How Much Car Insurance Do You Actually Need?

The Instamotor Team

Not your typical used car salesman. Our team is here to provide honest and transparent advice about car buying and selling.

Let’s face it. Financial instruments, loans, and insurance are confusing items to deal with when you own a car. How do you know what you need? How can you save money without sacrificing security? What in the world is the difference between comprehensive coverage and collision coverage? We’re here to help take some of the mystery out of buying insurance coverage for your new or used car.

WHAT IS AUTO INSURANCE ANYWAY?

On average, the normal sedan driver spends about $1,222 per year on car insurance, according to AAA’s annual Your Driving Costs survey. That’s up by $107 from last year. The costs of your insurance may be different, largely because insurance rates are based on your driving history, what kind of coverage you opt for, where you live, how far you drive on a daily basis, and what kind of car you drive. In some situations, you may be paying more than the national average based on these factors.

Car insurance is an instrument that covers you in different ways whether you are operating, a passenger in, or own a motor vehicle. If you own a car you are required, by law, to have it.

Insurance companies often try to upsell you on bundling your insurance or on the coverage you really don’t need. By knowing what your state requires and what your personal needs are you can make an informed decision about how much coverage to get. We’ve broken it down for you below.

HOW MUCH CAR INSURANCE DO I NEED?

Auto insurance includes six different elements that are all priced individually. We’ve listed them below for you.

BODILY INJURY INSURANCE

First and most importantly, there is bodily injury insurance. This covers any injury that you, a designated driver or the policyholder does to anyone else in an accident. Family members are also covered if they are listed on the policy when they drive other people’s cars with their permission. It’s really important to have this kind of coverage because if you do end up in an accident you can be sued for a lot of money. Each state has a minimum requirement. Check with the state where you have registered your car to find out what these minimums are.

How Much Bodily Injury Insurance Do I Need?

We recommend that you get more than the state minimum for bodily injury insurance. An injured party could go after your home and savings if they decide to sue you.

MEDICAL PAYMENTS OR PERSONAL INJURY INSURANCE (PIP)

Personal Injury Insurance covers the treatment of injuries and lost wages of the drivers or passengers of the policyholder’s car. This insurance can also cover the costs of a funeral if someone is killed in a car accident.

How Much Personal Injury Insurance Do I Need?

Some states have minimum requirements for this kind of insurance so check with the state that your car is registered in to be sure you have the right level of coverage. We recommend that you stick with the state minimum or go slightly above because your medical insurance should cover any injuries you sustain in an accident. If you have lots of assets to protect, consider stepping up your coverage.

PROPERTY DAMAGE LIABILITY

This covers damage done to another car, property or structures when you are at fault. It will cover repairs (up to a point) of the other person’s car, etc.

How Much Property Damaga Liability Do I Need?

Most states have minimums that you must have. Check with your state or insurance provider to find out what those are.

COLLISION INSURANCE

This insurance covers damage to your car as a result of an accident. This often includes coverage if you hit a pothole, too.

How Much Collision Insurance Do I Need?

The higher your collision deductible, the lower the premium you’ll pay. In this case, we say go high on the deductible.

COMPREHENSIVE INSURANCE

Comprehensive insurance covers you for losses due to theft or damage caused by anything other than a crash. So if a tree falls on your car it would be covered under comprehensive coverage. It would also cover flood, fire, theft or if your windshield cracks.

How Much Comprehensive Insurance Do I Need?

Opt for the higher deductible. It will save on the cost of insurance. Glass coverage is usually included for free. If you have a car loan your lender will require that you carry it.

UNINSURED AND UNDERINSURED MOTORIST

This covers you if you or your car are hit by an uninsured or underinsured driver and their level of insurance doesn’t cover your damages. It also covers you if you are hit as a pedestrian.

How Much Uninsured/Underinsured Motorist Coverage Do I Need?

You should make sure you have enough of this coverage because even though it’s illegal to drive without insurance people still do it. The cost for this kind of coverage is relatively low (around $40 per year for $100,000 worth of coverage) and it’s worth having.

What Do I Need to Consider When Shopping for Car Insurance

If you own or drive a car you need to have insurance. Making sure you have enough is a careful balance of pros and cons. In many cases, there are state-mandated minimum requirements. In others, you should look to go above and beyond what the minimum.

In general, a good rule of thumb to follow when buying car insurance is to set your deductible as high as you can stand ($1,000 is a good starting point) and never skimp on Liability insurance. Another good rule to follow is to insure yourself up to the worth of your assets. These include things like the value of your home, car, savings and other assets you may have. Realize that in the event of an accident, those assets could be seized to pay for damages.

How Can I Save on Car Insurance?

There are a few additional ways to save on car insurance if you want to. First, shop around. There are plenty of places to look online for great car insurance deals. Second, look into bundling your insurance together. Sometimes the discounts can be worth it. Also, be careful about what car you choose to buy. Some cars are far more costly to insure because they are more likely to be targets of theft. Try to keep your driving record (tickets and accidents) as low as possible. Your rates will then stay low. You also could look into taking a defensive driving course to lower your rates.

While car insurance is a factor to consider when buying a new or used car, it’s worth getting the right amount of coverage to ensure that you and your family stay financially safe.