Auto Insurance: Understanding How Much You Really Need

Auto insurance is a must for all car owners, but how much you must have often is dictated by state laws, while those still paying off their ride will be mandated to carry more coverage than one with a clear title.

That being said, these are standard auto insurance options to help you determine what types and how much coverage you actually need.

The Nuts and Bolts of Auto Insurance Policies

Again, needs vary depending on your situation and financial situation, and buyers with high dollar assets should consider going for the high end of maximum coverages in most areas to protect their portfolio. Here are the basic components of auto insurance policies.

  • Liability for Bodily Injury: Bodily injury liability is designed to pay for a party’s injury-related expenses incurred in an accident that’s the policyholder’s fault. Minimum coverage for most states starts at $10,000 per person or $20,000 per incident. Policies cap out around $500K but can be increased under Personal Excess or Umbrella policies.
  • Liability for Property Damage: Required by law in most states, this component covers repair costs for damage to physical property and other autos in at-fault accidents. Property damage liability doesn’t cover the owner’s auto and minimums generally won’t be helpful, so get as much as you can afford.
  • Collision Coverage: Ensure that collision coverage for your vehicle is ample to cover replacement value, and deductibles range from $250-$1000 per incident.
  • Comprehensive: Covers the cost of miscellaneous damages to your car not caused by a collision, such as fire and theft.
  • Medical Expenses: Additional medical coverage for drivers and passengers with limits up to $1M or higher.
  • Uninsured/Underinsured Motorist Coverage: Covers damages when at-fault party is uninsured.
  • Personal Injury Protection: PIP is no-fault insurance that covers certain basic costs regardless of each party’s insurance coverage status.

Talk to an auto insurance professional to explore coverage options and discuss limitation amounts best suited for your situation.