Key Insurance Considerations for Car Buyers

Most families have automobile insurance since they've been on the road, but many may not fully know the ins and outs of coverage until they have to file a claim.

But by then, it might be too late to learn that you're uncovered -- or undercovered -- for certain liabilities.

Here's a closer look at three key coverage areas you should be sure to examine before you hit the road.

Policyholders could be on the hook for damage costs from car accidents if they don't have enough coverage. Many drivers opt for the minimum coverage required by their state: typically around $10,000 for personal injury protection and $10,000 for property damage liability. But that may not be enough to cover the damage caused by serious accidents.

Experts suggest consumers consider collision and comprehensive coverage; uninsured motorists coverage to pay for hit-and-runs and for damage caused by someone without insurance; and bodily injury liability coverage, which pays for death or serious and permanent injury to others when you're responsible for an accident. It covers all people on the policy, even when they're driving someone else's car.

Child Drivers

Consider Vehicle Value

Consumers can lower their limits for coverage as their cars depreciate in value. In the event of a total loss, the carrier does not pay the policy limit listed for property damage. They pay the depreciated value. Therefore, you pay for coverage you can never collect on.

Furthermore, consumers with loans on their cars can buy "gap" insurance to cover the difference between the amount of coverage they have and the amount of the loan. Since the vehicle depreciates immediately after it's taken off the lot -- by several thousand dollars – the owner has to have coverage to pay off your loan.

But for older cars, collision and comprehensive coverage may not make sense. It may not be cost-effective to continue insuring cars worth less than 10 times the amount you would pay for coverage, according to InsWeb, a company that partners with major insurers to provide online automobile insurance rate quotes. For instance, if your car is valued at $3,000 and the collision and comprehensive part of your policy costs $300 or more, it may not be worth keeping the coverage.