You have car insurance—but do you have enough? Don’t find out the hard way, when an accident leaves you not only shaken up, but also broke.

How do I know if I’m underinsured?

To make sure your policy offers solid protection, it’s important to consider key facts like the value of your car, your driving record, and even the value of your overall assets. Work with an agent, who has the chops to ask smart questions and find a policy that meets your budget—but also provides enough coverage so you can rest easy.

What is liability insurance and why does it matter?

Even well intentioned people have accidents. If you cause an accident that damages another vehicle or injures someone, your liability coverage kicks in to repair the other vehicle(s) and cover medical bills for those who were injured. Nearly every state requires drivers to carry liability insurance.

If you don’t have liability coverage, the person you hit may come after your pocketbook to cover their expenses, which could total tens of thousands of dollars—or more. If you can’t pony up, your wages might be garnished, or your home equity could even be taken. As a general rule, the more property and assets you own, the more coverage you need.

What is bodily injury liability?

If someone else is injured in an accident that was your fault, your bodily injury liability coverage pays their medical expenses. Most states require drivers to carry between $15,000 and $25,000 in bodily injury liability coverage per person, $30,000 to $100,000 in bodily liability per accident, and $5,000 to $25,000 in property damage liability.

What is property damage liability?

If you hit someone else’s property with your vehicle—whether another vehicle, buildings, or landscaping—your property damage liability policy covers the repair costs.

How can I figure out how much auto insurance coverage I need?

Purchasing the minimum coverage your state requires will keep you legal while saving you money, but you may want to consider boosting your limits. Let’s say you live in California and carry property damage liability with a limit of $10,000, the minimum required. If you crash into a $50,000 sports car and total it, you’ll be on the hook for the additional $40,000.

If someone is injured, medical costs—which might include ambulance, paramedic, and hospital bills—can add up quickly. Experts advise going beyond the minimum bodily injury coverage limits required by most states. They generally suggest limits of $100,000 for one person in an accident, and $300,000 for all people injured in a single accident. A judgment in excess of your coverage could impact future earnings and future assets acquisition (think inheritance or winning the lottery), so it’s better to carry more than just the minimum coverage.

The policy you choose will be, in part, based on how much risk you’re willing to take. But whether you’re comfortable taking some risk or you prefer to play it safe, talk to an agent, who can run the numbers and suggest your best options.

 

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Disclaimer: This page is for educational purposes only and is intended to help answer the most common questions people ask about insurance. Information published here might not reflect the specific policies and products offered by AAA.