How Much Car Insurance Coverage Do You Need?

June 15, 2010

"How much car insurance do I need?" is the number one question consumers ask whether they are purchasing a used car or a brand new luxury car. A universal answer for how much auto coverage is the right amount does not exist, mainly because every driver is different. The amount of auto insurance coverage you carry will depend on the type of car you drive, how much you drive, where you live, and how many drivers are on the policy. The primary factors dont stop there. Auto insurance companies will consider other primary factors in determining coverage recommendations and rates. These will include age, gender, employment, driving record, marital status, and even credit history.

While the auto insurance company will have several coverages in mind after assessing your own individual situation, there are three questions you must ask yourself in order to get an idea of how much insurance you actually need:

1.    What coverage must be purchased because of state law?
2.    Which coverage do you need or want?
3.    How much will optional coverages cost (the more coverages purchased, the higher the premium)?

Lets start with state law. Every state has its own auto insurance laws, including minimum auto liability coverage amounts. Some states require three minimum coverages while others may require additional uninsured/underinsured motorist coverage or personal injury protection (PIP). To find out your state requirements, visit your state insurance department website for official figures. It's important to note that requirements vary greatly by state. For example, in the state of California, drivers must carry at least $15,000 for death or injury of any one person, in any one accident; $30,000 for all persons in any one accident, and $5,000 for damage to property in any one accident (15/30/5). But in places like Alaska, the amounts are much higher at 50/100/25.

Next, which coverage do you need or want? If you own a luxury car, SUV, sports car, vintage car, or any car worth more than several thousand dollars, you should consider doubling the minimum amounts, especially for property damage. If you live in a state that has a high number of uninsured motorists, you should also consider carrying uninsured/underinsured motorist coverage. Check with your state department of insurance for statistics on uninsured drivers and accidents. Remember, underinsured drivers typically carry the absolute bare minimum coverage amounts required by law. If you live in a tort state where someone has to be found at fault in order for the victim to collect damages, uninsured/underinsured motorist coverage is probably a good optional coverage to carry. Your department of insurance website will also list whether your state follows a tort system or a no-fault system.

If you drive often, own a moderate to expensive vehicle, and you live in a densely populated area, carrying additional coverages or higher than the minimum amounts is a smart thing to do, but youre probably wondering how much these options will cost. Again, there is no set amount. The final tally will depend on a combination of primary factors that are out of your control and factors that you can control.

If you want to protect your vehicle and your family, opting for bare minimum coverage is a risky thing to do. Purchase the maximum amount of coverage you possibly can and ask your auto insurance agent about discounts and deals. If you want to save on car insurance without skimping on coverage, you can complete a safe driver course or add all of your household vehicles to one policy. Auto insurance providers also offer discounts for added safety features or carrying all of your insurance policies (health, home, life) with one company--theirs.

For more information about auto insurance coverage, visit your state department of insurance website. You can locate your state insurance department by visiting the National Association of Insurance Commissioners (NAIC).

Michelle Burton is a published author and contributing editor for Auto Insurance Tips, Trouvé Media, Internet Brands, and Publications International, Ltd.

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