Reading the liability numbers
Liability limits are written as three figures, such as 25/50/25. The first is the maximum paid, in thousands of dollars, for one person's injuries. The second is the maximum for all injuries in one accident, and the third is for property damage. State minimums are often at or below that level, and they are dangerously thin. One hospital stay or a collision with a new pickup can exhaust them, and the injured party can pursue your wages and savings for the rest. Coverage of 100/300/100 is a sensible target once you have any income or assets to protect.
The other coverages
- Collision pays to repair or replace your car after a crash, whoever was at fault, minus your deductible.
- Comprehensive covers theft, hail, flood, fire, falling trees, vandalism and animal strikes.
- Uninsured and underinsured motorist coverage pays for your injuries when the driver who hit you has no insurance or too little, which describes roughly one driver in seven.
- Gap coverage pays the difference between what you owe on a loan or lease and what the car is worth if it is totaled early in the loan.
A lender or leasing company will require collision and comprehensive. On a paid-off older car, a common rule of thumb is to drop them once their annual cost exceeds about ten percent of the car's value, because the most the insurer will ever pay is that value minus the deductible.
What sets your price
Insurers weigh your driving record, age, years licensed, ZIP code, annual mileage, the car itself, and in most states a credit-based insurance score. Ask about discounts for good grades, a defensive driving course, low mileage, bundling with renters insurance, and paying the full six-month term up front. Shop at least three insurers every year or two with identical limits, since pricing for the same driver varies widely.
After a crash
- Move to safety, check for injuries, and call 911 if anyone is hurt or the road is blocked.
- Exchange names, license numbers, plate numbers and insurance details with the other driver.
- Photograph both cars, the plates, the scene and any road signs, and collect the names and numbers of witnesses.
- Notify your insurer promptly, and describe what happened without guessing at fault.
Tip Insurance generally follows the car, not the driver. Before you lend yours to a friend, remember that the friend's accident becomes your claim and your rate increase.
