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Best car insurance company in indiaOne of the common nuggets of financial “wisdom” tossed out there by personal finance writers is the idea of downgrading one’s car insurance to save money. “Cut your collision or comprehensive coverage or raise your deductibles and save a mint!” they’ll say, but such comments don’t take into account the current status of the car in question, nor does it account for your own personal financial state.

How do you know when the time is right to downgrade your car insurance? First, let’s look at the insurance variables we’re looking at, then let’s move through the thought process of figuring it out.

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Types of Auto Insurance and Basic Terminology
… just so we’re all on the same page here.

Most states require that you carry at least liability insurance on your automobile as a minimum, so we’ll assume that in all cases you’ll continue to carry liability coverage. Liability coverage takes care of any costs or damage you may do to other people and property during the course of driving, including both bodily injury to others and property damage. These insurances are usually pretty cheap – the only thing you might want to be concerned about is that your coverage limit is quite high.

What we’re mostly concerned about is comprehensive and collision insurance. Collision insurance covers damage to your car when your car hits or is hit by another object, while comprehensive insurance covers losses resulting from incidents other than collision – floods, damage caused by external forces, and so on.

For more specific details on these definitions, check out The Simple Dollar’s useful car insurance guide.

For each type of insurance, you’ll have a deductible, which is the portion of any bill that you will be responsible for. So, if you have a $1,000 deductible and you’re facing $2,500 in damages, you’ll pay $1,000 and the insurance company will pay $1,500. You also have a premium, which is the amount you have to pay the insurance company to maintain the insurance.

What Do You Need?
Unfortunately, there isn’t a clear and straightforward answer to this question, and it’s because of that lack of clarity that people tend to over-insure – and personal finance writers can get away with simple statements like “eliminate your insurance and raise your deductible to save cash!”

First, should you raise your deductible? From my perspective, your deductible amount should always be directly related to your emergency fund. A single car incident shouldn’t be able to entirely deplete your emergency fund – if it does, you put yourself quickly at risk of something else happening. In fact, I often encourage people to have an emergency fund at least as twice as large as your deductible.

Given that, you can quickly figure out how much deductible you need based on your emergency fund. If you have an enormous emergency fund, for example, you may not even need comprehensive or collision insurance at all, as you have enough cash to just pay for the repairs or the replacement yourself out of pocket.

The way I see it, if you have enough emergency fund that you could pay for an entire replacement car in cash and only reduce your fund by half or less, you don’t need collision or comprehensive insurance. Liability insurance should be all you need. But, of course, most people aren’t in that situation, as it demands a much larger cash emergency fund than most people have access to.

Similarly, at what point should you entirely cut collision coverage and comprehensive insurance on an older car? It’s not an easy question to answer.

I’m currently in this situation with my pickup truck, which is more than a decade old and is approaching the 200,000 mile mark – it has a pretty low Blue Book value at this point. It’s reached a point where my family feels uncomfortable driving it any significant distance at all, so I mostly just use it for local travel within fifty miles of my home (going to the library, getting groceries, and so on). We intend to replace it by early next summer.

Given that, it may in fact make sense for us to drop down to just liability coverage on the vehicle. This would save us several hundred dollars over the winter, and if something severe went wrong with it again, we’d simply go ahead and sell it.

Ask yourself this honest question: if a significant repair needed to be done to your current vehicle, would that be the final push you need to replace it? If that’s the case, do you need collision or comprehensive coverage on that vehicle at all?

Between these two perspectives, you may find that comprehensive and collision insurance aren’t worth it to you. But you may find yourself also feeling unprotected without that insurance. Insurance does have a psychological benefit beyond any directly financial benefits – you can be confident in knowing that even if something bad happens, you’re covered.

If your signs are pointing away from needing collision and comprehensive insurance, but your gut is telling you it’s a bad idea, I recommend just raising your deductible nice and high. That way, you’ve got the security of the insurance while saving money as well. This may be the best option of all for people with used cars and a nice hefty emergency fund, but find that comprehensive and collision insurance makes them feel better about their car.

I look forward to hearing the comments of readers on this topic.

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  1. Shanel Yang says: August 23, 2008 at 11:44 am My dad was a big risk taker — heck, he was out and out a gambler. He didn’t care much for insurance. He got away with a lot of savings by buying cash for vehicles and then dropping coverage to the bare minimum. I thought he was crazy and anyway never had the chance to try his strategy till 2002 b/c I never owned a car outright till then. Money was real tight back in ’02 and my car was old so I decided to try it. Took my coverage down to the legal limit. Don’t try this if you’re accident prone! But, I’m a great defensive driver and the only accidents I ever got in were minor fender benders that I never reported to insurance anyway and paid out of pocket for or accepted the other driver’s out of pocket. So far, so good. It’s not for everybody but it works for me! : )
  2. bigwinner says: August 23, 2008 at 11:55 am As far as I understand, not paying for collision insurance is a good incentive for families to have old yet fairly reliable cars (I’m thinking like a mid-90’s Taurus which can be had with reasonable miles for $1500-$2000). Not only is the initial out of pocket expense less, but you don’t have to waste money on unnecessary insurance.
  3. April @ SALT for the Spirit says: August 23, 2008 at 12:04 pm I think it is worth pointing out that adequate liability insurance is often one of the most neglected areas of coverage. As a recent recipient of an auto injury judgement, I would advise all to carefully review this section of one’s insurance and make sure that the liability coverage is in considerable excess of one’s assets, especially if one is self-employed.
  4. Robin says: August 23, 2008 at 12:54 pm I hate the idea of cutting insurance. Everyone thinks they’re a good driver. News is, they’re not.
  5. Brian says: August 23, 2008 at 1:10 pm Since car insurance coverage differs from state to state, no wonder it’s so confusing. In Oklahoma, where I live, state law requires full coverage insurance for vehicles that are not paid in full. Therefore, if you’re making a loan or lease payment on a vehicle, you’re required to carry full coverage insurance. Only when the vehicle is paid in full can you drop to liability. I bought a new 2006 Toyota Matrix almost two years ago. I have about 4 years of payments left. So I have no choice when it comes to dropping my coverage, unless I want to increase my deductible. Thankfully I shopped around and found the lowest price thru a reputable, local, independent insurance company. Independent as in they are not affiliated or an authorized dealer of the big named insurance companies. I pay about $105/month for full coverage insurance. Other places wanted to charge at least double that. So while downgrading coverage or increasing the deductible can save you money, simply shopping around for the best price can save money too. And once you find the best deal, you’re not required to stay with the same insurance company. I shop around every six months, which is around the time most insurance policies are renewed. So far my current company still has the best price. And it doesn’t hurt to keep in touch with your current company to take a new look at your policy. Improvements in your driving record since your policy was changed can result in more discounts.
  6. Steve says: August 23, 2008 at 1:26 pm I have been thinking about how to adjust my insurance deductibles lately, so this is a timely article for me. Of course, I wasn’t able to come to a final conclusion based off of this article alone, but it has given me some food for thought.
  7. David says: August 23, 2008 at 1:28 pm As a Chartered Property Casualty Underwriter, I need to point out that wear and tear is generally excluded by your insurance policy. Additionally, the liability, medical payments, and uninsured motorists liability portions of your insurance policy will not have deductibles. The most important parts of an individual’s car insurance policy are liability and uninsured motorists liability. Many people are insufficiently covered. If you were to cause bodily injury to another person that required hospitalization or surgery, imagine the costs. Imagine the costs of hospitalization if a motorist that was uninsured or underinsured hit your car and caused you bodily injury. If you carry the minimum liability limits, this is bad for a number of reasons: (1) You will covered insufficiently for bodily injury or property damage you might cause (how much is it to pay a claim on a total loss for a 2007 Ford Expedition?), and (2) if you carry the minimum liability limits for your state, you are only allowed to take that amount in insurance for uninsured motorists liability. Most people do not realize that if you carry minimum limits of $25,000 or even $50,000 for liability, these amounts are insufficient to cover the average loss. The minimum liability is simply your state’s legal minimum. Remember that your car insurance liability is protecting your financial assets. If you are covered insufficiently for property damage or bodily injury you have cause by operating your car, the car insurance company will simply pay their limit and then send you a letter saying that your limits are exhausted. You are liable for the rest and will be sued. Another scenario is that a drunk and insured driver t-bones your car. You are injured severely, hospitalized, and miss a lot of work. Uninsured motorists liability coverage covers you in this situation or supposing that the motorist at fault had those terrible state minimum limits. Personally, I carry the highest limits on both liability and uninsured motorists coverage. One thing that is negative about raising your deductibles on Comprehensive and Collision to the highest points is that many insurance companies use these as underwriting tools rather than price breaks. There might not be much of a price break between $500 and $1,000 deductibles. Check it out – it’s not always a good deal. Homeowners insurance is a good example – my policy only gave me a $110 price break in annual premium between a $1,000 deductible and $2,500 deductible.
  8. David says: August 23, 2008 at 1:33 pm I meant to say “drunk and uninsured driver” in my previous comment. Another situation, suppose a drunk driver hits your car, injures you, totals your car, but the drunk driver only has $25,000 of insurance liabilty limit. Is that enough to cover your surgery, hospitalization, rehab, and buy you a new car, not to mention lost wages? NO. Uninsured motorists liability coverage is very important – it essentially functions as life insurance as well if you are killed. Liability is settled with your survivors. I’ve seen it numerous times in the claims business.
  9. Elisabeth says: August 23, 2008 at 1:45 pm But if something severe happened to your truck, who would want to buy it? You might wind up getting more from an insurance company (rather than selling or trading it) because it would probably be totaled.
  10. Anitra says: August 23, 2008 at 2:15 pm We only have liability on our 8-year-old truck – for exactly this reason. If something serious happened to the truck, we would simply replace it at this point (we’re probably going to replace it in the next year or so anyway). We DO keep a minimal amount of collision/comprehensive on our 6-year old sedan, even though it’s not worth a whole lot more than the truck. Partly for peace of mind, partly because it’s in better shape mechanically and we wouldn’t want to replace it yet. That said, our deductible is still somewhere around 1/3 of the car’s blue book value, which we could pretty easily afford.
  11. John says: August 23, 2008 at 2:43 pm I own a 1999 Honda Accord and in 2003 I increased my deductible from %500 to $1000. The savings in premium were well worth it. Less than six months later I was hit by an uninsured motorist. Since I had a $10,000 emergency fund, paying the $1,000 deductible wasn’t a problem. Quite to my suprise, several months later my insurance company recovered my deductible from the other driver. I’ll bet that wouldn’t have happened if I didn’t have an emergency fund. My car still runs great and I’ve never had a mechanical breakdown, however considering it is now 9 years old and has 210,000 miles, I decided to drop my collision/comprehensive coverage and now I only have liability. This makes perfectly good sense because I have a car replacement fund and can afford to replace the Honda without going into debt should it be totaled, stolen, or suffer a major mechanical malfunction. Consequently, my opinion concerning increasing your deductible and eventually eliminating certain coverages can be a sound strategy so long as you have an adequate emergency fund and there is enough savings in premiums to justify taking on the increased risk.
  12. Jeanie says: August 23, 2008 at 2:52 pm We have a 1995 Dodge Ram pickup with low mileage. We only use it for summer( mowing towing trailer etc). We dropped everything but liability. Then my DH had a summer job and drove it to work about 25 miles away. He hit a deer. $1400 later we checked on comp.; figures out about $5 a month. we put on our truck and convertible also. So the next deer we will be ready.
  13. Chris says: August 23, 2008 at 3:38 pm I have a 2001 Olds Alero that I’ve been driving with just liability for about 3 years or more now. I feel like I’m a good driver and my record seems to agree. Mostly I just hate monthly payments and like the feeling of saving a few bucks each month. I realize there is a small risk that I’ll get burned doing things this way, but I figure my car’s only worth $3500 or so anyway, so I’m not too concerned.
  14. Source

    UPDATE: If you’re looking for a rideshare friendly policy, we’ve actually got a list of insurance options by state available here: http://therideshareguy.com/rideshare-insurance-options-for-drivers/

    More and more states/companies are adding options every day so make sure you bookmark that page and check back often as we are constantly updating it!

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    I get e-mails all the time from drivers who get into accidents while driving for Uber and Lyft and have no idea what to do.  Unfortunately, accidents do happen and instead of waiting until it’s too late, I can’t stress how important it is to take a proactive approach and figure out what you need to know ahead of time.  

    Today, RSG Senior Contributor, Scott Van Maldegiam, takes a look at what happens after you get into an accident while driving for Uber or Lyft.  Scott has years of experience in the insurance industry and his review is one of the most thorough guides I’ve seen on the subject to date.

    As with many things in life, it isn’t a matter of “if” but a matter of “when”.  When the time comes and you have an accident while rideshare driving, you will want to be prepared.  You can ignore the risk and pretend that you’re the best driver on the road, but at the end of the day, the more you drive, the more likely it is that you will get into an accident.

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    How to Handle Rideshare Insurance After a Car Accident With Uber or Lyft

    Understanding what to do in the event of an accident and how the process works will help to relieve some of the stress that is involved with each and every accident.  This article should help prepare you for the inevitable but working with a good personal agent is probably your next best bet.

    More and more states are starting to offer rideshare friendly policies which means there are more and more agents that you can contact for help.  You can find a full list of rideshare insurance options by visiting our Rideshare Insurance Page where we also have recommendations for local agents who know what type of policies drivers need.

    Insurance Basics – things to know before you have an accident

    Let’s talk a bit about how insurance works in general when you get into an accident.  I will be talking exclusively about states that assign fault.  No fault states simplify things as your insurance company will always pay your damages regardless of fault, but most states assign fault and financial responsibility.

    If you are at fault

    This means that you and your insurance company bear the brunt of the financial responsibility.  Here are the different pieces of the insurance policy and what they apply to:

    • Liability – This part of your policy will cover damage to other cars, property and people that were involved in the accident.  Any injured persons that were in your car that are not direct family members are covered by liability as well.  There is no deductible for any liability claims.
    • Collision – This part of your policy covers damages to your own vehicle.  There is usually a deductible associated with collision insurance and varies policy to policy.
    • Medical – This is one of the most misunderstood parts of insurance.  Medical insurance covers yourself and anyone else in your car for medical expenses prior to assignment of fault.

    If the other driver is at fault

    This is certainly a better situation than the first example, but this is where most people get confused.  Coverages are used differently.

    • Liability – Not used here since you were not at fault.
    • Collision – This coverage is used temporarily until your insurance coverage can get payment from the other insurance company.  With most insurance companies, you will be subject to a deductible until the other insurance company pays.
    • Uninsured/Underinsured – This coverage is to protect you and your passengers should you get into an accident with an uninsured driver.  This coverage will pay out in the case the other person is at fault but does not have insurance.
    • Medical – This covers you and your passengers until the other insurance company pays.

    If the other driver is at fault, your insurance company should pay for the damages (mostly) and has a legal right and responsibility to collect from the insurance company of the at-fault party.  This is a valuable service that insurance companies perform if you allow them to,  if the damages are higher than your collision deductible and/or if there are injuries.

    If fault needs to be determined, then it is handled like the other person is at fault until responsibility for the accident can be assigned.

    What do you do in the case of an accident

    With all the boring, but important, background information out of the way, here is what you should do if you get into an accident while in a ride request with Uber, Lyft or Sidecar.

    • Keep your wits about you – The first few minutes after an accident are very important.  Here is what you need to gather.
      • License plate – Make sure you get the license plate of the other car in case they decide to take off.
      • Exchange information – Take pictures of the other person’s insurance card and drivers license.  Allow them to do the same.
      • Listen – It is more important to gather information than it is to provide information.  If you aren’t sure what happened, don’t be afraid to say “I don’t know.”  Also, pay attention to what the other party or parties are saying about the accident.  People who know they are at fault but don’t want to admit it will often lie to get out of the accident.  These lies usually contradict the evidence but it is especially important to note if the other party changes their story multiple times after the accident.
      • Witnesses – If there are witnesses, ask for their information and if they are willing to speak to police and insurance companies if asked.  If the other party is protesting that they were at fault and they clearly were, you would surprised how many people will come to your aid.
      • Police – Yes, they should be called, but do not rely on their information to help at all when determining fault or assisting in recovery of damages.  I have had more than one occasion where the police were actually a hinderance to the insurance claim process.
      • Note: If you get a ticket for causing an accident than you may want to consider using a service like GetDismissed.com to help prevent it from adding a point to your license since any tickets won’t end up being covered by your insurance ocmpany.
      • Be nice and keep an open mind – Regardless of who was at fault, be nice.  Emotions will be high so it is best to bring calm to a situation that can be the exact opposite of calm.
      • Do not admit fault – Unless fault is obvious, do not admit fault.  You don’t have to blame the other person, but it isn’t necessary to fall on the sword either.
      • Notes or recording – Recording your thoughts soon after the accident will help you remember small details.  Things happen quickly.  Taking a few moments to replay what happened in your head soon after the accident is a very good idea.
    • If driving as a rideshare driver, provide the rideshare insurance as primary insurance, not your personal policy.  Rideshare insurance is primary insurance when you have an active ride request (or are en route to a rider) so be sure to use Uber’s, Lyft’s, etc. insurance.

    In order to find your Uber proof of insurance, go to the waybill from the menu on the driver app and scroll down to the bottom of the waybill.  You will see Uber’s insurance information there and that is what you will provide to the other driver.

    With that out of the way, you will now want to contact your rideshare company.  You can call Lyft’s emergency hotline (855-865-9553) but with Uber, you’ll have to e-mail your local Uber office.  They will assist you in starting the process of your claim with James River.

    After the accident is reported, Uber or Lyft will most likely suspend your account until you can prove your car has no damage.  When you start a claim, you are letting them know that your car is damaged, so it makes sense.  In order to reactivate your account, you will need to provide proof that the damage is minimal enough as to not affect the customer experience or proof that repairs have been made.  For me, it was less than two hours from the time I provided proof via email until I was reactivated.

    James River will then ask you to get an estimate of the damages.  James River will only become involved in the process if:

    • You are at fault or
    • The damage to your vehicle is higher than the deductible.

    If the damage is lower than the deductible and the other person is at fault, then you are on your own to recover the damages.  From here, if James River is handling the claim, the process is simple as they handle everything.

    Things become more difficult in situations where you are not at fault and damage is less than the deductible.  (The deductible for Uber is $1,000 and the deductible for Lyft is $2,500.)

    Related Article: Lyft’s $2,500 Collision Deductible Explained

    As a rideshare driver…

    There is a lot to think about here, so here are a few things you should remember as a rideshare driver about preparing for the eventual accident.

    • Deductible – Have the amount of the Lyft or Uber deductible saved.  It is highly likely you will need this money in order to get back on the road quickly even if you aren’t at fault.  Lyft’s deductible is $2,500 which is admittedly high.  Uber’s is more reasonable at $1,000.
    • Down Time – An accident will take you off the road.  If the damage is so minor that it doesn’t affect your passengers experience, then you can be back on the road quickly.  If the damage is more severe, you could be off the road for weeks.  There are many variables involved with repairing vehicles including part availability.  Plan on 4 weeks and work with your repair shop to try and cut that time down.
    • Report the accident – The way to report the accident differs between the rideshare companies.  With Uber, you send an email.  They will then request you to fill out an incident report.  With Lyft, they ask you to call 855-865-9553.
    • Which insurance to report the accident to – What “period” you are in when the accident occurs affects who you report the accident to.  During period 1 (online without an active ride request), Uber and Lyft insurance is primary in some states and contingent in most others.  If insurance is contingent in your state, that means that it is secondary and will only cover you if your own insurance company doesn’t cover you.  During Period 1, if you are going to contact insurance at all, you need to contact your personal insurance company.  They will likely ask you if you are an Uber or Lyft driver (this is a standard insurance question now) and if you haven’t told your insurance company that you are a rideshare driver, you do run the risk of your claim being denied and/or dropped.  During periods 2 and 3 (active ride request with or without the passenger in the car), you should contact Uber or Lyft as they are the primary insurance at that time in all states.
    • Communicate with your personal insurance agent – Your personal insurance agent can be a great source of information.  While they won’t be the person to facilitate your claim, they will point you in the right direction and keep you on the right track.  We have created a list of good reliable insurance agents so this is a great place to start when looking for rideshare friendly policies.

    Handling the claim without James River or your personal insurance company

    The operative word is Diligence.  If you want to recover your damages, you need to stay on top of the other person’s insurance company.  Things that will help and things to watch out for are:

    • Witnesses – I cannot stress enough how much witnesses can help.  If it becomes your word against the other driver’s, it becomes more difficult.
    • Labor rate – This is a common way for insurance companies to low ball the claim amount.  Don’t let them do it unless you know your shop can do it for that amount anyway.  This can be a bit of a game since body shops know to price high in order to counteract the labor rate issue.  Yes, there are pricing standards, but….
    • Persistent – Call the other insurance company.  Be nice but force them to commit to a timeframe.  If the timeframe is too long, let them know that.  Follow-up with them when they miss deadlines and they will.
    • Don’t threaten – There are subtle ways to let them know this can be done the easy way or the hard way.  Express, after they have missed the third deadline, that you have been patient but they continue to say one thing and do another.  Ask them to confirm things that you both agree on.  They are not used to dealing with reasonable people.  This is one situation where honey will get you a lot further than vinegar.
    • Last resort – Of course if you can’t get them to make a payment, then you will need to seek representation.

    Personal examples

    I have learned how to handle accidents from the accidents my family has had.

    • My wife was in an accident many years ago where she was clearly not at fault.  It happened in a parking lot so the police did not write any tickets but took a police report.  The other party had friends on the police force so they went to the police station and modified the police report to make it look like my wife was at fault.  Thankfully, the story they concocted was so unbelievable that their own insurance company saw that it was a lie and paid us a higher amount so the claim would exceed a threshold where they could raise their rates.
    • I was in a three car accident about five years ago where I was rear-ended while sitting at a stop light.  It was a bad accident where the person in the third car went to the hospital.  The person in the second car which was the car that hit me changed her story three times while at the accident site.  She told the final version to the police officer.  The real story was that she hit me and then the final person rear ended her.  Her insurance company claimed the third car pushed her into me.  I knew this wasn’t true since I felt two impacts.  The case went to arbitration and the middle car was assigned responsibility for my damages which were over $4000.  My insurance company paid out for all damages minus the deductible right away but withheld the deductible amount ($500) until they received payment after the arbitration which was 9 months after the accident.

    If you are still with me after this marathon article, you understand the importance of insurance and knowing what to do.  Please share any personal experiences or any questions you may have in the comments.

    -Scott @ RSG

    UPDATE: If you’re looking for a rideshare friendly policy, we’ve actually got a list of insurance options by state available here: http://therideshareguy.com/rideshare-insurance-options-for-drivers/

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    Scott Van Maldegiam

    I'm Scott, a full time health benefits consultant and rideshare driver. I spent 11 years working for Motorola and Tellabs using my EE degree and MBA before transitioning into the mortgage industry where I spent 6 years. I then spent 5 years in the cycling industry before transitioning into health insurance. Car insurance dubois parkCar insurance diminished value

    Latest posts by Scott Van Maldegiam (see all)

    • Top 10 Rideshare Vehicles to Insure - October 21, 2016
    • How To Drive For Uber And Lyft At The Same Time - July 28, 2016
    • What Can Happen If You Don’t Have Rideshare Insurance? - June 15, 2016


    How much car insurance should you buy?

    There are two correct answers:

    First, you need enough insurance to drive legally. Find out your state car insurance minimum requirements.

    Second, you need enough car insurance to protect your life from turning into a living hell if you have a car accident. That can be as easy as buying the minimum coverage. Or it can be much more complicated.

    We'll walk you through our guide on figuring this out.

    Who should buy minimum levels of liability car insurance?

    • Minimum liability is rarely advisable, but if you can't afford more, it's better than no insurance.
    • If you have no savings or assets, minimum liability coverage may suffice.

    In most states the minimum liability required by your state is not enough to pay for serious injuries or to replace a newer car. It is only enough to drive legally.

    If you own only the clothes on your back and a very old car, you can get by with just the minimum levels of liability mandated by your state. That’s because you're probably what is known as "judgment-proof." You may lose if someone decides to take you to court to pay for an accident you cause, but you have no real assets to take.

    If you have savings or a home or even expensive jewelry and valuable collectibles, you are not judgment-proof. And you need more coverage.

    To help you decide how much liability insurance you need, we've created three liability insurance levels as a rough guide. Levels of coverage offered will vary by state and by insurer. Liability insurance will not repair your own car.

    In the levels below:

    • The first two numbers refer to bodily injury liability, which pays the hospital bills of anyone you injure.
    • The first number is the per-person limit.
    • The second is the per-accident limit.
    • The third number is the property damage liability limit, which would repair or replace the car of anyone you hit.

    50/100/50: This level of coverage is recommended for those who have an older car, few assets, don’t drive much and are on a tight budget, for instance college students and retirees who are downsizing.

    100/300/100: This is the level most financial experts say is appropriate for middle-income earners with a typical level of savings, adequate in most circumstances. The cost of liability insurance, once you have bought the basic levels, does not increase exponentially. Moving to 100/300/100 will not cost twice as much as 50/100/50. In an analysis of rates, CarInsurance.com found that it costs just $96 more a year, on average.

    250/500/100: If you own an expensive home or have saved diligently, you may be worth millions even though you do not consider yourself rich. We would suggest supplementing even this high level of coverage with an umbrella liability policy that extends your protection by $1 million or more. It’s relatively cheap.

    Who should buy uninsured motorist car insurance?

    • If you have your own health insurance and you have purchased collision coverage, you may be able to skip uninsured motorist coverages if your state allows.
    • It is a good idea to keep uninsured motorist coverages if you can afford to, because they can minimize your financial losses from deductibles and coverage caps.

    Your state may require that you buy uninsured motorist bodily injury coverage, which pays your hospital bills if you are hit by an uninsured driver. Your state may require only that you be offered this coverage but allow you to turn it down.

    If you buy this coverage, it typically will come in the same amounts as your own liability coverage.

    Uninsured motorist coverage costs an average of $83 a year, according to a CarInsurance rates analysis.

    A few states also require uninsured motorist property damage, which usually pays for some -- but not all -- of the damage to your own car. It doesn’t cover hit-and-run accidents in most states, though.

    Do you need comprehensive and collision coverage?

    • Yes, if your car is less than 10 years old.
    • Yes, if you can't afford to repair or replace your car.
    • Yes, if you live in an area prone to flooding, hail, tornadoes or animal strikes.

    Comprehensive insurance pays for damage to your car from severe weather, fire, collisions with animals and theft. Collisions pays to repair your car if you cause an accident.

    This is where car insurance for a 10 year old car comes into play. If your car is less than 10 years old, you should consider buying comprehensive and collision coverage. You should also carry comprehensive and collision insurance if your car is 10 years old or older, but worth more than $3,000, or if you can’t afford to repair or replace it.

    If you owe money on your car, your lender requires you to have collision and comprehensive coverage, which would repair or replace your car. Liability insurance pays only for others’ cars.

    You must choose a deductible amount for collision and comprehensive coverages. Damage below this amount is your responsibility to fix.

    We recommend that you keep deductibles low while you are still making payments on a car. Once the car is paid off, build an emergency fund and raise your deductible to match it.

    Comprehensive costs an average of $172 a year, collision costs an average of $488 annually, according to CarInsurance.com’s rate analysis.

    Do you need medical payments or personal injury protection?

    • Yes, if you don't have health insurance.
    • Yes, if you can't afford or don't have the savings to live without a loss of income due to injury.

    Your state, especially if it is a no-fault state, may require that you buy personal injury protection so that your injuries in a car accident are always covered up to your limits, no matter whose fault the accident was. It usually includes coverage for lost wages as well.

    Medical payments coverage is required by a few states but is optional in most, paying medical expenses up to your limits. If you don’t have your own health insurance coverage, you should consider this coverage. If you have a high-deductible health plan, medical payments may help pay the deductible.

    Personal injury protection costs an average of $198 yearly. Medical payments costs an average of $22 a year, according to CarInsurance.com’s rate analysis.

    How should you save money on car insurance?

    In order of impact and potential savings, we suggest the following steps for drivers trying to save money on their car insurance bills:

    • Shop around. You will see that the rates major insurers charge the same driver in the same car can vary by hundreds, sometimes thousands, of dollars. See how much average car insurance rates can differ in your neighborhood by entering your ZIP code into our comparison tool.
    • Look for car insurance discounts.
    • Consider a named driver exclusion if a member of your household has a high-risk driver history.
    • Raise your deductibles.
    • Drop collision and comprehensive coverage altogether if you own your car outright.
    • Drop other optional coverages such as uninsured motorist or medical payments.
    • Reduce the amount of liability coverage you are buying.

    If you know what coverage you want to buy, start comparing quotes from multiple insurance companies.


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