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How Coverage Limits Work for Car Insurance


There is a lot you need to know when going to purchase an automobile insurance policy, including what car insurance limits are and how car insurance limits work. Each state has different minimum requirements, called minimum limits, for automobile insurance in the state. The lowest amount of insurance protection you can purchase in order to be legally driving in the state is called the state-mandated minimum liability coverage limit. This is the bare minimum in terms of insurance, and it is often not enough to cover people's needs. Many people choose to get a higher amount of insurance coverage to better protect them for their specific situation. In addition to the minimum limits for liability insurance, as well as other required insurance depending on the state, there are other insurance types that you may want to purchase.

How Coverage Limits Work

Minimum coverage limits are the minimum amount of insurance, of specific types, that are required by law. Above that, the coverage limits are used to determine the maximum amount your car insurance company will pay out in given situations. To drive legally in your state, you will need to meet the minimum limit requirements for insurance in your state. Some states only require that drivers purchase liability insurance policies to drive legally, and others require other insurance types at state minimums, like uninsured motorist coverage, UIM coverage, personal injury protection, and sometimes others as well. Keep in mind that your state might require both bodily injury liability coverage and property damage liability coverage. Each of these insurance types, if required by the state, will have minimum limits. Other insurance types that are not required, such as comprehensive insurance and collision insurance, will not have minimum limits. You will want to explore the value of your vehicle, the laws in your state, the deductibles that you can afford, and other variables while shopping around for the best car insurance policy for your needs.

The premium rate that you pay will be based on the amount of coverage that you select, with the lowest car insurance premiums being the minimum amount of insurance required. Most people choose to purchase more car insurance coverage, and if you are financing or leasing a vehicle, you may find that the financing or leasing company has requirements regarding insurance as well. Most financing and leasing businesses will require that you have comprehensive insurance coverage, as well as collision insurance coverage on your vehicle. They may also require that you have a lease gap insurance as well. Getting the right amount of insurance is incredibly important.

In addition to minimum limits, when you purchase an automobile insurance policy of any amount, you are buying a plan that has a limit of some sort on it. The higher the limits of what a car insurance provider will pay on a claim, the higher your premiums are. Since there are multiple types of car insurance that you can purchase, adjusting any of them can increase or decrease the rate you pay for car insurance.

What types of car insurance coverage is available?

One of the types of car insurance that is available is liability insurance, which covers the expenses related to other people's vehicles, their bodies, or their property. This type of insurance does not cover you, your car, or your property. Comprehensive and collision insurance coverage will cover damage to your vehicle if an accident or covered situation occurs. There are also insurance types, like Med Gap insurance, to help cover medical expenses if you or your passengers are injured in a car crash. Roadside assistance coverage, uninsured motorist insurance, UIM insurance, lease gap insurance, and other types of insurance, are also available for purchase. This allows for a lot of flexibility for policyholders when they decide to purchase an auto insurance policy. Not all car insurance companies offer every type of insurance and perks, so you may need to shop around to find exactly what you are looking for. It is a good idea to shop around for the best car insurance policies, as comparison shopping helps you find the best rates on car insurance. Each car insurance provider uses different factors and variables to determine rates, and you can save hundreds of dollars on car insurance by comparing rates from multiple companies.

Factors to Consider When Selecting Your Auto Insurance Limits

An excellent first step for purchasing automobile insurance is to look up with the average cost of insurance is in your state. You can use this as a benchmark to determine a ballpark amount to start with. Some people also choose to look up statistics surrounding crime, vandalism, accidents, and other variables to help them determine how much liability insurance coverage they should get, and whether or not collision insurance coverage or comprehensive insurance coverage make sense for them. If you do choose to get collision or comprehensive insurance plans for your vehicle, you will want to consider getting enough coverage to cover the entire cost of your vehicle. Another important factor to consider is how much money you can afford in terms of deductibles and out-of-pocket expenses. It is usually the best plan to purchase enough liability coverage to cover the costs of a serious accident. This is the best way to protect your finances if a car crash occurs.

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