When you purchase car insurance, your liability insurance actually covers the damages you cause to another driver's car, not to your own car. Only collision and comprehensive coverage -- which aren't usually required by law -- cover you. Most states establish minimum liability coverage amounts, and you'll have to purchase at least this much in insurance. If you're concerned about the risks of an uninsured driver damaging your vehicle, you can also purchase uninsured motorist coverage.
New Car Financing
If you finance your car, the lender might require you to purchase collision insurance that covers the full value of the car as well as comprehensive insurance to cover non-collision-related damage and theft. Even if such a requirement isn't listed in your financing agreement, it's a wise idea to take the plunge and make the purchase. Otherwise, if you get into an accident and your insurance doesn't cover the full value of the car, you could be stuck making payments on a car that's useless to you.
State Minimum Coverage Rules
Every state establishes minimum auto insurance requirements. This minimum insurance covers the other driver if you cause a collision. In Georgia, for example, motorists have to have $25,000 in property damage insurance whether the car is new or not. They must also carry an additional $75,000 in coverage for bodily injuries to other drivers.
Additional Property Coverage
If your state minimum coverage rules are less than the value of the other driver's car, your insurance won't cover all of the damages. The results could be financially catastrophic if the other driver sues you and insurance won't cover the full amount. If you can afford to do so, you might want to buy additional coverage. Similarly, if state coverage requirements are less than the value of your car, uninsured motorist coverage can help make up the difference.
Uninsured Motorist Coverage
Uninsured motorist coverage is designed to pay for your damages -- such as physical injuries, destruction of your car or injuries to passengers -- if you get into an accident with a driver who is uninsured. If you purchase such coverage on a new car, it's a wise idea to buy at least enough insurance to cover the cost of replacing your car. According to Allstate Insurance, many people who purchase uninsured motorist coverage opt to purchase it in an amount equal to their liability coverage limits, but such a decision can dramatically increase the costs of your car insurance.
Other Coverage Considerations
In addition to considering the cost of property damage to your car, you'll need to weigh the risks of injuring someone else or being injured in an auto accident. Purchasing additional coverage can help you avoid having to pay out of pocket for significant damages, and uninsured motorist coverage for bodily injury may help fill in the gap if you're injured by a driver who is either uninsured or who does not have good insurance.
Van Thompson is an attorney and writer. A former martial arts instructor, he holds bachelor's degrees in music and computer science from Westchester University, and a juris doctor from Georgia State University. He is the recipient of numerous writing awards, including a 2009 CALI Legal Writing Award.