What You Need to Know About Different Auto Insurance Options
New Mexico, like most states in the U.S., has a mandatory auto insurance policy. This basic requirement protects drivers and pedestrians alike from costs associated with property damage, medical car, and vehicular death.
Failure to carry the minimum insurance can lead to a suspended vehicle registration, and if the owner doesn’t return the registration, he will be subject to the penalties prescribed by law, including criminal penalties.
What is Auto Insurance?
Auto insurance itself is a protection from financial loss in the event of any accident that involves a vehicle (e.g. hit-and-run, head on collision, drunk driver, property damage, car fire, etc.)
It is a contract between the vehicle owner, called the policyholder, and the insurance company. The policyholder agrees to pay a monthly stipend each month, called a premium, and the insurance company agrees to pay for losses based on the policy.
New Mexico Mandatory Requirements
All New Mexico registered drivers are required to carry:
- $25,000 for bodily injury to or death of one person,
- $50,000 for bodily injury to or death of two or more persons, and
- $10,000 for property damage in any one accident.
Those numbers are the minimum limit that the insurance company must provide under a policy. In the event of an accident, up to that amount will be paid by the insurance for damages. Anything else is out of pocket of the victims. This is why the Insurance Information Institute advises carrying higher than the minimum.
“Chances are that you will need more liability insurance than the state requires because accidents cost more than the minimum limits,” they said. “If you’re found legally responsible for bills that are more than your insurance covers, you will have to pay the difference out of your own pocket. These costs could wipe you out!”
Costs of Sticking With The Minimum
To save money each month, some motorists may prefer to stick with just the minimum, but that can make a difference down the road. A 2013 study by the Centers for Disease and Control (CDC) found that New Mexico accounted for $433 million losses in car-related deaths. The World Health Organization (WHO) says “as many as 50 million people are injured or disabled by road traffic crashes every year” and that “half of all crash victims are vulnerable road users such as pedestrians, cyclists, and motorcyclists.”
Hitting closer to home, the National Highway Traffic Safety Administration called New Mexico drivers “the second worst in the U.S.” This was largely due to drunken driving arrests. The same report said that New Mexico ranked “fifth for the most careless driving cases and 10th for the most drunken driving accidents. The state was 17th in traffic fatalities, 12th for speeding and 16th for other citations.” It’s those sort of things that insurance covers outside of the minimum when policies allow it.
Optional Auto Insurance
Bodily Injury Liability
This coverage applies to situations where the policyholder injures somebody else in an accident.
“It’s very important to have enough liability insurance, because if you are involved in a serious accident, you may be sued for a large sum of money,” says the Insurance Information Institute (III) “Definitely consider buying more than the state-required minimum to protect assets such as your home and savings.”
Personal Injury Protection (PIP)
This coverage applies to the injuries of the policyholder and those inside the policyholder’s vehicle.
“At its broadest, PIP can cover medical payments, lost wages and the cost of replacing services normally performed by someone injured in an auto accident. It may also cover funeral costs,” the III states.
This coverage pays for any sort of collision of a covered vehicle with another object and typically pays out whether or not the policyholder was at fault in the accident.
“You may be thinking about dropping collision coverage to get your insurance premium cheaper, but if you are at fault in an accident, you will need to pay the full bill to repair your car,” says WhosDriving, an auto industry blog. “Paying off a complete bill for a bad wreck will end up costing more than a low monthly premium.”
Property Damage Liability
This coverage pays for any damage the policyholder’s vehicle may have caused to other objects and properties – trees, fences, buildings, etc.
Uninsured and Underinsured Motorist Coverage
This coverage pays for costs if a policyholder is involved in an accident with someone who is carrying insufficient insurance or no insurance at all. Typically the at-fault party’s insurance would pay for all damages, but in the event that they are only carrying the state minimum, or that they are uninsured, this coverage fills the void.
The Insurance Information Institute also advises that this can cover damages during a hit-and-run.