According to the National Association of Insurance Commissioners (NAIC), the average cost for auto liability coverage is $644.11. Comprehensive coverage costs an average of $167.91, and collision averages $377.62.
How, though, can you make sure you have enough coverage to pay for an at-fault accident? What about deductibles that won’t leave you in the lurch? That’s precisely what we’ll help you decide in this article.
Before diving in, let’s quickly discuss a few basics to ensure everyone’s on the same page.
How Does Auto Liability Coverage Work?
The liability portion of your auto policy consists of two main coverages:
- Bodily injury (BI) — Pays for injuries to another party’s driver and passengers, including emergency and ongoing medical expenses, along with loss of income.
- Property damage (PD) — Pays for damages to another party’s property, whether their vehicle or anything else you strike with your car, such as fences, mailboxes, and so forth.
Related: Why is Auto Liability Coverage Important?
Under your auto policy, liability coverages are typically listed as split limits (e.g., 25/50/25). Here, the first number represents the total bodily injury available per person, the second represents the total BI available per accident (regardless of the number of drivers), and the third represents the total property damage available per accident.
Sometimes, these coverages are listed as a combined single limit (e.g., 500 CSL), which represents the total available per accident without limiting the per-person payout.
Additional liability coverages available, depending on the state in which you reside, include:
- Uninsured/underinsured motorist coverage — Helps pay for damages to your person or property caused by an uninsured driver or one that doesn’t carry enough coverage to compensate you for your losses.
- Personal injury protection (PIP) — Helps pay for your and any passenger’s medical and hospital bills, as well as many other aspects, if you’re injured in a car accident. Not available in all states.
So, how can you decide which liability limits you need? We’ll get to this topic shortly, but let’s first take a closer look at deductibles.
What is an Auto Insurance Deductible?
A deductible is an amount you must pay out of pocket before your insurance coverage kicks in.
But not all coverages under your policy are subject to a deductible. In most instances, the only ones where you’ll need to pay include:
- Collision — Provides coverage if you collide with another vehicle or a fixed object, such as a fence, tree, mailbox, or traffic sign.
- Comprehensive — Pays for causes of loss not covered under collision. Typical perils covered include theft, fire, glass and windshield, vandalism, natural disaster/weather (hail, flood, lightning, hurricanes, tornadoes, earthquake, etc.), explosion, animal-related damage, and civil disturbance (e.g., riots).
For example, if you rear-end another vehicle on the highway, the total damage to your car is $5,000, and you have a $1,000 deductible, the insurance company will cut you a check for $4,000.
With these details in mind, let’s find out how you can choose the right deductibles and liability, comprehensive, and collision coverages for your auto policy.
How to Choose the Best Auto Liability Coverages
Most states stipulate the minimum allowable liability coverages, although these limits often aren’t sufficient to cover another party’s bodily injury and property damage in the event of an accident. As such, I recommend going no lower than 100/300/100, although a good rule of thumb is to purchase the highest auto liability coverages you can afford based on your total assets.
Otherwise, if you’re involved in an accident, the courts can seize your assets and garnish your wages to help repay the bodily injuries and/or property damages you caused.
How to Choose the Best Auto Insurance Deductible
When it comes to choosing your deductible, there are three main aspects to consider:
- The value of your vehicle;
- The amount of money you have available to pay for an emergency;
- Your target premium.
According to WalletHub, you might want to consider removing comprehensive and collision altogether if the cost of these coverages exceeds 10% of your vehicle’s value. For example, suppose your vehicle’s valued at $8,000, but you pay $900 per year for comp and collision. In that case, it might make financial sense to remove them since they’re typically the most expensive coverages under your policy.
Even if the cost of these coverages doesn’t exceed 10%, but you have enough money set aside to pay to repair your vehicle if it’s damaged in a covered accident, it might make sense to remove them.
Do You Need Additional Help With Your Auto Coverage or Deductibles?
Choosing the right liability coverages and deductibles is a reasonably straightforward process, based on your assets and overall budget. But if you need help, the team at IHS Insurance Group is standing by!
Need a FREE Quote or have questions regarding Auto Insurance Coverage? We have three convenient ways to reach us:
- If you prefer to talk to a licensed agent directly, please call (866) 480-5063.
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We look forward to speaking with you!
