A Breakdown of Car Insurance and What You Should Actually Be Spending

Jun 30, 2023

Car insurance is mandatory in the USA. Thebasic car insurance mandate laid out by most USstates provides financial protection to car owners and the person injured in an accident. Inaddition, basic insurance also covers public and private property damage and other financialdistress during and after the accident. Therefore, car owners are confusedaboutwhether theyshould purchaseoptionalinsurance or not. In this blog post, we willbreakdown car insurance and explainmandatory and optional insurancetodecide whether you need additionalinsurance or not.

Mandatory Coverage  

Nearly all the states in the USA require car owners to have the following insurance coverage when they purchase a new vehicle. These insurance coverage options act as a safety measure for car owners and pedestrians.  

  • Bodily Injury Liability  

Bodily injury liability is straightforward mandatory insurance that covers injuries and accidental death. With this insurance, you don’t have to pay out of your pocket as your insurance company will cover the cost of the accident.  

  • Property Damage Liability  

Property damage liability is similar to bodily insurance. However, instead of covering injuries, this insurance pays for property damage during a car accident. Property could be public or private, car, or a street light. All the costs involved with an accident are covered to an extent under this insurance.  

Frequently Required Insurance 

Many states require you carry this insurance when you buy a car. However, these insurances aren’t mandatory but very helpful in case of an accident.  

  • Medical Payment or Personal Injury Protection (PIP)  

PIP is a common insurance most car owners purchase that can reimburses you for the medical expense of you and the other person involved in the car accident. PIP also covers the passenger, lost wages, and other expenses.  

  • Uninsured Motorist Coverage  

This insurance pays for your expense when a driver without insurance hits you. Moreover, this insurance is also helpful for hit-and-run cases. You can also purchase underinsured motorist coverage, which will pay for the lacking from the at-fault party’s insurance.  

Optional Insurances You May or May Not Purchase  

The main question here is, “should I buy optional insurance?” Legally speaking, mandatory insurance covers the damages done to the other person but does not pay for your car. In this situation, most car owners opt for optional insurances, like collision insurance, comprehensive insurance, glass coverage, and gap insurance. These insurances pay for your car in case of an accident, while gap insurance pays when your car is totaled.  

What You Should Actually Be Spending on Car Insurance 

You don’t have to buy optional insurances in most cases unless you drive an expensive sports car because the legal insurance of the at-fault party is more than enough to cover your expense. However, their insurance limit might not cover the damages to your luxury vehicle. Nevertheless, the national average of insurance payments in the USA is more than $1,000. The payment varies due to factors such as driving record, age, gender, and credit history. Moreover, you can cut down your insurance cost by protecting your driving points so you can bargain for better insurance rates in the future.  

In a Nutshell 

Mandatory insurance of the other part is enough to cover your damages if you don’t own a luxury or sports car. On the other hand, optional insurances are also beneficial if you know your car’s repair cost is above the roof! However, you don’t need to pay too much for insurance if you drive safely, follow the law, and have mandatory insurance.  

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