Last Updated on March 22, 2018 by Jason Mason
All states require car owners to show a form of financial responsibility and one way of being able to meet this requirement is through auto insurance. When it comes to auto insurance, there is this thing called auto insurance limit. So what is an auto insurance limit? Basically, auto insurance limit refers to the maximum amount of money that auto insurance will pay out if you make a claim. And there are a number of things that you should take into account that affect auto insurance limit.
State Required Minimum Limit
All states require a minimum amount of auto insurance with most having a minimum for liability insurance, which pays for the other driver’s injuries as well as the passengers and damages to the vehicle. It is normal for you to see limits written in this format: 20/50 or 20/40/25 when it comes to the minimum limit required by a state. And this would mean:
- $20,000 for bodily injury for a single person’s injuries in an accident that you have caused.
- $40,000 for bodily injury for all the occupant’s injuries in an accident that you have caused.
- $25 for damage to the other driver’s property.
There are states that have no-fault insurance or personal injury protection coverage. This basically means that regardless of who is at fault, the auto insurance will cover your injuries after the accident. This law was originally implemented to give drivers the opportunity to pay for their medical bills right away, rather than waiting for the completion of accident investigations by the car insurance companies.
Assets
It would be better to go for a higher coverage limit if you have a higher salary throughout the year. This is to take into account the possibility of the other driver making an attempt to go after you in court to obtain money that is more than what your auto insurance will be willing to pay.
Finances
Consider how much you can realistically pay on a monthly basis while taking your other expenses into account.
Location
Statistically speaking, accidents taking place in the urban area are higher and leaving your car in the garage or on the street can expose it to theft; hence it is better to get comprehensive coverage.
These were a number of factors that affect the coverage of auto insurance and you can determine how much coverage you should get, keeping these factors in mind.
