How Much Auto Coverage Do I Need?
The Importance of Buying Enough Auto Insurance
When it comes to car insurance, purchasing enough is the name of the game. Without enough coverage, you could end up on the hook for paying tens of thousands of dollars out of pocket in an at-fault car accident.
So how do you determine how much coverage you need? If it seems complicated, know you're not the first person to think that. "Is a 25/50/25 policy enough or do I need to fork over higher premiums for more liability coverage?" "What do those numbers even mean?" "Does being a responsible car owner really require this much math?"
Buying car insurance can definitely seem intimidating at first, but don't worry—it's a whole lot more straightforward than you might think! This article will break down the basics you'll need to know to be an informed customer when shopping for liability auto insurance in Tennessee.
What is included in car insurance coverage?
Car insurance coverage typically includes a range of protections to safeguard you and your vehicle. The most common types of coverage, such as a 25/50/25 policy, include liability coverage, which pays you for damages and injuries you cause to others; collision coverage, which covers repairs or replacement of your own vehicle in case of a collision; comprehensive coverage, which protects against non-collision events such as theft, vandalism, or natural disasters; and uninsured/underinsured motorist coverage, which comes into play if you're involved in an accident with a driver who lacks insurance or has insufficient coverage. Additionally, car insurance may offer other benefits, like medical payments coverage, roadside assistance, and rental car reimbursement. It's important to review and understand your policy to ensure you have the appropriate coverage for your needs and preferences.
What do the three numbers mean in 25/50/25?
Let's get down to brass tacks: the three numbers represent liability coverage limits:
$25,000 in bodily injury per person
$50,000 in total bodily injury per accident
$25,000 for property damage per accident.
Bodily Injury vs Property Damage
When it comes to car insurance, it's important to make sure you have the right coverage limits for bodily injury and property damage. Since injuries can be more costly than property damage, it's a good idea to have a total bodily injury limit (the second number in a policy like 25/50/25) that exceeds your net worth.
To figure out your net worth, you can do a simple calculation. Just add up the value of your home, the value of your car(s), your savings, and investments. Then, subtract any outstanding debt like credit card balances or student loans. This will give you a better understanding of your financial standing and help you determine how much bodily injury coverage is appropriate for your situation.
Let's break down how car insurance coverage works using an example. Imagine you have a 100/300/100 policy. This means you have $100,000 in bodily injury liability coverage per person, up to $300,000 for bodily injury per accident, and $100,000 for property damage. These coverage limits indicate the maximum amount your insurance will pay.
Now, let's say you're involved in an at-fault accident, and the damage to the other person's vehicle amounts to $60,000. Since your policy covers up to $100,000 for property damage liability, your insurance will cover the full $60,000. However, if the damage were $140,000, your insurance would still pay the maximum of $100,000, leaving you responsible for the remaining $40,000.
Of course, that's assuming you have a 100/300/100 policy. In a state that has a minimum 25/50/25 auto policy, your premium may be cheaper, but you'll have to pay much more if you end up causing more damage than your policy covers.
To illustrate, with a 25/50/25 policy, let's say you cause $60,000 in property damage to someone else's vehicle. In this case, your insurance would only cover $25,000 of the damage, leaving you to cover the remaining $35,000 on your own.
Understanding these coverage limits is crucial as they directly impact your financial responsibility in different scenarios. It's essential to review and choose coverage that aligns with your needs and offers adequate protection in case of accidents.
What kind of auto insurance is required for Tennessee drivers?
In Tennessee, drivers are required to provide proof of financial responsibility, which most people do by purchasing liability automobile insurance. A liability automobile policy only covers other drivers and their property when you are at-fault. Liability policies protect you from paying the full cost of expensive vehicle repairs and medical bills to the other party if you cause an accident.
In Tennessee drivers are legally required to maintain a 25/50/25 auto liability insurance policy or otherwise meet financial responsibility requirements under state law.
How much is enough insurance?
As mentioned in the previous section, Tennessee only requires drivers to have a 25/50/25 liability insurance policy. However, you may want to get more coverage than the minimum required to help you protect your assets and income should you ever cause a car accident.
When deciding what limits to choose, remember that you may have to pay for medical expenses and the other party's vehicle repair costs if you are at-fault in an accident and don't have enough automobile liability coverage. The last thing you want to do when shopping for insurance is underestimate the cost of a collision.
I'm on a budget. What coverage do I really need to pay for?
Sticking to a budget is a great way to save money and achieve your goals. Even when you're in saving mode, keep in mind that it's one thing to cut down on eating out, but it's another to not have enough automobile liability insurance. When it comes to the risk of being responsible for damage from an automobile accident, insurance should be high on your list of necessary budgeting items.
For an average budget, you may consider a 250/500/250 or a 100/300/100. And for those on a tighter budget, you may choose a 50/100/50 or 25/50/25 policy. Of course, the ideal scenario would be that you'd never need to use your policy, but it's worth remembering that you take a risk every time you choose to get behind the wheel. Even if you take precautions and use best practices while driving, some factors are simply out of your control.
If you ever end up in an accident where you are deemed at-fault and asked to pay up, you'll thank yourself for buying a higher limit car insurance policy. In an expensive accident, higher premiums simply can't compare to the potential cost of a five or six-figure bill that you are expected to pay out-of-pocket.
What other types of auto insurance should Tennesseans consider?
As important as it is to purchase enough liability insurance to cover the damage you might cause to others and their property in an accident, you also need to consider whether you can pay out of pocket if a tree branch falls through your windshield or an uninsured/underinsured driver hits your car—which is not ideal.
Below are some of the other types of insurance you may want to consider purchasing to stay as protected as possible on the roads:
Comprehensive – Buying comprehensive (other-than-collision) coverage insures your vehicle against damage from lots of things that are not your fault—from vandalism to falling tree branches.
Collision – Collision covers damage to your vehicle in case of an accident where your vehicle collides with another object/vehicle.
Uninsured/underinsured motorist coverage – Uninsured/underinsured motorist insurance covers you if you are hit by a driver who doesn't have insurance or does not have enough insurance for your damages. This coverage is very important in Tennessee since more than 20% of drivers in Tennessee don't have auto insurance.
Medical payments coverage – Medical payments coverage provides a limited amount of medical expense coverage for you and other people in the car in case of an accident.
Rideshare – If you drive for companies like Lyft or Uber, you are often required to have rideshare insurance. Should an incident happen, this kind of coverage can bridge the gap between what the rideshare company offers and your personal auto coverage. Your local agent can answer any rideshare insurance questions you may have and help get you set up with a policy.
Looking for car insurance in Tennessee?
Farm Bureau Insurance can help you stay safe on the road. Get in touch with your local agent or view our related Auto resources for more information.
