Affordable Auto Insurance – the Nuts and Bolts

Are you shopping for affordable auto insurance?  Before you begin your search, it will help if you know what the minimum liability requirements are for your state.  All states, except for New Hampshire, usually require motorists to carry Bodily Injury Liability and Property Damage Liability.  When you look for your state’s minimums in the chart below, these 2 components are expressed with 3 numbers.  For our example, Alabama’s liability minimums are 25/50/25K.

The first number (25) represents bodily injury (BI) liability and is the maximum amount ($25,000) that will be paid to one person injured in an accident.

The second number (50) of bodily injury (BI) liability represents the maximum amount ($50,000) that will be paid for all injuries in one accident.

The third number (25) represents the maximum amount ($25,000) that will be paid for property damage (PD) for one accident.

Once you know your states minimum liability requirements you can use these numbers to search for affordable auto insurance online.  However keep in mind most state’s minimum coverage amounts are quite low when you compare them to the actual costs of medical care and property damage after an accident.

In addition, sixteen states will require you to purchase Personal Injury Protection (PIP).  If you are injured in any type of automobile accident (be it on a bicycle, as a pedestrian, as a passenger or driver), PIP covers your personal medical expenses and any lost income for up to 1-3 years, depending on your state.  PIP also covers any passengers in your vehicle at the time of an accident if they don’t have similar insurance.  Often referred to as “no-fault” insurance, PIP pays for your injuries regardless of who caused the accident.  See the chart for your State’s PIP minimums.

Don’t forget too, you’ll probably want to factor in the cost of Collision and Comprehensive to your policy.  It’s not required coverage unless you’re still making payments to the bank.  If you’re driving anything 15 years or older, you may want to eliminate both Collision and Comprehensive to save money.  Just remember liability property damage only pays for damage to the other guy’s car, not yours.  Only Collision coverage pays for damages to your vehicle in the event of an accident.  Comprehensive pays for things like fire, theft, vandalism, wind damage, hail or run-ins with deer.

The chart below also details which states require drivers to carry uninsured (UM) and/or under-insured motorist (UIM) coverage.  Maybe as a result of the U.S. economic crisis, data collected by the Insurance Research Council has found a strong correlation between the unemployment rate and the percentage of people driving without insurance.  They believe that the percentage of uninsured motorists could rise from 13.8 in 2007 to 16.1 in 2010.  Not a big surprise there!  If your finances are tight, deciding which bills to pay can be a tough choice.  However, driving without insurance can result in a suspended license and/or registration.  Some states will seize your car and/or impose heavy fines.  Severe penalties can even include jail time.  A better choice might be to look at other ways of getting to and from your destinations.

Unfortunately, it doesn’t matter how good a driver you are, an accident can happen when you least expect it.  Finding affordable auto insurance is a priority for everyone, but don’t sacrifice your financial future with inadequate coverage.  You’ll find advertisements all over the internet for cheap auto insurance.  Just remember you get what you pay for.  If you do the research and get as many quotes as you can, your persistence will pay off in savings and provide you with the coverage you need at an affordable price.

Source: Insurance Information Institute and State Departments of Insurance

(*FR) Financial Responsibility

(1) No-Fault States do not attribute blame to drivers involved in accidents.  In other words, your insurance company will pay for your medical expenses up to your policy limits, regardless of who is at fault.   No fault is also known as Personal Injury Protection (PIP).

(2) California’s Automobile Assigned Risk Plan provides low-cost policy limits of 10/20/3K for low income drivers.

(3) Bodily Injury Liability comes under Florida’s Financial Responsibility Law.  It requires drivers to have sufficient cash reserves available to meet BI limits of $10/20K, or they must purchase insurance to cover these limits.

(4) Policy holders in New Hampshire and Maine must also carry a minimum of $1,000 for medical payments (MP).  This covers funeral and medical expenses for you or any others hurt or killed while passengers in your car.

(5) In addition to the Standard policy, New Jersey offers a Basic Policy that is less expensive than the Standard, but provides limited benefits.  Ask your representative for details.