How Much Car Insurance Do I Need?

That is a common question when someone begins to shop for insurance.

There are only a couple states that don't set minimum requirements for carrying Liability Insurance on your car. The requirements are quite low so we would suggest not using them as a guideline for what you should purchase. When you are looking to save money on car insurance, the liability portion of your coverage is not the place to cut corners. If you’re found legally responsible for a greater amount than your insurance covers, you have to pay the difference yourself. In other words, one bad accident can literally wipe you out!

The Insurance Information Institute (iii) recommends carrying at least a 100/300 car insurance policy. This covers you for:

$100,000 of bodily injury protection per person
$300,000 of bodily injury protection per accident

How Much Car Insurance Is Required by State


Who Needs More Liability Coverage?

If you have more assets that you wish to protect from risk, you may want to talk to your insurance agent about a liability umbrella insurance.  This type of policy is secondary insurance that pays once your primary coverage has reached it's limits. These policies are typically inexpensive for the amount of coverage you receive, most people can get $1 million worth of coverage for a couple hundred dollars per year. If you have your home insurance and car insurance with the same company then adding an umbrella policy will be easiest, otherwise it's probably best to go with whoever has your car insurance.

How Much Comprehensive Car Insurance Do You Need?

This depends primarily upon the value of your car  and whether or not you have a loan on your car. States do not require comprehensive coverage but if you have a loan or lease outstanding on your car the financial institution will require coverage.

Comprehensive Insurance is usually combined with collision and liability insurance to provide Full Coverage Car Insurance. The comprehensive portion is primarily to cover your vehicle for losses resulting from incidents other than collision. A rock damaging your windshield or hitting an animal on the road are both covered under your comprehensive coverage. Damage that occurs as a result of fire, flood or someone stealing or vandalizing your car is also covered under the comprehensive.

In order to keep your premiums low, choose an insurance deductible that is as high as you are comfortable with. The more you are willing to pay as a result of an incident the cheaper your coverage will be. Companies may offer different deductibles for glass and other damage, so you can have an overall $500 deductible but a $50 glass deductible.

In this case if you hit a deer and the total damage was $2000, you would pay $500 and the insurance company would pay $1500. If you had a rock hit your windshield and crack it then you would only have to pay the first $50. Some companies will completely waive the deductible if it can be repaired instead of being replaced.

How Much Collision Car Insurance Do You Need?

The Collision coverage pays for damage to your car when your car hits another car, is hit by another car or you hit a stationary object.  Similar to comprehensive coverage the insurance company will pay for the damages minus the deductible you chose.  The cost of coverage will depend upon the value of the car you drive and how expensive it is to repair.  To keep your premiums as low as possible you should compare different deductibles.  Typical deductibles are $250, $500 & $1000.

Coverage is normally limited to the cash value of your car, so that's why most people drop "Full Coverage" insurance once the car is older.  Once a car is old enough to be a classic or antique it is normally insured under a "Stated Value" insurance policy where you pay based on the agreed upon value of the vehicle.  Since most collectible and classic cars are licensed as collector cars and driven very few miles, coverage is quite reasonable.

Collision coverage is not required by state regulations, but if you have a loan or a lease then the lien holder will require it.

Car Insurance Summary

States set the minimum liability insurance requirements you can have on your vehicle.  How much liability car insurance you need can also depend upon the level of assets you desire to protect.  The more assets you have the more coverage you would want, such as an umbrella policy.

Collision and Comprehensive coverage are required only if you have a loan or lease on your car.  It is not a state requirement, rather it's required by the lein holder.  The most effective way to lower this portion of your premium is to increase the deductible that you pay when damage occurs.

Consult a local insurace professional for additional advise and coverage details specific to your state.  If you wish to learn more about how much is car insurance you may want to visit our companion site.