The auto loan is not the only expense you need to think about when you purchase a car. Another cost you have to carefully consider is car insurance. How much insurance coverage would you need? What is the right amount you should be paying for? Unfortunately, there is no definite answer to both questions. This is because the right coverage depends on what the state requires and the person’s situation.
Car Insurance as Required by Colorado
The first thing you should consider when determining your car insurance coverage is the state where you live. Almost all states have an auto insurance requirement, and dictate minimum values for different policies. As a resident of Colorado Springs, you need to abide by the car insurance requirements of Colorado. Colorado law mandates that all drivers must have liability coverage that includes bodily injury (BI) and property damage (PD).
Bodily injury liability covers you in the event of an accident when you are at fault and another person is injured or killed. The state’s minimums for this coverage is $25,000 per person for bodily injury and $50,000 per accident per bodily injury. As for property damage liability, this covers you when you cause damage to another person’s car; it may apply to other physical properties as well, including garage doors, utility poles and buildings. Colorado’s limit for this is $15,000 per occurrence for property damage.
Moreover, Colorado also requires Uninsured/Underinsured motorist (UM/UIM) coverage, which will cover you for medical and other related expenses in the event you are hit by a driver without insurance or without enough insurance. The state suggests that you get this coverage in the same amount as the liability limits you choose. UM/UIM coverage must be offered and included, but can be waived if rejected in writing.
Car Insurance Based on Personal Factors
Personal factors are also worth considering when determining the right insurance coverage. First on the list is your assets. The general rule is that an individual should be covered for an amount equal to the value of all his or her assets. Think of all the assets you are protecting—car, house, investments, savings—and add up their values. The sum is the suggested amount of liability coverage you should secure. If you will be using the vehicle for business purposes, you may need even more coverage—liability limits are higher for commercial car insurance policies.
Another personal factor that you should think about when you get insurance is your risk. How much risk do you carry on a regular basis? If you often have many passengers (i.e., if you bring your kids to school, carpool to work, etc.), you are carrying more risk because there are more people that can be hurt should an accident happen. With more passengers come higher liability exposure.
Getting minimum coverage is fine, but there are some instances when getting more than what you are required to is necessary. Talk to an insurance agent or an insurance company representative to figure out the right amount. If you have a family, get them involved in your conversation with the insurance professional.