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How Much Auto Insurance Do I Need? Making Sure You’re Fully Covered

By August 10, 2018February 7th, 2022No Comments

Auto insurance comes in all sorts of levels of cover so the choice can sometimes be a little overwhelming. You may be left asking: how much auto insurance do i need? We take a look at exactly what you need to make sure you’re fully covered for any eventuality.

It’s estimated there are more than 6 million car collisions in America every year. With statistics like this, it’s very likely you’ll be involved in a car accident at some point in your driving career.

The importance of having the right auto insurance isn’t lost on you. The question you’re asking is, how much auto insurance do I need?

The answer depends on several factors. One consideration is the minimums set out by law in the state you live in. Another is your net worth and how much it would cost to replace your car.

We’ll guide you through the ins and outs of figuring out just how much car insurance you need.

State Requirements and Other Minimums

Most states set out levels of required auto insurance. The exact requirements vary from state to state. Some states require policies like Personal Injury Protection or MedPay.

Several states have no-fault insurance in play. This means the policies pay out no matter who is at fault. It also limits your ability to sue other drivers.

You should always check what your state requires. Once you know the minimums, you can talk to an insurance agent about increasing your coverage.

It’s almost always a good idea to increase your coverage over the state requirements. State law represents the lowest level of insurance needed. If you’re asking how much car insurance do I need, one answer is more than the minimum.

The Basics of Answering How Much Auto Insurance do I Need

There are several different types of car insurance that make up what’s called basic coverage. In most places, you’ll need to carry three policies:

  • liability coverage
  • comprehensive coverage
  • collision coverage

Taken together, they cover you, your passengers, and your car.

Liability Insurance Protects You from Third-party Costs

If you’re at fault for an accident, you’re liable for it. You might be asked to pay for medical expenses or car repairs for the other person involved in the accident. Liability insurance will help you pay for these.

Many people ask, how much liability coverage do I need? A good rule of thumb is $500,000 in coverage. This means the policy will pay up to $500,000 if you are liable for the accident.

Some people will recommend extra liability insurance. This is sometimes termed umbrella insurance. It’s an excellent idea if you have a high net worth.

Collision and Comprehensive Insurance

The other two parts of basic coverage are comprehensive and collision coverage.

Comprehensive coverage protects your vehicle in many circumstances outside of an accident. If hail damages your car, comprehensive coverage may pay to fix the dents. Falling trees, fire, and other events can also cause damage.

Comprehensive coverage doesn’t usually pay if your car is damaged in an accident. Instead, you’ll need collision insurance. This coverage pays for repairs, or to replace your vehicle.

Some drivers choose to skip collision insurance. They may believe it’s too expensive, or they may think they’re covered under a liability policy. Keep in mind liability insurance doesn’t protect your vehicle.

If you’re asking how much insurance do I need, you might be tempted to consider collision non-essential. Most drivers choose to add it for good reason. Unless you can afford to repair or replace your car out of pocket, you’ll want this coverage.

What Other Coverage Exists?

You can also buy additional coverage, beyond the basic insurance outlined above. Some states require extra coverage. In most cases, you’ll pay a higher or extra premium for these options.

Additional coverage can include:

  • Guaranteed Auto Protection (GAP) coverage, which covers what you still owe on a loan for a new vehicle
  • mechanical breakdown, which allows you to choose who will repair your car
  • rental reimbursement, which helps you pay for a rental car while your own vehicle is in for repairs
  • roadside assistance, which can help you if you have a flat, run out of gas, or need a tow
  • pay-per-mile, which allows you to install a GPS device and pay for insurance per mile of driving

MedPay and PIP

Some states require policies known as MedPay and PIP. In other states, these options aren’t available.

MedPay covers reasonable medical expenses for you, your passengers, or your family members if they’re involved in an accident.

PIP is like MedPay, but it has higher coverage limits and more comprehensive coverage. It also usually has a deductible and a higher premium.

What about Deductibles?

Something people often wonder about is the deductible with recommended auto insurance coverage.

A deductible is what you pay out of pocket before your coverage kicks in. If your deductible is $500, you’ll need to pay $500 for auto repairs before your insurance will pick up the tab. If the bill is $750, then your insurance will cover $250.

Should you go with a high or low deductible? Both types of plans have their pros and cons. A high deductible plan often comes with a lower price, but it could leave you paying more out of pocket.

Insurance companies see a low deductible as a higher risk, so they charge a higher premium. If you don’t have an emergency fund, a lower deductible could be the right choice. Otherwise, high deductibles can save you money.

Saving Money on Auto Insurance

If you’re wondering how much auto insurance will cost, there are many factors that could help you get a discount.

Be sure to mention if you’re married, or if you have a teenage driver who has completed driver’s education. Some carriers will even give you a discount if you have a college degree.

Certain occupations, such as being in the military, may also qualify for discounts. Being a homeowner, parking your car in a garage, and installing anti-theft devices can also help.

Get the Right Insurance for You

If you’re asking, how much auto insurance do I need, you may want to re-evaluate your current policy. You may need more coverage than you think you do.

Talk to your insurance agent about how to find the right coverage for you. Making sure you’re fully covered will give you peace of mind.

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