As an auto insurance agent licensed in 46 states as well as the District of Columbia, I get a lot of questions about what sort of insurance people should have, and what does all of the coverage mean. After all, it’s not like insurance is an interesting topic that people discuss at lunch or at parties! Instead, it’s something necessary that you must have, and pay, in order to operate a motor vehicle.
To break it down, every car in the United States must have at least the minimum amount of liability in their state. Several states are different.
For example, in California, the state minimum is $15,000 per person and $30,000 per accident. The coverage can go as high as $1,000,000 per person and $1,000,000 per accident.
Before you choose a coverage that’s right for you, there are things you should know so you can save on premium.
1) Liability insurance covers costs of injured people in vehicle you hit. It does not cover your own vehicle.
2) Liability insurance should be equal to the amount of money and property you own. You may only ever be sued for what you own. If you are renting an apartment and you have $100 in the bank, and your limits of liability are $250,000 per person and $500,000 per incident (shows as 250/500), then your coverage is too high and you are probably paying too much for insurance. By the same token, if you own a $300,000 home and you have $250,000 in a IRA or 401K, and your coverage is 15/30- you will be in big trouble if you get into an accident and hurt someone- because they can sue you for what you own, but you’re only covered for $30,000.
3) Other insurance you must have according to the state is ‘Property Damage’ which is what your insurance will pay if you hit another car, or damage a piece of property.
4) Full coverage only covers your car. If you have a 1989 Honda Accord, it’s probably not worth having full coverage on because your insurance company will not fix it if you’re in a wreck. If you have a lien on your car, you MUST have full coverage according to the lien holder.
As far as getting good rates on auto insurance, your insurance score will be a factor. Every insurance score will get it, but some emphasize it more than others. It includes your previous accidents, tickets, credit score, and your financial responsibility when it comes to paying your insurance. The best companies to look at if you want cheap coverage is Progressive and GEICO. They are not conservative companies and they will take almost anyone (unless there is a DUI involved).
I hope this helps answer questions you may have when purchasing insurance!