How Much Car Insurance Do You Really Need?


Choosing the right amount of auto insurance can be tricky. While your condition probably requires coverage, you may be wondering if this is enough or if you should buy more.

There is no quick and easy answer. Although you are required to obtain the minimum amount of auto insurance required to drive in your state, the amount you purchase beyond that will depend on your own financial situation.

Protect your wallet with sufficient liability coverage

The main component of auto insurance – Liability coverage – don’t pay you if you crash. Instead, it pays for the injuries, deaths, and property damage you cause, up to your policy limits. Liability limits are often listed in a format such as “25/50/15” which means your insurer will pay $ 25,000 per person and $ 50,000 per wreck for injuries you are responsible for and up to 15 $ 000 for the property damage you cause.

In states where it is needed, the minimum personal injury limits can be as low as $ 15,000, but a bad wreck can easily result in higher medical bills than that. The average cost of an accident resulting in non-disabling injuries was over $ 28,000 in 2019, according to the National Safety Council. And if you’re sued with insufficient liability coverage, you’ll pay the rest out of your pocket.

So how do you know you’ve bought enough? TJ Roberts, owner of a Farm Bureau insurance agency in Mission, Kansas, recommends that you consider your net worth and how much you drive when determining the liability limits for your auto policy. Roberts emphasizes that the most important thing about auto insurance is to have the appropriate coverage limits for your financial situation.

To determine your net worth, add up all of your assets, including investment and retirement accounts, and subtract any debt you owe. Then make sure you have sufficient personal injury liability coverage to cover that amount.

If your liability limits are maximized but you want more extensive coverage, you can purchase additional coverage with a umbrella insurance Politics. These policies add additional liability coverage for your car and home, often in $ 1 million increments.

If you don’t have any assets to protect besides your car, you’re probably okay with purchasing minimum liability coverage.

Choose full coverage based on the deductible you can afford

Usually referred to as “full coverage” when added to a liability policy, collision and comprehensive coverage pay for damage to your own vehicle, regardless of the fault. Collision coverage pays when your car collides with another. Comprehensive coverage covers damage to your car caused by situations beyond your control, such as vandalism, theft or a collision with deer.

Both are optional, unless you are leasing or financing a car. If you drive an expensive vehicle that would be difficult to replace, comprehensive coverage could give you some peace of mind after an accident. If your car has low dollar value or you’re willing to pay for a replacement, you’re probably better off skipping the full check and collision.

If you buy collision insurance and full coverage, pay attention to the deductible – how much you pay out of pocket before your insurance pays for a claim. Collisions and full deductibles tend to range from $ 250 to $ 1,000; choose an amount you could afford to pay off in no time.

Coverage for uninsured motorists is recommended

About 1 in 8 drivers on the road do not have auto insurance, according to 2019 data from the Insurance Research Council. If you get hit by any of these, you might be out of luck unless you have uninsured auto coverage – or underinsured auto coverage in case the person whose car hits yours. would not have sufficient liability insurance. They are often sold together, in limited quantities such as liability coverage.

Although many states do not require it, Roberts still recommends adding it to your policy. “Why would you insure other people’s business and not your own?” he asks.

If you’re wondering how much to add to your policy, keep it simple. Match the limits you selected for personal injury and property damage.

Some types of optional coverage may be worth it

Insurers offer a variety of other useful types of coverage:

  • Glass cover pays to repair car windows if damaged, a handy cover to have if rocks on the road hit your windshield.
  • Medical payment coverage will pay for your injuries or those of your passengers after an accident and can be useful for covering health insurance deductibles.
  • Roadside assistance for if you need a tow or a quick start, although some companies may charge you for services in addition to the regular premium.

Whichever type of coverage you choose, Roberts advises you to prepare for possible scenarios that might arise down the road when purchasing insurance. “You don’t want to wonder what cover you have when it’s too late.”

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Ben Moore writes for NerdWallet. Email: [email protected]

The article How Much Car Insurance Do You Really Need? originally appeared on NerdWallet.

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