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Auto Insurance Information Center

In Touch with 21st - August 2013

How much auto insurance do I need?

How much insurance do I need?

Auto insurance policies can be highly personalized, designed to fit a person’s needs or lifestyle. Most states have a minimum level of auto insurance drivers must purchase, Driving uninsured is not an option, and you want to protect yourself financially by having enough auto insurance coverage. How do you know if you’re underinsured?

Let’s start with required coverage. Liability insurance, protects you against the damages you cause to others if you are found at-fault in an accident, is required in 49 states and the District of Columbia. New Hampshire is the only state that does not have a required liability insurance law, but the state requires drivers to be able to demonstrate they are able to provide sufficient funds in the event they are found at-fault for an accident.

On the other hand, Uninsured (UM) and Underinsured (UIM) motorist coverage is not required in most states. An uninsured driver is someone who does not have insurance, or whose insurance company either denied their claim or was not financially able to pay it. An underinsured driver is someone who met minimum legal financial responsibility requirements, but did not have coverage limits high enough to pay for the damage they caused. In these cases, UM or UIM coverage can pay for your damages.

Why you need Uninsured (UM) and Underinsured (UIM) coverage  

Unfortunately, the chances that you will be involved in an accident with someone who does not have insurance coverage are higher than you think. There are usually a couple of reasons for this. In some cases drivers cannot afford insurance, in others, drivers simply do not want to pay high premiums as a result of their poor driving record. With close to 14% of drivers in the United States uninsured it is costly to track down violators. On top of the 14% who drive without insurance, it is also estimated that 20% of people who do have insurance purchase only the required minimum liability coverage. If you are hit by an uninsured or underinsured driver any injuries or damages may not be paid for by the person at fault if they don’t have enough insurance to cover the costs. By including uninsured/underinsured motorist (UM/UIM) coverage on your policy, you will most likely be covered should something like this happen.

The potential outcome of not having enough coverage  

Im addition to having coverage to protect against other drivers, it's also important to make sure you have enough insurance. While it may be enticing to reduce the amount of coverage to save on costs, savings that result from reducing the amount of coverage you have aren’t necessarily the best option. If you are involved in an accident and the limits on your policy are not enough to cover the costs, you may be responsible for payment of those damages if you are found liable. Instead, take some time to discover ways to pay less for auto insurance.

Here are some ways you can save on the cost of insurance without reducing your coverage:

• Take advantage of a multi-policy discount.

• Take advantage a multi-vehicle discount.

• Take a defensive driving course to lower your rates.

You have to look at the big picture when deciding on the amount of coverage you select. Try to think about auto insurance based on what you are trying to protect rather than a bill to pay. By identifying your needs you can better focus on the amount of coverage you need. Is it worth saving a few dollars a month to potentially leave yourself exposed to a claim? With auto insurance, while you only are required to purchase the minimum amount your state requires, spending a little more – which can often mean having a lot more coverage – is often the best thing to do.

Note: This information only serves as an educational guideline and is not to be taken as advice. 21st Century Insurance is not responsible for any injury or loss that may occur due to use of this information.

Sources: nhtsa.gov; dmv.org; iii.org; nytimes.com; insurance.com; cnnmoney.com

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