Every driver needs to buy auto insurance. But there’s a wide variety of coverage options and motorists must decide both what types of insurance to buy and how much coverage to get. Doing this can be complicated, but there’s one simple step every auto-insurance buyer should do first.
This step is crucial in buying car insurance
The very first step that every motorist should take when buying insurance is to understand what coverage is required.
There are rules in every state that set certain minimum coverage requirements. Most states require drivers to buy liability insurance, which provides payments to accident victims if the covered driver injures them or damages their property by causing a crash.
Other required types of coverage could include personal injury protection that pays for the policyholder’s bills after an accident, as well as uninsured or underinsured motorist coverage that pays the policyholder’s bills if their vehicle is damaged in a crash caused by someone else with too little insurance.
Drivers need to buy at least the minimum amount of coverage their state mandates because otherwise they could be ticketed and cited for failure to have required coverage. And those drivers who have car loans or who lease vehicles may also have additional mandated coverage they need to buy because their lender requires it. This could include, for example, gap insurance which pays the difference between the value of the car the insurer will pay for after a crash that destroys the vehicle versus the amount the driver owes on the car loan or lease.
By finding out what coverage their state and their lender requires, drivers can make sure they are in full compliance with the rules by buying enough coverage to comply with the mandates.
Is buying mandated coverage enough?
Buying the minimum amount of car insurance that a state and a leasing company or loan company requires is just the first step in getting the right car insurance coverage in place. While this is the most important step because of the dire consequences of not doing so, most drivers shouldn’t limit their coverage to only what is mandated.
That’s because there are many optional types of coverage that can provide vital protection for a driver’s assets. For example, states don’t typically require comprehensive coverage that pays for other damage to the policyholder’s car not caused by an accident, such as repairs necessitated if a tree falls on the vehicle. Collision coverage, which pays for the repair or replacement of a car if the policyholder causes a crash, also isn’t required under state law.
While most lenders require collision and comprehensive coverage, there are additional protections drivers may wish to consider that go beyond what their loan provider wants them to buy. For example, it could be smart to buy rental car coverage so the insurer covers the costs of renting a vehicle while a car is being repaired after a crash happens.
Ultimately, drivers should get the minimum coverage and then look at what other protections are available so they can make a fully informed choice about what level of risk they are willing to take on — and what risks they should transfer to an insurer so a problem with a vehicle doesn’t lead to financial disaster.
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