How to Determine the Right Amount of Car Insurance Coverage for You
What if you could finally keep from paying too much for insurance?
All drivers should protect their rides with reliable car insurance. However, getting the right policy amount can be as scary as it is confusing. Get too much, and you will be stuck paying more than you should each month. Get too little and you could be a single car accident away from losing your automobile and having to buy a new one.
There is no one-size-fits-all answer to “How much car insurance do I need?” Fortunately, you do not have to figure everything out alone: Keep reading our easy guide to determining the best coverage for you and your vehicle.
Understanding the Different Types of Car Insurance Coverage
You might find it hard to answer the question: “How much car insurance do I need?” There are many types of policies, and each one protects your automobile in a different way. To know exactly what you need, it is important that you understand every option available to you.
Wondering what kind of policy you need? Or maybe you are trying to understand the difference between liability vs. full coverage car insurance? Below, you will find answers to everything you need to know.
Liability Coverage: What It Covers and Why It Is Essential
Liability coverage is a requirement in most states. Such a policy pays to cover any damage to people or property when you are found at fault for an accident. In some states, your liability will help pay for your own property damage, but in most states, it is there to pay for damage you cause and will not pay anything for your own damages.
Collision Coverage: Protecting Your Car in Case of an Accident
The sole purpose of collision coverage is to repair any damage to your vehicle after an accident. Notably, it pays out regardless of who is at fault. Therefore, if you are liable for an accident, this is the only policy designed to pay for repairs or replacement, if your vehicle is totaled.
Comprehensive Coverage: Coverage for Non-Accident Events (Fire, Theft, Etc.)
Comprehensive coverage is designed to protect your vehicle when you are not actually driving. For example, such a policy can insure against theft, vandalism, fire, and even falling trees, so it offers solid protection against natural disasters. Should you purchase liability, collision, and comprehensive, you will have what is known as “full coverage.”
Additional Coverage Options: Uninsured Motorist and Personal Injury Protection
Liability is designed to pay for damage a driver causes up to their coverage limits, but some drivers have insufficient policies, and some have no policy whatsoever. If you are worried about being hit by such a driver, you can purchase uninsured and underinsured motorist protection, which pays out when the other driver cannot.
In certain states, you must purchase personal injury protection, or PIP. It helps to pay for medical expenses after an accident and may even cover any lost income you experience while recovering from the accident. In most states, you can purchase this coverage even when it is not required.
Factors to Consider When Determining Your Car Insurance Needs
Knowing what kinds of policies are available may help with determining the ideal amount of coverage. However, that is only part of what you need to know. There are also several other factors that impact everything from which policy you choose to how high your limits are.
Trying to find the best policy for your vehicle and budget? Sick of paying for more of a policy than you really need? Below, you will learn the most important factors when it comes to finding the best policy.
Your Vehicle’s Value: How Age and Condition Impact Coverage
Deciding your exact personal car insurance needs begins with the vehicle itself. Newer models need more protection because it may be costly to repair or replace an expensive new automobile. Conversely, those who drive very old vehicles may be tempted to drop down to a liability-only policy because they are determined to simply replace the older vehicle out of pocket in the event of an accident.
Your Driving Habits: How Often You Drive and Where You Drive
There is no universal “best car insurance coverage” because different car owners have different driving needs. For example, if you drive very far over varied terrain, you would benefit from both comprehensive and collision, and you might even want uninsured/underinsured motorist protection. Those who work from home and otherwise barely drive, though, may only want liability, and they may be eligible for low-mileage discounts from their carrier.
Your Budget: Finding the Right Balance Between Coverage and Cost
Many walk into their carriers asking, “How much car insurance do I need?” By definition, higher limits provide more robust protection to your finances and your vehicle, but they also increase your monthly premium. Therefore, you need to balance the kinds of policies and limits you want with what you can afford to pay each month.
State Requirements: What Is Legally Required for Your Car Insurance
It is important to be aware of the car insurance limits required by your state. Most states require a minimum amount of liability insurance in order to cover any damage you may cause. You may want to get more than the minimum amount in case you damage expensive vehicles. And remember that, depending on the state you live in, liability usually does not pay to cover damages to your own vehicle.
How to Assess Your Risk and Coverage Limits
Your personal car coverage needs depend on how likely you are to get into an accident. Even if you are a safe driver, you may live in a neighborhood or work in an area that is very prone to car wrecks. Similarly, you may live or work in areas prone to robbery, in which case, the best policy for you would include a comprehensive policy to protect against theft when you are not behind the wheel. Even the most careful of drivers may lose control and hydroplane in a rainy situation.
Once you have a policy picked out, you need to make sure you have the right liability policy limits. It’s always best to have more than you might need to repair or replace someone else’s vehicle if you are at fault.
With collision and comprehensive, the limit is the fair market value of the insured vehicle and there are deductibles for these policies, unlike liability, which has no deductible.
How to Choose Deductibles That Make Sense for Your Situation
Understanding how to choose car insurance means understanding how to pick the right deductible. Higher deductibles mean lower monthly premiums, but you must pay more when you file a claim. Lower deductibles, meanwhile, come with higher monthly premiums but require less money down when you file.
Your deductible amount entirely depends on how comfortable your bank balance will be if you need to file a claim to replace your vehicle or handle an expensive repair. Your deductible should be the amount you can come up with if necessary.
Why Quality Car Insurance Is More Important Than the Cheapest Option
Newer drivers figuring out how to choose car coverage often make the same rookie mistake: namely, going with the cheapest possible option. To them, the answer to “How much car insurance do I need?” is simply the state-required minimum amount. However, getting only the minimum amount may be a bad idea.
As mentioned before, most states only require liability, and these policies only help pay for the damage for which you are responsible. If the repairs or injury costs go over that amount, it will be your responsibility to pay the remainder. These policies also will not pay a dime to repair or replace your vehicle in an accident.
Get the Right Amount of Car Insurance Coverage — Quality Coverage Tailored to You
Now you know how to answer the eternal question of “How much car insurance do I need?” This includes how to calculate your own needs and how to understand different policies, including liability vs. full coverage car insurance. But do you know who can provide all the protection your car will ever need?
At InsureOne, we are experts at protecting drivers just like you. When you are ready to give your ride the best protection at the best possible price, come get a quote online. You are also always welcome to pick up the phone and give us a call at 800-836-2240. Finally, we would love to see you in person when you come visit an InsureOne office near you.