What Car Insurance Coverage Do You Need?

In the world of motor vehicles, most of us try to stretch our dollars as far as they will go.

For what you might pay for a new car, you could buy a house in some parts of the country. For what you will pay for gas, you may be able to put at least one of your children through college.

Insurance coverage is just one more expense for motor vehicle owners. Many of us try to cut back on that expense by limiting the amount of car insurance coverage we purchase.

However, when it comes to determining what car insurance coverage you need, you must consider both the requirements of your state and your own personal preferences.

State Requirements

All 50 states require some form of liability coverage or financial security, so the first step in purchasing car insurance is to check with your state to determine the minimum liability coverage or financial requirement.

Some states also require you to purchase collision or comprehensive coverage, also known as full coverage, for vehicles that aren't fully paid for yet.

For example, if you purchase a car at a dealership but don't have the money to immediately pay for it completely, you'll most likely finance it through the dealership or a bank. Since the vehicle isn't fully paid for until you make the final payment, your state may require you to have collision coverage.

Collision or comprehensive policies are based on the value of your car, as well as how expensive repairs would be. Deciding on how much collision or comprehensive coverage you need is not an issue. It's decided for you.

For specific insurance coverage requirements in your state, visit our Insurance Center or choose your state below:

Personal Preferences

Once you have the adequate amount of car insurance coverage as required by your state, it's time to decide how much car insurance coverage, if any, you want to add.

It's no news flash that the prices of cars, gas, and insurance are much more today than the prices of yesteryear. This fact alone may make it tempting to skimp on your car insurance coverage. As long as you meet your state's requirements, there's nothing to worry about, right?

Not necessarily.

According to the Insurance Information Institute, having at least $100,000 of bodily injury coverage per person and $300,000 of coverage per accident is wise.

You should also consider purchasing an umbrella policy to supplement your existing liability coverage. It will take effect once your existing liability coverage runs out.

For example, if you are involved in a motor vehicle-related accident and don't have enough liability insurance coverage to fully pay for the damages, the other party involved may try to sue you for your home or other assets. However, if you have an umbrella policy, it will pick up where your liability coverage left off.

Collision or comprehensive coverage is also something to think about even if it's not required.

Many people purchase cars outright from private sellers. These vehicle purchases are less expensive, and insurance coverage is cheaper because collision or comprehensive coverage isn't required.

Insurance coverage also becomes cheaper once you pay off your vehicle and decide to drop the collision or comprehensive coverage.

However, just because it seems like you're saving yourself a few bucks by not paying extra for collision or comprehensive coverage, you may actually be costing yourself a lot extra in the long run. Why? Because you have nothing to fall on back when it comes to repairing your vehicle after an accident.

In the end, the amount of car insurance coverage you need is based on your state's requirements and your own personal preferences. You can take a risk and only purchase the minimum requirements of your state, or you can drive easy knowing that you are fully covered in the event of an accident.