a car accident and be at fault.
If you select to purchase only the minimum amounts of coverage or liability-only coverage, you’ll personally be responsible for damages over and above those amounts. Here are some things to think about:
- Catastrophic Damage to Others. Other drivers can sue you if you’re found liable for a major accident. Costs can include the property damage and hospital fees. Your savings, future wages and even property you own could be at risk. Consider increasing your coverage to at least $100,000 of bodily injury per person, $300,000 per accident.
- Personal Injury Costs to Others. To ensure you have coverage for medical expenses beyond your bodily injury limits, in most states there’s medical payments (MedPay) and/or Personal Injury Protection (PIP) coverage, and both will usually help with funeral expenses. PIP also pays for wages lost because of an accident – something that MedPay doesn’t.
- Losses not covered. If you have strictly liability-only coverage, you could be out of pocket for the following losses.
- Hail damage caused to your vehicle.
- Hitting an Animal.
- Damage from hitting a pole in a parking lot.
- Replacing a stolen vehicle.
- Flooding damage.
- Damages caused by a un- or underinsured driver.
- Fire damages.
Be sure that the choices you are making are informed and make sense for your personal situation. There’s never a one-size-fits-all when it comes to insurance coverage.
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