Weighing Car Insurance Needs

We are all insuranced to death it seems. Car insurance is no exception. In some states it is even mandatory. If you're like many people, your first priority is to get the bare minimum requirements.

Where most states require car insurance, the minimum they ask for is that you have liability insurance, but it varies from state to state. This covers you when you're at fault in an accident.

Comprehensive and collision coverage are required on most lease contracts, and are essential if you own an expensive car. If you're driving an old vehicle, on the other hand, and the cost of the sum of your premium and your deductible nearly or in fact exceed the worth of your vehicle, you might want to consider doing without this coverage.

Before you purchase any type of auto insurance coverage, be sure to study your other insurance policies so you don't end up paying for something you don't need.

So what does all of this insurance lingo mean. Here are some descriptions:

1. Bodily Injury Liability. This coverage, which is required in most states, compensates the driver of the other car and its passengers in the event you get into an accident. It also covers the passengers in your car. The main consideration here is protecting your assets against lawsuits that arise from auto accidents.
Bodily injury liability is sold in standard increments that designate both how much coverage you have per person in an accident, with an additional limit per accident. For example, if you buy bodily injury worth $100,000/$300,000, each of the people you injured could be compensated $100,000, but only up to $300,000 per accident.

2. Property Damage Liability. This coverage will pay for the repair and replacement of the other guy's car or property in the event of an accident. State-required minimums are as low as $5,000, but if you total somebody's Lexus, that won't begin to cover the damage.

You're better off with a minimum of $50,000 for each vehicle you own. And to be truly safe, you should have a total of $100,000 coverage.

3. Personal Injury Protection. This is definitely one coverage you can skimp on. PIP coverage pays for the medical and funeral costs associated with an accident for you and your family — regardless of whose fault it was. But if you already have separate health, life and disability policies, you can probably forgo this one altogether. Check those policies first, but chances are those sort of expenses are already covered.

4. Uninsured or Underinsured Motorist. This coverage pays for medical and funeral costs for you and your family in the event you get in an accident with either a hit-and-run driver or a driver who doesn't have enough auto insurance. These policies usually cover bike and pedestrian accidents, too. Given the prevalence of uninsured drivers nationally, this coverage is essential. On average, it costs less than $40 a year for $100,000 worth and will make up for anything your medical insurance doesn't cover.

5. Collision and Comprehensive. Collision reimburses you for the full cost of repairs or replacement of your car after an accident. Comprehensive covers you in the event your car falls victim to a natural disaster, vandalism or theft. With either coverage, the lower the deductible you choose, the more the policy will cost you. The purpose of insurance is to protect you against big losses, not to make you whole to the last dollar. If you have an older car, you might drop this coverage altogether.

Collision and comprehensive — which can account for 30% to 40% of your total premium — are cash-value coverages. That means if your car is damaged, the most you'll recoup is the Kelley Blue Book value, which declines precipitously as your car ages. Here's a good rule of thumb: If the cost of your collision and comprehensive is more than 10% of your car's Blue Book value, it probably makes sense to drop these coverages and save a tidy sum. With most cars, you should approach this limit as the car turns five years old. Understand, however, that if you eliminate the coverage, you'll have to foot the repair bill if you get in an accident that's your fault, or if the car is totaled or stolen.

6. Extras. While insurance companies will try their hardest to sell you any number of extras to go along with the essentials, most of them aren't worth it. Consider rental-car reimbursement, which pays a paltry $15 or so a day while your car is in the repair shop after a collision. Not only is the reimbursement small, the odds you'll need it are remote. The chances are at least even that the other guy will be at fault, and his insurance will pay the full cost of this. Another dubious extra is towing coverage. It costs $25 or more per year on a policy, money you'd be better off putting toward an auto-club membership that would be exponentially more useful. One extra that is worthwhile: Full glass coverage. Auto glass is expensive and an errant stone can ruin a $500 windshield in the blink of an eye.

Greg Chapman of Greg Chapman Motors is a knowledgeable and leading provider of used cars, trucks, and SUV’s. Since 1959, Chapman motors has supplied reliable used cars in Austin and the surrounding area and is known as one of the bad credit car dealers in Austin. For more information please visit http://www.gregchapmanmotors.com.