How much auto insurance is needed?
March 26, 2007 3:48 PM   Subscribe

How much auto insurance does my friend need?

I don't own a car, and my friend is getting her first. I've tried to do the research but I'm still confused. Her details.

She's just out of high school with virtually no assets. She is also going to be a poor college student for the next 4 years. She will be driving a 6 year old car that's paid for but not worth much.

These are the coverages we have to decide limits on:

Bodily Injury
Property Damage
Uninsured Motorist
Medical Coverage
Comprehensive Deductible
Collision Deductible

I'm guessing there's no need for comprehensive and collision, but I just don't know on the first four. If it were me I'd make the decisions, but I'd hate to tell her the wrong choices. Any help is greatly appreciated.
posted by gtr to Work & Money (8 answers total)
You didn't say where she or the car was, but her agent will best be able to advise her based on her driving record, locality, etc.
posted by jerseygirl at 3:55 PM on March 26, 2007

Where she's living has an *enormous* impact on how much insurance she needs.

Out in the stix, you can probably do with the state-mandated minimum insurance. The liklihood of hitting somebody in traffic seems much lower in Oberlin, Ohio than in Los Angeles.

I live in the city (Philadelphia) and cannot imagine driving with as much insurance as I can afford. When you total a BMW filled with a litigious yuppie, you really don't want to have skimped on anything.
posted by Netzapper at 4:05 PM on March 26, 2007

Rather, I cannot imagine driving without as much insurance as I can afford.
posted by Netzapper at 4:05 PM on March 26, 2007

Response by poster: The car is an old toyota camry and it's in louisiana. The driving is mainly small town/rural.
posted by gtr at 4:08 PM on March 26, 2007

She has no assets, so you don't need to worry about having more than the state minimum for insurance. People with no assets tend to not get sued.
posted by yohko at 7:19 PM on March 26, 2007

Best answer: Can't speak for Louisiana law on the topic, but I have to advocate getting both Liability (which covers damage inflicted on other people, cars, and property in an accident) and comprehensive (which covers damage to your OWN car in an accident). The question you must ask yourself is, can you afford to replace your own car if it is rendered unusable? Can you do without a car? If the answer to those questions is no, then you need comprehensive coverage.

Medical and liability will protect you from needing to pay for someone else's hospital bills and car repair, respectively. Get them. Even as a poor college student, I got the whole package because I could not afford the consequenses of an accident otherwise.

And the idea that poverty protects you from lawsuits is just silly - if you are involved in an accident with even minor injury or property damage, you could still be sued by someone just as poor as you because they can't afford the bills generated by the accident. Even a successful defense of such a suit would break you. God forbid you lose such a suit.

Insurance is there to protect you from your own bad luck. With proper insurance, an accident that could have ended up with court-ordered garnishments of your pay for years to come would mean paying a measly $300 deductible and getting your car fixed on the insurer's dime.
posted by BigLankyBastard at 7:12 AM on March 27, 2007

Best answer: Insurance is all about mitigating risks.

Things to consider
  • Can she do without a car if it is totaled in an accident?
  • Just because she has no assets does not mean that she can't be sued for future assets (this is a generalization with LOTS of exceptions, exclusions and such).
  • She is going to be a student, would a time consuming legal action affect her abilities as a student?
  • Just because she has no assets does not mean that they won't go after her parents. How effective this is depends on things such as "Is she still a dependent?"
You are paying a smallish amount into a big pot of money for the privilege of being able to withdraw from that pot later if certain conditions are met. Assuming you have a good insurance company, they handle nearly all of the matters above.

As to deductibles, there is usually a sweet spot where increases do not save you much in your premium. In my experience the point where a real savings in the premium basically evaporates is at $1000 deductibles.

As to the rest of the numbers, I would recommend using what the insurance company recommends for your state.

Other things to consider:
  • Price is not the only concern when choosing insurance. You want (and may need) excellent service when you are calling on them to pay out.
  • Do not lie to your insurance company. Specifically the bits about how much you drive the car.
  • Keep the insurance company updated if you change address, changing the amount your drive, etc.
  • Learn how her coverage covers other people driving her car.
  • Coverage for an under 21 person that is not tied to a parent's insurance policy is likely to be either bad (in terms of service, fine print, or whatever) and/or expensive.
All that said, does she really need a car?
posted by fief at 10:31 AM on March 27, 2007

Response by poster: Unfortunately, yes.

Thanks LankyBastard and fief, you've helped a lot.
posted by gtr at 9:35 PM on March 27, 2007

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