Americans are required by law to purchase, at the very minimum, liability insurance for any car they are driving. However, with the rising cost of medical services, and cost distribution that favors an inverse bell curve (favoring the extremes rather than the averages) it makes great sense to purchase more than your state liability minimums. However, in addition to this, there are three other coverages you should keep in mind, which will help protect you and your property.
Coverage One: Medical Payments
When someone else is liable for an accident, then they are liable for any injuries sustained to passengers of your vehicle. When you hit another vehicle, your liability coverage will help to protect you from being sued over medical costs of the other party. However, it is important to note that your liability coverage does not count towards other occupants of your same vehicle in the event of a crash that you cause (with or without another car).
It is arguable that a person would win in such a case, as they chose to ride with you, probably knowing your driving habits. However, if they can prove pure negligence, then they might have a case against you. Instead of going through this, you might want to look into medical payments, which will cover the occupants of your vehicle during any accident. This extra coverage usually costs very little but could save you a lot down the road.
Coverage Two: Depreciation Protection
Many companies offer some sort of rider that will protect you from losses or underwater due to depreciation. If you are purchasing a new car and getting a loan on it, you most certainly should get such additional coverage. A car can depreciate as much as 25% just by driving it off the lot, and depreciation protection is designed to provide replacement cost, not actual cash value.
For example, say that you decide to take an auto loan to buy a car for 20,000 USD. As soon as you drive off the lot, the car’s actual cash value is probably somewhere around 15,000 USD. Imagine while you are going down the road, you accidentally run a stop sign, swerve to avoid another car, and go into a tree. Luckily you are not injured. However, if you had no depreciation clause, you are automatically 5000 underwater, meaning you now have no car and you owe 5000 USD to your lender. Depreciation protection can help with that.
Coverage Three: Under-Insured Motorist
Usually, companies will couple their under-insured motorist coverage with their uninsured motorist coverage. However, with some companies, you might get the chance to opt-out of under-insured coverage for a small monthly reduction on your bill. I cannot recommend against this enough. If you have medical conditions or a car that cost more than the state minimums of liability coverage, you WILL need this coverage. Otherwise, there is a high likelihood that your car will not be fully covered in any given accident.
With these things in mind, you will be able to make an informed decision about what coverage packages you need, and what is applicable to your lifestyle. The companies truly hope you never need to use your coverage, but it is peace of mind knowing you have them.