How Much Auto Insurance To Buy

Purchasing car insurance can be confusing and financially taxing if you are unfamiliar with the types of coverage you need. Many people make the mistake of purchasing too little auto insurance coverage, but just as many others make the mistake of purchasing too much.

Fortunately, once you understand the purpose of each type of coverage, you can better determine if you require that particular coverage for your vehicle.

 

Liability Insurance

First, know that liability is a requirement in nearly every state so, unless your state offers some other option (such as posting a surety bond of a certain amount) and you choose to take that option, chances are you have to purchase liability insurance.

Now, it boils down to determining how much to purchase.

The purpose of liability insurance is to cover damages to another persons property and injuries suffered by another person in an auto accident. Each state mandates its own liability insurance requirements, but you will typically not be required by law to carry more than $100,000 bodily injury coverage and $25,000 property damage coverage per accident.

However, in the event of a serious accident, the minimum amount might not be enough. The amount of liability insurance you need depends on the worth of your personal assets, but insurance professionals typically recommend carrying no less than $300,000 bodily injury protection and $100,000 property damage protection.

 

Additional Types of Auto Insurance Coverage

In addition to liability insurance―which is usually mandatory―you might also consider the following optional coverage types:

• Collision coverage, which covers damage to your vehicle due to collisions.

• Comprehensive coverage, which covers damage to your vehicle due to theft, vandalism, natural disasters, and weather conditions.

• Uninsured or underinsured motorist coverage, which covers you in the event of an accident with an uninsured―or insufficiently insured―driver.

• Personal injury protection (PIP), which covers any medical expenses not covered by the other driver’s liability insurance policy. PIP is also referred to as no fault insurance, and is required in several states.

Typically speaking, you will want to consider these types of coverage if you drive an expensive vehicle, if you live a highly populated area, or if you often commute in heavy traffic. On the other hand, if you live in a rural area, or if your vehicle is fairly inexpensive, you will likely not require these types of coverage.

 

How Much Car Insurance to Buy

Insurance professionals recommend purchasing the following amounts of each coverage type:

• $250 deductible for collision insurance. The actual amount of coverage depends on the worth of your particular vehicle.

• $100 deductible for comprehensive insurance. Once again, the actual amount of coverage depends your vehicle’s worth.

• $300,000 of bodily injury uninsured motorist coverage.

• $100,000 of property damage uninsured motorist coverage

The amount of PIP coverage is not typically specified in an insurance policy, the majority of providers have a limit to what they will pay out for a PIP claim. Be sure to inquire about this limit when you purchase PIP insurance.

 

Obtaining an Insurance Quote

You can compare car insurance policies online, or by contacting the Insurance Department in your state.

Be aware that the more coverage you purchase, the higher your annual premium will be. You can reduce this premium by assuming a higher deductible, and by taking advantage of every discount available to you. Be sure to talk with an agent with each insurance company you're considering about all discounts for which you might be eligible.