Liability for Bodily Injury – The minimum coverage for bodily injury varies by state and may be as low as $10,000 per person or $20,000 per accident.  Many auto policies stop at a maximum of $300,000 or $500,000 per accident for Liability coverage.  If you injure someone with your car, you could be sued for a lot of money.  The amount of Liability coverage you carry should be high enough to protect your assets in the event of an accident.  Most experts recommend a limit of at least $100,000/$300,000, but that may not be enough. This is no place for cheap auto insurance. If you have a million-dollar house, you could lose it in a lawsuit if your insurance coverage is insufficient.  You can get additional coverage with a Personal Umbrella or Personal Excess Liability policy.  The greater the value of your assets, the more you stand to lose, so you need to buy liability insurance appropriate to the value of your assets.

Liability for Property Damage – The minimum that you must carry varies by state, but that minimum is not likely to be enough to protect you in a serious accident.  With many cars costing upwards of $50,000, you could easily be responsible for a substantial repair bill if you hit someone’s car and it is totaled.  If you have a Personal Umbrella policy, you will be covered for excess costs, but your insurance company may require that you carry more than the minimum to qualify for a Personal Umbrella policy. 

Collision – Covers the cost of damage to your own car in an accident.  You don’t have to figure out how much to buy – that depends on the vehicle(s) you insure.  But you do need to decide whether to buy it and how large a deductible to take. The higher the deductible, the lower your premium will be.  Deductibles generally range from $250 to $1,000.  Collision coverage is important to have if a car is new and valuable, but less important as the value of the vehicle declines.  If the car is only worth $1,000 and the deductible is $500, it may not make sense to buy collision coverage.  Collision insurance is not generally required by state law.

Comprehensive – Covers the cost of miscellaneous damages to your car not caused by a collision, such as fire and theft. As with Collision coverage, you need to choose a deductible. The higher deductible you choose, the lower your premium will be.  Comprehensive coverage is generally sold together with Collision, and the two are often referred to together as Physical Damage coverage. If the car is leased or financed, the leasing company or lender may require you to have Physical Damage coverage, even though the state law may not require it.

Medical Expenses – Covers the cost of medical care for you and your passengers in the event of an accident.  The limit you choose under Medical Expenses coverage is the maximum that will be paid for medical claims to each driver.  Therefore, if you choose a $2,000 Medical Expense Limit, each passenger will have up to $2,000 coverage for medical claims resulting from an accident in your vehicle.

Uninsured/Underinsured Motorist Coverage – If you are involved in an accident and the other driver is at fault but has too little or no insurance, this covers the gap between your costs and the other driver’s coverage, up to the limits of your coverage.  In some states, this coverage is limited to bodily injury, while in others it may cover property damage, as well. The limits required and optional limits that may be available are set by state law.

Personal Injury Protection (“PIP” or “No-fault”) – This coverage, required by law in some states, covers your medical costs and those of your passengers, regardless of who was responsible for the accident.  The limits required and optional limits that may be available are set by state law.

Umbrella policies pick up where your homeowner and automobile policies leave off. For example, if you are in a car accident and your auto policy provides $500,000 in coverage but someone suffers a debilitating injury in the accident, you could be sued for much more than $500,000. If that happens, all of your financial assets would be at risk.

If you have assets that you would want to protect in such a situation, an umbrella policy is critical. You can get a $1M umbrella policy for about $250 to $350 per year. Additional million dollar increments can be purchased for even less.

Generally speaking, your coverage amount should equal or exceed your net worth. Getting a policy is easy and the best place to start is by calling the company that carries your home and auto policies because you can generally get a discount if you have all of the policies with the same company. Also, in order to get an umbrella policy, you must have certain coverage limits in place on the home and auto policies and the agent can check that when you request the new policy.

If you are feeling stretched by the premium involved with the coverage, consider raising the deductibles on the underlying car and home policies. When you raise your deductibles, the cost of the insurance goes down and that would free up more money for the umbrella policy

Typically, insurable interest is established by ownership, possession, or direct relationship. For example, people have insurable interests in their own homes and vehicles, but not in their neighbors’ homes and vehicles, and certainly not those of strangers.

According to the US Department of Transportation, distracted driving killed 5,474 people in 2009 and injured another 448,000.

What Is Distracted Driving?

Distraction occurs any time you take your eyes off the road, your hands off the wheel, and your mind off your primary task: driving safely. Any non-driving activity you engage in is a potential distraction and increases your risk of crashing. Here are a few sobering statistics:

• Drivers who use a hand-held device are four times more likely to get into a crash serious enough to cause injury.
• Using a cell phone while driving delays your reaction time as much as having a blood alcohol concentration of .08, which is the legal limit for drunk driving.
• Research indicates that the burden of talking on a cell phone—even if it’s hands-free—saps the brain of 39 percent of the energy it would ordinarily devote to safe driving. So far, research indicates the cognitive distraction of having a hands-free phone conversation causes drivers to miss important visual and audio cues that would ordinarily help you avoid a crash.

Texting drivers are 23 times more likely to get involved in a crash. Texting is the most alarming distraction because it involves manual, visual, and cognitive distraction at the same time. Sending or reading a text takes your eyes off the road for an average of 4.6 seconds. At 55 mph, that’s like driving the length of an entire football field, blindfolded. It is incredibly dangerous.  If you have young drivers in your home, have them watch this powerful video http://www.att.com/gen/press-room?pid=2964

Depending on where you live, you may be able to cruise the streets without auto insurance — and you won’t be breaking any laws.

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In some states — such as California, Tennessee, Washington, Texas and Ohio — it’s perfectly legal to skip carrying car insurance if you can prove you have the financial ability to cover liability costs if you get in a wreck. And if you live in New Hampshire, you don’t even need to prove your financial fitness.

“New Hampshire is always contrary to other states,” says James Van Dongen, spokesman for the New Hampshire Department of Safety. “The Legislature has never felt that they should compel people to buy insurance.”

Although you are not required to have auto insurance in New Hampshire, if you’re uninsured and at fault in an accident, you will be required to post a bond or cash equal to the amount of damage you caused in that accident.

Options if you don’t buy car insurance: deposits, bonds

In other states, you either need to purchase car insurance or prove you can cover your costs.

California businessman Michael Reza went the latter route for more than a decade as he spent his vacations traveling in Europe and purchasing cars in various countries.

Because the cars were built to different standards than those sold in the California market, it also made them unique and difficult to easily replace. They were virtually impossible to insure, Reza says. Insurers couldn’t compute a replacement cost for the cars, so they refused to provide coverage for them.

California requires drivers to have liability insurance, with a minimum of $15,000 in coverage for the injury or death of one person, $30,000 for more than one person, and $5,000 for property damage.

In lieu of that, a California driver who doesn’t want to buy car insurance can make a $35,000 cash deposit with the California Department of Motor Vehicles (DMV), post a surety bond for $35,000 or get a self-insurance certificate from the DMV.

Reza had no problem registering the vehicles, which included a Porsche from Germany and a Ferrari from Italy. But because he couldn’t purchase auto insurance, he posted a $35,000 surety bond.

Typically, you can obtain a surety bond by paying a fee based on a percentage of the bond amount, and the issuer will extend credit, guaranteeing the full amount. You won’t have to pay the full bond amount unless you’re in a wreck and need to cover the liability costs. Fees for surety bonds vary a lot, depending on your credit history and state laws, among other things. But in general, they range from 1 percent to 4 percent of the surety bond amount if you have good credit. If you paid 4 percent for a $35,000 surety bond, it would be $1,400.

Reza primarily drove vehicles made for the American market, and the imports were cars he used on occasion, racking up a couple thousand miles per year.

While he had some concern about being in an accident with such valuable vehicles, “I was more concerned about liability and other people,” he says. “It makes you cautious.”

Jan Mendoza, spokeswoman for the California DMV, says the state doesn’t keep track of the number of motorists who don’t purchase auto insurance.

Individuals who don’t buy car insurance have the financial ability to meet the $35,000 requirement, while corporations with 25 or more vehicles find it more cost effective to self-insure, Mendoza says.

Don’t want to buy car insurance? Move to Ohio

Ohio is another state where you can choose between auto insurance and demonstrating the financial ability to cover liability if you’re involved in a wreck.

If you choose not to carry auto insurance you must have one of the following:

• A $30,000 bond issued by a surety or insurance company
• Money or government bonds worth $30,000 on deposit with the state treasurer
• A certificate of bond issued by the Ohio Bureau of Motor Vehicles (BMV) worth $30,000 and signed by two people who own real estate with equity of at least $60,000.

The state randomly selects about 5,400 vehicles each week to verify that they’re insured, says Ohio BMV spokeswoman Lindsey Bohrer. Vehicle owners are mailed a notice requiring them to prove they have insurance.

Those who don’t respond or don’t provide adequate proof of insurance can have their license suspended and may be prohibited from registering a vehicle in the state.

Iowa insurance laws: know the details

While Iowa’s law doesn’t mandate compulsory auto insurance, in reality drivers must buy car insurance or prove financial responsibility, says Mark Lowe, director of the Iowa Motor Vehicle Division.

You can register a car in Iowa if you don’t have insurance. But if you’re stopped by a law enforcement officer, you must have proof of insurance, Lowe says.

If you don’t have liability insurance, you must post a certificate of deposit or bond with the secretary of state that shows you have the financial resources to cover $55,000 in injuries and property damages if you’re involved in an accident, he says.

Only a handful of individuals choose that option, he says. Typically a big company, like a car rental agency, will decide to self-insure.

It’s a different story in New Hampshire, where no liability insurance is required unless you’ve been in an at-fault accident. Van Dongen says the state doesn’t record how many motorists have decided to go without insurance, but it’s a small percentage of the population. He says those who go without “tend to be people with lower incomes, or they’re young kids.”

Because of that, if you’re hit by an uninsured driver, the driver usually is “judgment-proof because he or she doesn’t own anything,” and instead your uninsured motorist coverage foots the bill, Van Dongen says.

Girls are twice as likely as boys to use cellphones and other electronic devices while behind the wheel, according to an in-car video study released this week that offers a revealing look into the driving lives of teens.

The study, “Distracted Driving Among Newly Licensed Teen Drivers ,” was issued by the AAA Foundation for Traffic Safety, and is based on video footage gathered by researchers at the University of North Carolina Highway Safety Research Center. Cameras installed in the cars of teens from 50 North Carolina families showed that the most common distractions were texting and talking on the phone while driving, eating and drinking, personal grooming, and fiddling with vehicle controls.

“This new study provides the best view we’ve had about how and when teens engage in distracted driving behaviors believed to contribute to making car crashes the leading cause of death for teenagers,” Peter Kissinger, AAA foundation president and CEO, said in a statement.

The report is groundbreaking because the recorded footage is believed to be the first to specifically focus on teen drivers in both normal and challenging situations, according to the foundation.

“Researchers at the UNC Highway Safety Research Center identified the prevalence and consequences of various distracted driver behaviors and distracting conditions among teens during high g-force maneuvers such as swerving, hard braking, or rapid acceleration,” according to the report..

Here are some of the study’s key findings, based on nearly 8,000 video clips captured during a six-month period:

• Use of electronic devices showed up in 7 percent of the video clips, making it the top distraction.
• Other distractions, from grooming to eating and drinking, added up to 15 percent of the footage.
• Many of the distracting behaviors — including cellphone use — were more prevalent with older teens, “suggesting rapid changes in these behaviors as teens get more comfortable behind the wheel,” according to the AAA foundation.

Gender plays an intriguing role, as the research indicates that:

• Besides using cellphones and other devices twice as often as teen boys, girls were nearly 10 percent more likely to become distracted while driving. The distractions included reaching for something (nearly 50 percent more likely to do this than the boys) and eating or drinking (nearly 25 percent more likely).
• Teen boys, on the other hand, were roughly twice as likely to be distracted while swiveling to look behind them. They also were more likely to talk with people outside the car.

“The gender differences with regard to distraction observed in this study raise some points that we’ll want to investigate in future projects,” Kissinger said. “Every insight we gain into driver behavior has the potential to lead us to new risk management strategies.”

Solo teen drivers more apt to use mobile devices

When teens have peers in the car, they are more likely to engage in boisterous behavior, according to the report.

“Loud conversation and horseplay were more than twice as likely to occur when multiple teen peers — -instead of just one — were present,” according to the report. “These distractions are particularly concerning, as they are associated with the occurrence of crashes, other serious incidents (such as leaving the roadway), and high g-force events.”

However, when driving alone, teens use mobile devices and perform other distracting tasks more often. “Generally speaking, electronic device use and other distracted driver behaviors were most common when teens were carrying no passengers. Teen drivers used an electronic device in 8.1 percent of clips and engaged in other distracted behaviors in 16.9 percent of clips when driving alone,” the report states.

Lynne McChristian, a spokesperson for the Florida wing of the Insurance Information Institute (III), says that it’s smart for parents to keep teens safer by restricting the passenger list to one. It also makes good insurance sense because fewer distractions could lead to fewer accidents, which could lead to savings.

How to save on car insurance for your teen driver

McChristian has some other insurance savings tips for teen drivers:

• Keep grades up. McChristian says students with at least a “B” average usually can qualify for discounts.
• Take driving courses to hone skills. She notes that many insurers offer online classes, and teens who pass probably will receive a discount.
• If you’re getting your teen a car, look for one with as many safety features as possible. McChristian points out that buying a newer car may cost more to purchase, but it could pay off in the long run if it’s safer to drive and results in fewer accidents.
• Pay attention to your teen’s driving habits — keep up with your teen’s progress, or lack of it. Parents should teach teens how to become better motorists even after they have a license, McChristian says.

Nationwide, an estimated one in seven drivers was uninsured in 2009, according to a 2011 report by the Insurance Research Council.

Now imagine what happens when an uninsured driver errs and crashes into your car, sending you to the hospital with serious injuries. That risk is the reason for uninsured motorist coverage (UM).

What is uninsured motorist coverage?

UM pays the medical bills of you and your passengers if you’re the victim in a car accident involving an uninsured driver.

Underinsured motorist (UIM) coverage kicks in when the at-fault driver has liability insurance, but not enough to cover all the costs. In some states, UM also pays when you’re the victim of a hit-and-run driver.

UM/UIM can be a financial lifesaver, but it’s often misunderstood.

“We get a lot of questions about it,” says Carole Walker, executive director of the Rocky Mountain Insurance Information Association. “A lot of times people don’t realize until they’re hit by an uninsured driver what the coverage is.”

Here are 6 common myths about UM/UIM and what you should know:

1. Why buy the coverage? I can always sue the driver

“While an uninsured or underinsured driver is still financially responsible, good luck getting a financial settlement from a driver who chose not to buy car insurance,” Walker says.

Most uninsured drivers don’t have the money or assets to pay others’ medical bills, so suing them won’t do much good. That’s why UM/UIM coverage is important.

2. UM/UIM will pay for fixing my car

This a common misunderstanding, says Denise Johnson, an agent with ECI Agency Inc. in Piedmont, Okla., and immediate past chairperson of the Independent Insurance Agents of Oklahoma.

UM/UIM covers injuries — not property damage. In some states, you can buy a separate coverage called uninsured motorist property damage (UMPD) coverage, which pays for fixing your car if you’re hit by an uninsured driver. Another option is to carry collision coverage, which would pay for fixing your car, minus the deductible, regardless of who caused the accident.

3. I don’t need UM/UIM because I have health insurance

UM/UIM offers some important benefits that health insurance probably does not provide. For one thing, it pays your medical bills up to the limit without deductibles or co-pays. In addition, UM/UIM pays for lost wages if you can’t work because of injuries, and for pain and suffering.

4. I can decide whether I want UM/UIM

Twenty states and the District of Columbia require car owners to buy the coverage. Some other states mandate that insurance companies offer the coverage and require drivers to sign a statement declining it.

Other rules vary by state, too. Some states let you “stack” UM/UIM coverage — which means you can combine the coverage limits on multiple vehicles to recover costs from a single accident with an uninsured driver. Other states prohibit stacking.

Generally, your insurance company won’t allow you to buy UM/UIM coverage for amounts higher than your liability limits.

5. UM/UIM is too pricey

Actually, Walker says, it’s affordable car insurance. The average cost in Colorado, for instance, is $67 a year per vehicle.

“It’s silly not to have it,” says Johnson, who serves on a state task force recommending measures to reduce the rate of uninsured drivers in Oklahoma. An estimated 24 percent of drivers were uninsured in Oklahoma in 2009, according to the Insurance Research Council. The state is tied with Tennessee for the third highest rate of uninsured drivers. Mississippi and New Mexico top the list, with 28 percent and 26 percent of drivers, respectively, uninsured.

Walker advises considering UM/UIM coverage even if you live in a no-fault auto insurance state, where your own insurance covers your injuries in most cases regardless of who is at fault. No-fault systems vary widely from state to state, so learn how coverage works where you live and talk to your insurance agent, she says.

6. I can tap into UM/UIM in any accident involving an uninsured driver

The coverage comes into play only when an uninsured or underinsured driver is at fault. In states with comparative negligence laws, the coverage kicks in only for the percentage at which the uninsured or underinsured driver was in the wrong.