Nearly every state requires that you have some form of auto insurance coverage. Driving without insurance is illegal in most states and will result in heavy fines and penalties if you're caught. In addition, to register a car you will need to provide proof of insurance.
Minimum car insurance – is it enough?
There are state minimum insurance requirements that differ from one state to the other. These are regulations or state laws that prescribe the insurance requirements that car owners in the various states must abide by. You need to get auto insurance coverage that meets these legal requirements to avoid being on the wrong side of the state law. This underscores how important it is to check for your own state requirements to learn the details of these requirements. You can also find these minimum requirements for your state at the state insurance commissioner's website.
Normally, your state will require that your car has at least a specified minimum coverage for property damages and bodily injury. In other words, your auto insurance policy must carry two major parts: liability insurance for property damage and liability insurance for bodily injury.
Your state law might require additional coverage
There are some states that require additional car insurance coverage. Drivers in Minnesota, for instance, are required to buy personal injury protection (PIP), sometimes referred to as “No Fault” coverage, in addition to the policy for property damages and bodily injury. In Wisconsin on the other hand, you are required to carry uninsured motorist coverage as part of your auto insurance.
It's not always easy to find out what the exact details of this coverage are, so you may want to contact your insurance representative with any questions you want answered.
Just how much coverage is proper coverage?
The right coverage for your car depends on your financial situation. If you do not own a home and have very little in assets, the state’s minimum requirements might be sufficient for your coverage. However, keep in mind that you are taking a huge risk by going with just the minimum coverage. The cost of a moderate to severe accident can easily run north of $100,000 and you will could potentially be sued for damages and have assets seized or your paycheck garnished to satisfy a court order.
Liability coverage is mandatory however, collision is completely optional. Collision coverage covers damage caused to the insured's vehicle due to the fault of the insured. Due to the high costs involved in replacing a vehicle, collision coverage is a must.
In addition, you will be required to maintain full coverage if you finance your vehicle until the loan is paid off. If you drop the required coverages before your loan is paid off it could put your loan in jeopardy.
If you have health insurance coverage and disability insurance through your employer for instance then you likely will not need to spend much money on a Personal Injury Protection policy. The coverage you already have should be just sufficient enough.
You will also need adequate coverage against under-insured and uninsured drivers regardless of your state’s minimum. The good news is, this coverage is fairly inexpensive in most states.
Finally, be sure to choose the highest deductible that you can afford it. This will help lower your premium significantly.