Basic auto insurance is just that: it’s basic. But everyone has their own unique situation, and you may have a situation where more or less auto coverage would work better for you. There are some common reasons you may want to consider increasing your auto insurance coverage limits or adding optional coverages to your policy.
Let’s take a look!
Reasons to Consider More Auto Insurance Coverage
- You have a teen driver on your policy
- You have multiple drivers on your auto policy
- Your net worth has increased
- You participate in a carpool
- You’re going on a road trip
- You’re adding custom parts to your ride
- You’re financing your car
- You drive, park, or live in a high-crime area
- You drive for work
- You want premium coverage options
- You have a classic or high-value car
Note that the first five are typically related to situations where you may want to consider more auto insurance liability coverage while the last six are generally related to situations where you may want to consider purchasing optional coverages. You can learn more about what auto liability insurance is and how to ensure you have enough liability insurance here.
What is a coverage limit?
Your auto policy liability “limit” is the maximum amount your auto insurance will pay in the case of a liability claim (subject to the terms of your policy and your deductible). For example, you may have a 250/500/250 liability policy. This means, if you are found at-fault for someone else’s damages in an accident, you have available coverage of up to $250,000 in bodily injury per person, $500,000 bodily injury per accident, and $250,000 in property damage per accident. If the damages you are responsible for are higher than those limits, you could be responsible for paying the remainder out of pocket.
So, for example, you were at fault for an accident that totaled another car. The driver of that car was hurt as a result of that accident and wins a million-dollar bodily injury lawsuit against you for medical bills and pain and suffering. In the case of the limits above, your insurance would likely only cover $250,000 of those damages and you could be on the hook for the remaining $750,000 dollars.
The higher your limits, the more coverage you have available from your insurer
We recommend starting with the Guide to What Different Standard Auto Insurance Policies Cover to get a good grasp on the basics of auto insurance.
What are some instances where you might want to raise your auto coverage limits to help protect you from having to pay for substantial damages out of pocket?
1. You have a teen driver on your policy
Teen drivers tend to be a much higher collision risk on the road (which is also why their insurance premiums are typically higher than that of an adult driver’s). From inexperience to texting while driving, the risk of your teen having some sort of accident is generally higher than other age groups. This doesn’t just mean damage to your own car, but your teen could also be at-fault for a major accident that injures another person or damages property. This means you’ll likely want to consider higher bodily injury liability and property damage liability limits in the case that your teen causes a serious accident.
Recommended read: How to Offset the “Under 25” Auto Insurance Expense
2. You have multiple drivers on your auto policy
The more people you have driving your car, the greater the risk of a crash with your vehicle. Even if you aren’t driving, insurance coverage usually follows the car. So, if you lent your insured car to your cousin who has an at-fault an accident, your cousin will likely be covered under your insurance policy for the damages caused in that accident. If lots of people drive your car, , you’ll want to consider raising your auto insurance liability limits.
Note: Anyone who drives your car regularly should be listed on your auto policy.
3. Your net worth has increased
You always want enough liability insurance to cover the value of all of your assets in case someone comes for “everything you own.” For example, if you are at fault for a four-car accident that damages four cars, injures six passengers, and hits a lamppost, you’ll likely be on the hook for those damages. If your auto liability limits aren’t high enough to cover those damages, you could be found responsible for the remainder out of pocket. That means your assets could be on the line to pay out for those damages. You want your liability insurance limit to be enough to help protect all of your assets, for greater peace of mind.
If your auto liability policy limit isn’t high enough to cover your net worth, we recommend purchasing a supplemental umbrella insurance policy.
4. You participate in a carpool
If you carpool frequently, the total exposure for injuries in the event of an accident could increase because of the number of passengers in your car. If you are at fault for an accident, you can be responsible for any injuries sustained by each of your passengers. Because of this higher risk, you may want to consider higher auto liability limits or even an umbrella policy.
5. You’re going on a road trip
The more you’re on the road, the higher your risk of crashing. We recommend raising your liability limits if you’ll be taking your car on a long road trip to offset the risks of being on the road more. You may also want to talk to your insurer about getting optional coverages, like roadside assistance or trip interruption.
What are some instances you might want to consider purchasing optional coverages for your car?
6. You’re adding custom parts to your ride
Most standard auto insurance won’t cover custom parts or equipment on your vehicle. If you do anything special to your vehicle, like add special rims, custom paintings or other custom equipment, you will want to discuss with your insurance agent whether it makes sense to consider purchasing a special custom parts endorsement that will offer coverage for these add-ons.
7. You’re financing your car
Let’s say that you are financing a new car. The average length of a car loan is almost six years. Let’s say you total the car after two years. You’d likely still be responsible to pay off the remainder of that loan. But, your auto policy was “actual cash value,” so you only get a payout equivalent to the car’s actual cash value immediately before the crash. Since most cars depreciate quickly, that means the value of that car in two years may be a lot less than what you originally paid for it. In fact, it may even be a lot less than you still owe to your lender!
Gap insurance can help fill in the “gap” between what your insurance pays out for the value of your totaled or stolen car and the amount you still have left on your loan. This can help protect you from having to pay off a loan for a car you don’t even have anymore.
If you’re financing your car, we recommend considering gap coverage.
8. You drive, park, or live in a high-crime area
If you work in or have moved to an area that is prone to more crime, you may want to double-check your comprehensive coverage. Comprehensive coverage applies if your car is stolen, so it can help cover the costs of purchasing another car. Learn more about the importance of comprehensive auto coverage here.
Psst… If you live in a higher-risk area, a garage may help lower your auto insurance premiums.
9. You drive for work
If you drive for a ride-share app or use your vehicle for business purposes, your auto insurance will typically not cover your car while it’s being used commercially. If your ride-share service doesn’t offer commercial auto insurance while driving with the app, or if you use your car for your home-based business, you will likely need to purchase a separate business insurance policy that can cover your business property, liability, and vehicle.
10. You want premium coverage options
There are some instances where a basic auto insurance policy just won’t cut it. For example, you’ll need to purchase add-ons if you want separate glass coverage, mechanical breakdown insurance or rental reimbursement coverage.
Check out these optional auto insurance coverages or policies and see if any will provide a greater level of protection for you and your vehicle. These coverages and policies can be an incredible way to ensure your car is protected.
11. You have a classic or high-value car
If you have a classic car, a basic auto insurance policy may not offer enough coverage. For example, a typical auto insurance policy doesn’t cover custom parts and generally pays only actual cash value. That’s why we highly recommend you purchase a separate classic car policy if you have a classic, vintage, antique, collector, or kit car. Check out the Ultimate Guide to Classic Car Insurance to see if this kind of policy is right for you and your prized possession.
Should you raise your auto insurance coverage?
Some people are hesitant to increase or supplement their auto insurance coverage because it also often means raising their auto insurance premiums. But you never want to be without enough coverage. If you don’t have enough liability coverage, you could end up with your assets at risk. Plus, there are a lot of ways to lower your auto insurance premium so the costs aren’t so prohibitive—like shopping around for the right auto insurance plan.
An easy way to know if you are fully covered—and at the fairest price—is by chatting with an InsuraMatch advisor at (844) 819-2221. Our licensed agents are trained to help you understand your coverage and put the client first, and that means considering your unique needs as we build a custom insurance plan for your car, home, family, and other needs.
Review your auto insurance coverage with the help of our expert insurance advisors today at (844) 819-2221!
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