Car Insurance Guide

Liability insurance covers damage and injuries you cause to others — it's required in nearly every state. Property damage liability pays to repair or replace another person's vehicle or property. Bodily injury liability covers medical costs for injuries you cause. State minimum limits are often dangerously low; experts typically recommend 100/300/100 limits ($100k per person / $300k per incident / $100k property damage) as a practical baseline. Collision coverage pays for damage to your own vehicle in an accident regardless of fault. Comprehensive coverage pays for non-collision damage: theft, fire, hail, flood, animal strikes, and vandalism. Both have deductibles — the amount you pay before insurance covers the rest. Uninsured/underinsured motorist coverage pays for your injuries and damage if the at-fault driver has inadequate or no insurance.

The right coverage depends on your vehicle's value, your assets, your state's requirements, and whether you have a loan on the vehicle. For a financed vehicle, your lender requires collision and comprehensive. For an older vehicle worth less than $5,000, dropping collision and comprehensive and pocketing the premium savings may make financial sense — the maximum payout from the insurer can't exceed the car's value. For liability limits, match them to your net worth and assets. If you're sued following an accident, the judgment can exceed your policy limits and go against your personal assets. Higher liability limits are inexpensive — upgrading from 25/50/25 to 100/300/100 often costs $50–$150 more per year. That's a bargain for the protection it provides.