How Much Auto Insurance to Buy?

The average driver pays around $1,500 a year in car insurance premium, but these costs can vary greatly depending on the extent of the coverage, as well as factors such as the driver’s age, state, and driving record. But how do you know how much insurance you will need; should you opt for comprehensive coverage right off the bat or can you settle for something less, saving yourself a small fortune on premiums in the process?

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The Types of Auto Insurance

To understand how much auto insurance you need, we first need to look at the many types of coverage that can be added to your policy.

Bodily Injury Liability

If you hit and injure someone with your car, you may be held responsible. They can sue you and claim financial compensation for medical bills and lost earnings, as well as emotional and physical support. This type of coverage is essential, because if you’re hit with hefty legal bills and medical payments, you could lose your house, car, and every other asset you have.

Many auto insurance quotes include minimum liability coverage in the tens of thousands, and this is often capped at around $500,000. Liability limits are entirely up to you, but many experts recommend that you cover yourself with a minimum amount of at least $100,000.

Collision Coverage

One of the most common and essential aspects of your auto insurance policy, collision coverage will payout in the event that you hit or are hit by another vehicle. The rate you pay typically depends on the size of your deductible and the age of your car.

If you have a brand-new and high-value car, these premiums may be higher as it will likely cost more to repair. By the same token, if you have an old car, you may want to rethink the size of the deductible. There’s no point paying a $1,000 deductible if the car is only worth $1,500 or $2,000.

Property Damage Liability

Most states require a minimum amount of liability insurance for property damage, but this is rarely enough to cover you when such issues occur. In New Hampshire, for instance, the required minimum for property damage is just $25,000, but the actual cost could be much greater. An Umbrella Policy can help you here, providing extra liability cover than what is required under state law.

If you damage someone else’s property, this insurance will come in handy, so plan carefully when calculating the amount of coverage you need.

Medical Payments Coverage

In the event of a car accident that harms you and/or your passengers, medical payments coverage will ensure that medical bills are covered. The limits are often fixed at a few thousand dollars. This is the amount that each person in the vehicle can claim in the event of a car accident.

Uninsured Motorist Coverage

If you are involved in an accident with an uninsured motorist, you can get additional coverage to make up the difference, bringing their coverage to the same level as yours and ensuring you don’t lose out because of their mistakes. 

This is an important addition to your auto insurance policy, as America has one of the highest rates of uninsured drivers in the United States, with between 10% and 15% of the population said to be without even the most basic coverage.

Roadside Assistance

Drivers have multiple options when it comes to towing and roadside assistance services, but these can also be added to existing car insurance policies and provide some much-needed peace of mind. Depending on the type of policy, they may fix your car on the roadside or tow it to the nearest garage. From there, you may be offered a rental car while your own car is being fixed.

Comprehensive Auto Insurance Coverage

If your car is damaged from fire, flood or vandalism, you may not be protected by any of the policies outlined above. However, a comprehensive policy will cover you for these issues and more. This is offered by most car insurance companies and combines collision insurance, liability insurance, personal injury protection, and more, into one complete auto policy. 

Of course, because you’re getting everything under one policy, you can expect to pay much more than if you were to opt for minimum coverage.

How Much Car Insurance Do You Need?

Consider everything we’ve discussed above, speak with an insurance agent, and get some quotes to determine the best coverage limits for your needs. Car insurance coverage can vary greatly and if you’re on a tight budget you’ll need to cut corners where possible without setting yourself up for failure down the line.

Use insurance comparison sites to compare different car insurance companies and the policies they provide; speak with the experts and ask around. It’s also important to switch providers when your circumstances change. For instance, there is a massive difference between drivers aged 16 and drivers aged 18, and it could add up to tens of dollars a month. Rates also drop when you hit 25 and the older you are and the cleaner your record is, the more options you will have and the lower your premiums will be.

What are the Risks of Being Underinsured?

If you don’t have enough motorist coverage your expenses may be significantly greater when the need arises. You could be tasked with paying a higher deductible or covering most of the costs, and if you suffer from bodily injury and resulting medical expenses, those costs can spiral out of control.

Of course, this doesn’t mean you should automatically opt for all possible coverage options. It might not be possible to have too much insurance as far as your coverage is concerned, but it’s definitely possible with regards to your budget.

Summary: Your New Insurance Policy

Insurance is often essential, always expensive, and never easy. This is true for pretty much all forms, including health insurance and life insurance, but it’s also true for car insurance. The good news is that if you have made it this far, then you’ll know all you need to know about finding the best car insurance rates on your new car. 

Use the information we have provided and start looking for comprehensive insurance coverage with the best insurance companies today.