How Much Auto Insurance Do I Need?
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When shopping for car insurance, there’s no one-size-fits all policy. As you explore different coverage options and policy limitations, you’ll need to be the one to decide what type of insurance is best for you and how much coverage you need.
That can be a tough decision when you’re shopping for car insurance for the first time or have never had to rely on your insurance after an accident or other incident.
When it comes to coverage, cheaper policies with lower limits aren’t always better yet securing the most coverage available may not be necessary.
Instead, you’ll want to weigh multiple factors and decide what’s really best for you.
How Much Car Insurance Do I Need?
There’s no one simple answer to how much car insurance coverage is right. Instead, the coverage that is best for you will depend on the state you live in, the amount of risk you’re comfortable taking on, and your budget.
When you understand how factors like state minimum coverage and different types of car insurance policies work together, you can better decide how much coverage you need to buy.
Why You Need Car Insurance
Accidents are expensive. If you factor in vehicle repair or replacement costs, property damage, and medical bills, you could be looking at tens of thousands of dollars (or more) of damages from one accident. When you don’t have insurance, those expenses fall in your lap, because you don’t have an insurance policy to help cover costs.
Keep in mind that car insurance doesn’t just protect you after a car accident. Depending on the coverage you choose, your insurance may cover the cost of repairing or replacing your vehicle if it’s vandalized, stolen, or damaged by a natural disaster or fallen tree.
Chances are you’re also required to have car insurance. Most states will only allow you to drive legally if you meet the state minimum for car insurance. If you’re leasing your vehicle or financing it with an auto loan, your lender will likely also require you to have a certain amount of coverage. Knowing that the vehicle is insured protects the lender in case the vehicle is damaged before you’ve repaid the loan.
Different Types of Car Insurance
Before you shop for car insurance, it’s important to understand the different types of insurance coverage and how they work together to protect you.
- Liability Insurance: Liability insurance covers expenses another driver might incur after an accident. These include their medical bills and property damage.
- Personal Injury Protection: Personal injury protection covers any medical expenses you or your passengers might experience after an accident. This coverage is effective whether or not you were at fault for the accident. There are 12 states that require personal injury protection coverage.
- Medical Expenses: Medical expense coverage, also called MedPay, covers medical expenses for you and your passengers. It’s a relatively inexpensive policy and is effective whether or not you’re at fault for an accident. It’s required in Maine and New Hampshire.
- Uninsured or Underinsured Motorist: If you’re in an accident when an uninsured or underinsured motorist is at fault, this type of coverage helps to ensure you’re not left with unpaid expenses. It’s also effective if you’re ever in a hit-and-run. This coverage tends to be affordable, and is required in many states. Keep in mind that not all states offer uninsured property damage coverage. For example, in Connecticut, the uninsured/underinsured motorist coverage applies to liability only. The damage to the insured vehicle, though caused by someone else, would have to go through the collision portion, not the uninsured motorist portion.
- Collision Insurance: Collision insurance helps to cover your expenses if your vehicle is damaged in an accident. If your vehicle is financed or leased you will be required to have this coverage.
- Comprehensive Insurance: Comprehensive coverage helps to pay for expenses that result if your car is damaged by something other than a collision, like by weather or vandalism. Similar to collision insurance, you will need this coverage if you’ve leased or financed your car.
- Guaranteed Auto Protection (GAP): Gap insurance helps to protect you if your car is totaled, but you owe more on the loan than the car is worth. Your gap insurance will step in and pay the difference between what your insurance company pays out and what you owe on your vehicle loan.
There are also several add-on options, like full glass coverage, emergency roadside assistance, rental car reimbursement, and tow truck coverage. None of these add-ons are required, and they won’t protect you from lawsuits or major financial liabilities like other types of car insurance will. However, if you’re looking for extra peace of mind and potential savings if your vehicle breaks down or is damaged, you might want to consider them.
If you’re concerned about how much it will cost to equip your vehicle with the level of insurance you desire, the best thing you can do is get quotes from different insurance providers.
Compare.com’s comparison tool makes this easy. Just spend five minutes completing the quote request form, and we’ll compare rates from over 65 top insurance companies before presenting you with the best options for your budget.
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State Insurance Minimums
As you shop for insurance, you’ll need to choose a policy that satisfies at least your state’s minimum insurance requirements. States set these minimum requirements to help protect all drivers on the road. But keep in mind, this is typically just liability coverage which will only cover the costs of the other driver’s injuries and damages, not yours. You’ll be responsible for paying your damages out of pocket if you caused the accident and you have not opted to carry collision coverage on your policy.
Most states require you to carry a certain amount of bodily injury liability coverage per person and per accident. States also often specify a minimum amount of property damage liability. Some will also require you have personal injury protection or uninsured motorist protection as well.
For example, Arizona requires you to carry at least $25,000 in bodily injury liability per person, $50,000 in bodily injury liability per accident, and $15,000 in property damage liability. Keep in mind that these are the minimum amounts of required insurance, and you may want additional coverage.
Why You Need More Car Insurance Than the State Minimum
Just because your state specifies a minimum amount of insurance coverage doesn’t mean that those limits are enough coverage for you. You need to consider other factors to make sure you’re prepared and protected just in case you’re ever in an accident.
For example, Arizona’s $50,000 bodily liability coverage may not be enough to fully protect you in an accident. If you were at fault in an accident that caused $80,000 in bodily liability, you would still personally be responsible for $30,000 out of pocket. The driver or passengers in that accident could sue you for the remaining expenses along with your (and possibly their) legal expenses.
If you are liable for expenses resulting from an accident and you don’t have the cash to pay for them, your assets could be seized. Consider your net worth and the assets that could be taken if you’re in this situation. These assets could include your car, your home, your savings, and other items, including art, jewelry, and personal property. It’s also possible that a judge might order that your wages be garnished until your debts are paid.
However, if your net worth is lower, it’s less likely you’ll be sued. If your net worth is $100,000, it’s a good idea to have at least $100,000 worth of property damage liability coverage to protect you. You’ll need to carefully think about how much risk you’re comfortable with when deciding how much insurance you need.
Deciding How Much Car Insurance You Need
While the amount of risk that you’re comfortable with will affect how much coverage you decide you need, there are some general tips that can help you get a sense of what coverage levels are recommended.
- Bodily injury liability: A 100/300 split liability limit policy offers $100,000 per person and $300,000 per accident to the other parties involved in the accident when the incident is deemed your fault. This is recommended for any driver who can afford it, since medical bills can quickly add up and this policy offers you much more protection than state minimums. While 100/300 insurance isn’t the highest level of coverage available, it is a good mid-range coverage limit to go with.
- Property damage liability: It’s a good idea to get as much property damage liability as you can afford. Your property damage limit is the total amount your auto insurance will pay for ALL of the damages in an at-fault accident. It isn’t per vehicle damaged. Keep in mind that new vehicles can often cost $50,000 or more. That’s why, the more you can afford to get, the better.
- Personal injury protection: Take out as much coverage as you can afford, since this policy pays for basic medical expenses and some lost wages. It could help to protect you if you’re ever seriously injured in an accident and can’t work.
You will also need to consider your personal situation. If your vehicle is old and has a low value, then you might want less overall insurance than you would take out if you had a brand new car. But, if your car has a higher value, you can opt for additional coverage like GAP insurance. Ultimately, all drivers can consider additional add-ons available at a nominal fee such as roadside assistance, rental car reimbursement and full glass coverage.
How to Find Affordable Car Insurance
Taking out minimal insurance coverage because of the cost is understandable, but it could be a very expensive mistake. There are several ways to maximize your insurance coverage while still keeping your policies affordable.
Depending on your policy, you may be able to adjust your deductible to lower your monthly premiums. A higher deductible will reduce your premiums, but make sure you’re prepared to pay this larger deductible if you ever need to use your insurance.
You might also consider car insurance policies like pay-per-mile insurance. With a pay-per-mile policy, your rates will directly reflect how much you drive. This type of policy can ensure you’re still well-covered when you’re on the road, and it’s ideal if you spend minimal time driving.
Car insurance providers are increasingly offering options that benefit good drivers. With many companies, you can use telematics, which means you drive with a tracking app on your phone or device installed in your vehicle. That app will monitor your driving habits and identify whether you’re a safe or a riskier driver for the insurance company to cover. If you have good driving habits, you could receive lower rates while still enjoying additional coverage.
If you’re looking to increase your coverage or open a new policy, it’s always best to shop around and compare rates.
Compare.com makes that easy, allowing you to compare plenty of quotes with ease. There’s no need to contact lots of companies individually, so you’ll save time and can see at a glance which policies are best for you.
Drivers who use our auto insurance comparison tool save an average of $720 per year on car insurance, and you could use those savings to get even more coverage so that you’re well-protected every time you get behind the wheel.
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