Auto Insurance: How Much Is Enough?

How Much Auto Insurance Should I Carry?

The amount of auto insurance you should carry depends on several factors, including your state's minimum requirements, your budget, and your personal needs. While each state sets its own minimum liability insurance requirements, it is essential to consider additional coverage to protect yourself adequately.

Liability insurance typically includes bodily injury and property damage coverage, with recommended limits of 100/300/100 or higher. This means up to $100,000 per person and $300,000 per accident in bodily injury liability, and $100,000 per accident in property damage liability.

In addition to liability insurance, you may want to consider other types of coverage such as uninsured/underinsured motorist coverage, personal injury protection, collision insurance, and comprehensive insurance. The cost of auto insurance varies depending on factors like policy limits, deductibles, and your driving record. It is recommended to get quotes from multiple insurance providers to find the best coverage at a suitable price.

Liability insurance

The amount of liability coverage you need depends on your specific situation. At a minimum, you should meet your state's mandated minimum requirements. However, it is generally recommended to get higher coverage limits to adequately protect yourself financially. A good rule of thumb is to have enough liability coverage to cover your net worth, which includes the value of your assets (such as cash, investments, home, vehicles) minus your debt. This ensures that you are not left financially vulnerable if you are found at fault for an accident and face legal consequences or lawsuits.

When deciding on the amount of liability coverage, consider factors such as the value of your home, vehicles, savings, and investments. Additionally, think about the potential costs of medical bills, car repairs, and property damage in the event of a severe accident. By assessing your financial situation and the potential costs associated with accidents, you can determine the appropriate level of liability coverage needed to protect yourself adequately.

It is worth noting that liability insurance does not cover your own medical bills or repairs to your vehicle resulting from an accident. To ensure coverage for yourself and your vehicle, you may consider additional types of insurance, such as personal injury protection, health insurance, or collision insurance.

Collision insurance

When deciding on collision insurance, it is crucial to consider the cost of your car and the potential cost of repairs. If you choose a higher deductible, you will have lower monthly premiums but will have to pay more out of pocket if an accident occurs. Collision insurance is particularly beneficial for vehicle owners who lease or finance their cars, have newer or more expensive vehicles, or own older vehicles that still have good relative value.

While collision insurance can be expensive, there are ways to save on premiums, such as choosing a higher deductible. Additionally, it may be worth considering if you drive a car worth protecting and want the peace of mind that comes with knowing your vehicle is covered in the event of an accident.

It is also important to note that collision insurance is separate from comprehensive insurance, which covers events outside of a driver's control, such as natural disasters or carjacking. While collision insurance focuses on events within a driver's control, comprehensive insurance covers acts of nature or God.

Comprehensive insurance

The cost of comprehensive insurance varies depending on factors such as your age, driving record, vehicle, state, deductible, and coverage limit. According to the National Association of Insurance Commissioners, the average annual comprehensive insurance premium for drivers in the US in 2019 was $171.87, with rates ranging from $96.53 in California to $347.61 in South Dakota.

When deciding whether to purchase comprehensive insurance, consider the value of your vehicle, the cost of the insurance, and the likelihood of incidents occurring in your area. It may be worth purchasing comprehensive insurance if you have a new car, if the value of your vehicle is high, or if you live in an area with a high risk of extreme weather, car theft, or vandalism.

Uninsured motorist coverage

If you're in an accident with an uninsured or underinsured driver, you could be left paying for medical bills or vehicle repairs out of your own pocket. Even if you have health insurance, it may not cover all the costs associated with a car accident, such as lost wages or damage to your vehicle. Uninsured motorist coverage can help fill these gaps and protect you financially.

In some states, uninsured motorist coverage is required by law. For example, South Carolina requires drivers to carry uninsured motorist coverage equal to the minimum amounts of liability coverage. Other states, like Illinois, require both uninsured and underinsured motorist coverage. Even if your state doesn't mandate this coverage, it's essential to consider the risks of driving without it. According to the Insurance Information Institute, nearly 13% of drivers countrywide don't have auto insurance, and in some states, the number of uninsured drivers is over 20%.

When deciding on the amount of uninsured motorist coverage to get, it's recommended to match the amount of your liability coverage. For example, if your liability coverage limits are $50,000 per person and $100,000 per accident, you should consider choosing the same limits for uninsured motorist bodily injury coverage. This will ensure that you have sufficient protection in the event of an accident with an uninsured or underinsured driver.

Personal injury protection

In the US, some states mandate drivers to have PIP, some states require it only if the driver doesn't have health insurance, and some states make it optional or don't offer it at all. Requirements for PIP coverage vary from state to state, so it's important to check the specific requirements for your state.

When deciding how much PIP insurance to get, consider the following:

• Your health insurance: If you have good health insurance, you may be able to select a lower amount of PIP coverage to save money.
• Your health insurance deductible: If you don't have health insurance or have a high-deductible plan, consider purchasing at least the minimum amount of PIP coverage.
• Your lost wages: If you depend on your wages to make a living, consider adding PIP or increasing your limits as it covers lost wages.
• Your life insurance: If you don't have life insurance, adding PIP could help your family cover unforeseen expenses if you're in a fatal accident.

While PIP covers medical expenses and lost wages, it doesn't cover damage to your vehicle or theft of your vehicle. For protection against these types of damages, you'll need to add comprehensive car insurance coverage and auto collision coverage.

Frequently asked questions