How much auto insurance do you need to buy?

In the United States, auto insurance is a requirement if you expect to drive or purchase a car. When you are selecting auto insurance, you need to be aware of your state laws. Some states will require you to own collision coverage only, while others deem in mandatory to have liability insurance coverage. Knowing your state laws will help you determine how much auto insurance you need.

Each state will have a different requirement for coverage. For example, 20/40 coverage means that your insurance will cover up to $20,000 for each person injured in an accident, up to a maximum of $40,000 for the entire accident. Another coverage option could include 20/40/10, which is the same as above, but with $10,000 worth of coverage for property damage. Once you know what your state requires, it will be easier to determine the coverage amount you need.

Bodily injury liability insurance covers other people's deaths or bodily injuries for which you are responsible. This type of coverage will also provide you with a legal defense if someone filed a lawsuit against you. This coverage is required in most states and is highly beneficial. If your state doesn't require this coverage, you can save yourself some money, but you are taking a large risk. You can determine how much coverage you need by deciding what assets you need to protect. A good rule of thumb is to look at your annual income and rent or mortgage payment, this number should be the amount of coverage you need.

The amount of money you pay for bodily injury liability coverage will also depend upon your age, marital status, location, and driving record. If you are ever involved in a serious auto accident, you want to have enough coverage not only to pay for the other party, but for your passengers and yourself. Keep in mind that this coverage does not pay for the repairs to your vehicle, so it is a good idea to keep the same level of coverage on all your vehicles.

Comprehensive physical damage coverage will protect your vehicle from incidents other than collision. If your car is stolen, damaged by flood or fire or animals, this coverage will pay to fix your vehicle. This coverage has different deductible levels, so this choice is up to you. If you live in an area that is prone to natural weather conditions like a tornado, hail storms, hurricanes, or volcanoes, adding comprehensive physical damage coverage is a good idea. Deciding how much coverage you need is again up to you. A good idea is to choose the highest deductible you can afford. Comprehensive and collision coverage can account for 30 - 40 percent of your total premium. A good way to determine if you need comprehensive coverage is to look at the Kelly Blue Book value. If the cost of comprehensive and collision coverage totals more than 10% of your car's total worth, then you need to lower your amount. Most auto insurance companies will tell you not to use this insurance if your car is more than 5 years old. Keep in mind that if you do not select comprehensive coverage, you will be responsible for paying the repair bill if your car is damaged, totaled, or stolen.

Medical payments are another option you can add on for a small monthly fee. This type of coverage will pay for all the medical expenses to you and your passengers injured in an auto accident. This type of coverage may also help you if you are a pedestrian and you are injured by a vehicle. Again, this is optional coverage and will increase your total premium, so purchasing this coverage is up to you.

Even with the government passing a law mandating auto insurance, there are still some individuals who do not have auto insurance. If you are ever involved in an auto accident with an uninsured motorist, you may be forced to pay for all your medical expenses and for the damage to your car. Purchasing uninsured motorist coverage is a smart idea because it will cover bodily injuries to you and your passengers if the crash is not your fault. Uninsured motorist coverage will protect you from a hit-and-run accident and will cover the funeral costs for you and your family if you are involved in an accident with an uninsured driver. Uninsured motorist coverage isn't too expensive to add to your policy (typically $40 a year for $100,000 worth of coverage).

Another auto insurance addition to consider is personal injury protection. If you are looking to skim by with the cheapest auto insurance policy, you can probably skip personal injury protection altogether. Personal injury protection will pay for the medical and funeral costs of your or your family who was involved in the accident, regardless of whose fault it was. If you have life insurance, disability insurance, or health insurance, you should be covered already and you don't need to purchase personal injury protection. This type of coverage is not available in all 50 states, so if you decide you want it, be sure to ask the auto insurance company if it is available.

Property damage liability will cover you if your car damages someone else's property. You may have seen stories on the news where a driver falls asleep at the wheel and crashes into someone else's car or home. If you are one of these unfortunate individuals, having property damage liability will save you a bundle not only for the cost to replace the fence, car or garage, but from legal damages too. If the other party files a lawsuit, this type of coverage will provide you with a legal defense. Most state requirements are pretty low on this coverage, covering about $5,000. Most auto insurance companies suggest you cover a minimum of $50,000 for each vehicle you own.

Those are the different auto insurance coverage plans you can choose from. Of course, there are always extra coverage options you can add like rental car reimbursement, glass coverage, towing, etc. Deciding to add some extra features is up to you, take a good look at your past driving experience and decide if you need towing or auto glass insurance. Most insurance companies will push rental car reimbursement on their clients, because it is a sure way for the insurance company to make money.

Rental car reimbursement coverage generally pays a small amount ($15.00 a day) towards a rental car while your car is in the shop. On average, it costs $25.00 a day to rent a car, so as you can see; you will be paying some extra money to drive the rental car while yours is being fixed. Of course, if you are in an accident and the other party is at fault, their insurance will be responsible for paying for the rental car cost.

Towing insurance is a small cost, usually about $25 per year to add on to a policy. You should look at the age of the car and determine if you would need towing coverage. If you don't know how to change a flat tire, you probably should add towing coverage onto your policy just so you don't get stranded. Another extra is auto glass insurance. Like the other extras, you need to evaluate your situation and determine if this is even worth it. Do you drive on a freeway daily or on a dusty, rocky road? If your car is prone to rock chips that quickly spread, you might as well tack on auto glass insurance. Some cars have cheaper windshields and the cost may be cheaper than purchasing auto glass insurance. Other cars have antennas or oversized windshields that could run you $500 or more to replace.

When you are looking at your auto insurance coverage options, you should evaluate your current financial situation, determine what options are important to you and then decide if you want to add on the additional expense. Most individuals are fine with just the state law requirements, and this may be the case for you as well. You can get auto insurance quotes online in a matter of seconds. You can add or remove extra coverage options to see just how much you can afford and if it is feasible.

Keep in mind that auto insurance coverage should protect your assets from being taken if you cause an injury or damage another person's property. You should consider the cost of your car and decide if you would have enough money to pay for the repairs if you are ever in a car accident. Overall, your net worth will play the biggest factor when you are deciding how much auto insurance you need. If you have nothing to protect, you can get by with a smaller coverage plan. Once you determine how much coverage you need, ask about the cost to increase it to the next level, you will find that you can get more coverage for a little more money.