Your home state may require you to carry a minimum amount of auto insurance, but it’s sometimes confusing to figure out the right amount of coverage to buy. Buying more coverage than you need is a waste of money. Why pay a higher premium for coverage you don't need? Trying to save a few dollars by buying a bare-bones policy may come back to haunt you if you are ever in an accident and find that you don’t have enough coverage. Without the right coverage, you may not be able to file a claim for damages to your car, and may have to pay for repairs out of your own pocket.
State-Required Car Insurance
Each state has its own insurance laws that govern the minimum amount of car insurance you must have in order to drive legally. Mandatory insurance is required not so much to protect you, but rather to protect others who may be injured due to your negligence while operating a vehicle. A minimum mandatory policy typically includes coverage for property loss to others, as well as bodily injury to others.
The current Texas minimum liability limits are $30,000 for each injured person, up to a total of $60,000 per accident, and $25,000 for property damage per accident. This basic coverage is called 30/60/25 coverage.
Finance Company-Required Car Insurance
Any time you buy a new or used car and pay for it by taking out a loan from a bank or finance company, you may be required to carry full insurance coverage on the value of the car. It is usually written into the terms of the finance contract that you must carry a certain amount of auto insurance in order to receive a car loan. Your lender wants to insure its interest in the car so if you total the car, the loan they extended can be covered by the insurance company.
It’s Not Always Black and White
After the last payment is made on your car, you are no longer obligated to the finance company. While you still need to carry a minimum amount of auto insurance to meet state requirements, you have the option to drop some or all of the other coverage you may have. You can also choose to reduce the amount of coverage you have or raise your deductible.
- Collision and comprehensive coverage is appropriate when your car maintains significant value. It may become less important when your car is worth little more than its scrap metal value.
- It is worth paying a higher premium to get a lower deductible if you know you can't afford the out-of-pocket costs that occur until you meet your deductible.
We all want to save money on our car insurance and the best way to do that is to pay for the right amount of coverage; find the balance between being over-insured, yet fully protected in case of an accident. Talking with an insurance agent can help you make the right decision on how much insurance coverage you need.
Do you have enough coverage? Call your Dallas TX insurance agency at (972) 234-5588 for more information.