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Would You Rather Pay $18 or $10,000 After a Car Crash? – ValuePenguin

Auto Insurance
It’s affordable and practical to increase the liability coverage on a car insurance policy beyond the minimum legal requirements. It costs nearly $18 per year on average across the 50 states to add $10,000 of bodily injury liability (BIL) coverage.
The low cost of adding more BIL coverage means that a driver who’s responsible for a car crash could pay the average cost of adding $10,000 in BIL 556 times before the expense would equal a $10,000 out-of-pocket payment after an accident. In this sense, purchasing more BIL coverage is worth it — especially in states where the cost to increase coverage is even more affordable.
If a driver is set on getting complete coverage, the most effective add-on — especially in states like Michigan, Louisiana and Florida, where the rate of uninsured drivers is high — is more uninsured motorist bodily injury (UMBI) coverage. For an extra $10,000 of protection, the cost of this coverage equates to just 0.01%, on average, of the median household income.
Across the 50 states, the average cost of adding $10,000 of liability car insurance coverage to a policy represents a small portion of the median income. Together, adding $10,000 of both bodily injury liability and property damage liability comes to 0.03% of the median household income. In Louisiana, the most expensive state for adding coverage, purchasing $10,000 more in both types of liability coverage only amounts to 0.15% of the median household income.
Liability coverage: Bodily injury liability coverage covers injuries to another driver caused by the policyholder. Similarly, property damage liability coverage pays for damage to another driver’s property, again caused by the policyholder. Some levels of both are mandatory in the majority of states.
In terms of dollars, the average cost across the 50 states to add $10,000 in both types of liability coverage is $20.70. While affordable, it’s more expensive to add BIL than it is to purchase greater quantities of property damage liability coverage. The average cost of adding $10,000 of BIL is $17.99, while it’s just $2.71 for property damage liability.
Depending on the state, the cost of adding coverage can be higher. In Louisiana, it costs $69.64 per $10,000 of BIL, which makes it the most expensive state for this kind of coverage.
Depending on the state, it may be a better value to purchase more uninsured motorist bodily injury (UMBI) liability coverage. UMBI pays for medical expenses caused by drivers who don’t have insurance, those who flee the scene after an accident and those who don’t have enough liability insurance to cover the costs of a car crash. Nationally, it costs an average of $7.79 per $10,000 of UMBI coverage.
In states with a high percentage of uninsured drivers, it’s worth it to purchase more UMBI to avoid a potentially costly encounter with someone who can’t afford to pay for the medical expenses they cause in a car crash. In states like Mississippi, Florida and New Mexico, where many drivers are uninsured, UMBI rates can be higher than average. But compared to the cost of paying out of pocket for these medical expenses or pursuing legal action, the cost is much more affordable.
The amount of UMBI a driver carries is usually restricted to the same amount or less than the amount of BIL a policy contains. Because of this, any increase in UMBI comes with higher costs for both UMBI and BIL. In the states with the most uninsured drivers, the cost of adding bodily injury, property damage and UMBI is higher but still less than 0.1% of median income in these states.
Washington and District of Columbia excluded due to technical limitations
Compared to liability coverage, the cost of insurance against physical damage to your vehicle is expensive. Depending on the deductible, the cost of comprehensive and collision coverage is likely to constitute a significant portion of the overall cost of insurance.
Drivers don’t purchase varying amounts of collision or comprehensive coverage as they do with liability coverage. Instead, after electing to add on these forms of coverage, policyholders choose a deductible that would be taken out of their settlement after a claim.
Raising the deductibles one pays for comprehensive and collision coverage is an effective way to lower the overall cost of car insurance. On average, selecting a $500 comprehensive deductible produces an average cost of $323 per policy across the 50 states, while a $1,000 deductible carries a cost of $238. Conversely, collision coverage costs $827 with a $500 deductible and $653 with a $1,000 deductible.
This means that for every $100 change of the deductible, drivers with comprehensive coverage see a change of $16.90 to the cost of their policies. For collision, it’s much more expensive — $34.91, on average. Considering average payouts, however, it’s worthwhile to carry both forms of coverage.
The average amount of a collision claim was $3,750 in 2019. This means that the average cost of adding collision coverage with a $500 deductible is five times less than the typical out-of-pocket cost for repairing this type of damage without collision coverage. With a $1,000 deductible, the cost of coverage is six times less than a typical out-of-pocket expense.
Comprehensive coverage, while cheaper, still stands to save its users about as much relative to potential accidents as collision coverage. With a $500 deductible, the cost of comprehensive coverage is six times less than the average claim settlement of $1,780, while coverage with a $1,000 deductible carries a cost that’s seven times less than this figure.
Generally, since the costs of both comprehensive and collision coverage represent similar percentages of the typical claim payout, they’re both equally worthwhile additions to a standard policy — though the best deductible level varies by state.
States ordered by the most prominent drop in collision costs after increasing the deductible from $500 to $1,000.
Massachusetts is the best state for raising one’s collision deductible. Drivers who raise their deductibles can pay 32% less on their premiums. Premiums for collision coverage in Massachusetts, at only $574, are among the cheapest in the country. Conversely, the decision of whether to raise one’s deductible has less importance in states like Tennessee, where the cost only lowers by 10% afterward. By keeping a lower deductible in these states, drivers allow themselves to make smaller claims — while still paying relatively low rates.
It’s likely worth it for most people to add extra forms of car insurance that aren’t included in the cost of a full coverage policy. Particularly, gap coverage (for leased vehicles or those being paid for with a loan) and towing services are affordable ways of increasing the coverage of one’s insurance policy.
ValuePenguin found that, in an analysis of the 50 states, the average cost of adding unlimited towing coverage only increases car insurance costs by $16. Likewise, drivers who are financing their cars with a loan can get gap insurance — which covers the value owed on a lease or loan after a total loss — for $63 per policy. Both forms of coverage are effective ways of avoiding hefty out-of-pocket expenses if one’s car is totaled.
Towing coverage is cheapest in Maine, where services cost just $9 per year on average. Gap coverage is also cheapest in Maine, where it costs $29.
Table is ordered by the lowest cost of towing services.
Increasing the amount of liability coverage above the statewide required limits necessarily increases the cost of coverage. However, on average, each increase of $10,000 in BIL coverage carries an overall cost of $17.99, or 0.03% of the median household income.
The coverage with the greater effect on the cost of car insurance is personal injury protection (PIP), which is required in 16 states and available for purchase in a handful of others. Across 10 states where it is required and for which data was available, the average cost of PIP is $7.01 per $1,000 of coverage. While this figure is lower than the average BIL rate of increase, it’s a larger financial burden in most cases than BIL is.
One reason for this is that there are fewer avenues for customizing PIP coverage. Companies often offer it in accordance with statewide laws and regulations and can lock users looking for more coverage into higher rates.
For instance, in Michigan, where the cost of car insurance is already expensive, drivers are required to carry a minimum of $250,000 of PIP coverage, but if they want increased protection, they can either raise the limit to $500,000 or select unlimited coverage. Though the cost of PIP in Michigan is only 44 cents per $1,000, multiplying that by 250 would mean a substantial cost increase.
Depending on a driver’s level of risk aversion, it’s a good idea to consider the financial cost of buying more PIP than what’s required, especially since it might be worth it to get more BIL and UMBI coverage instead.
ValuePenguin gathered two sets of 12-month, full coverage auto insurance rates from across the country, then analyzed the cost per dollar of increasing one’s insurance limits. Researchers gathered two sets of quotes with the following limits:
Allstate only allowed researchers to gather rates in most cases for $100,000/$300,000 of bodily injury liability protection instead of $100,000/$200,000.
Researchers also collected personal injury protection quotes in states where available, except for Massachusetts, Minnesota, New Jersey, New York and Pennsylvania, where there were technical difficulties. In all cases, researchers amassed quotes in line with the minimum requirements and analyzed the cost of increasing each by $1,000.
ValuePenguin’s analysis used insurance rate data from Quadrant Information Services. These rates were publicly sourced from insurer filings and should be used for comparative purposes only, as your quotes may be different.
Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.
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