How Much Auto Insurance Do I Need?

How much auto insurance do I need? Is one of the most common questions when shopping around for new auto insurance or a cheaper auto insurance rate. As with any insurance, you generally don’t know 100% of what you need until you actually need it, but then it’s too late. Unless you can foresee the future, it’s impossible to truly know exactly how much auto insurance you need. Because of this, you can be on the safe side and pay more per month to be covered for more. Or you can risk it and pay less per month to be covered for less.

The whole purpose of insurance is to protect you financially just in case something happens. If you don’t have enough, you might not be adequately protected and still suffer financially in an accident. Some additional questions to ask yourself when determining how much auto insurance do you need:

  • What price is affordable each month?
  • Can I afford to pay out of pocket if I don’t have enough insurance in a situation?
  • Do any coverage’s overlap other coverage’s that I might have?
  • How much coverage does my lien holder require?
  • Which coverage’s protect me financially if my vehicle was damaged?
  • What coverage protects me financially if I caused property damage to someone else?
  • Which coverage’s protect me financially if myself or my passengers are injured?
  • What coverage protects me enough financially if someone else is injured?

Purpose of Auto Insurance

As an industry insider, I often see drivers get the state minimum auto insurance requirements. There are two reason’s why people do this. They either want or need the cheapest auto insurance and they just don’t care about the coverage. To them, it’s more about being legal to drive for the lowest cost possible, than it is caring about the quality of financial protection. Because of this, these drivers are also the most affected financially when an accident happens. They wanted to save a little money each month, but then aren’t able to fully replace their vehicle, or get all of the medical care they need. Or even worse, they don’t have high enough coverage to cover the other person’s vehicle or injuries and as a result they get sued by the other party and are in debt to them for years or even decades.

The whole purpose of auto insurance is to protect you financially. You might be a safe driver. You might be doing your part out there on the road. But you can’t control other drivers. Auto Insurance is intended to give you peace of mind just in case an accident happens, whether its your fault or not.

So How Much Auto Insurance Do I Need?

The answer to how much auto insurance do I need depends on what you are comfortable with. I recommend that you talk with a licensed agent that can guide you through the options and explain the full benefits of each of the coverage’s. Having an agent help you doesn’t mean you will pay more, it just means that you have an expert helping you setup the right financial protection for your comfort level.

Expert Opinion

As an industry insider who has bought auto insurance, sold auto insurance, used auto insurance, seen the difference between good coverage and bad coverage in an accident situation; I am very opinionated on the auto insurance coverage’s that I carry.

  • My bodily injury liability limits have to be high. Medical services cost a lot, it is very easy to exceed state minimum limits in a minor accident. Accidents happen to the best of us, I don’t want to put my family in a financial setback because we are getting personally sued because we chose not to have enough coverage.
  • My property damage liability limit has to be high. Again, accidents happen to the best of us. In that situation, you can’t choose if you hit a 20 year old Honda Civic worth a few thousand at best, or a brand new Mercedes-Benz worth over $100,000.
  • I like to have high coverage for PIP/MED. Even though I have a great medical insurance, I still like to have a high level of personal injury protection on myself, my family, and my passengers. PIP and Medical Expense is a no-fault coverage that can be used for relatively small bodily injury expenses, regardless of who is at fault for the accidents. There is no deductible like there is with your normal health insurance. There might also be additional coverage’s built in that are beyond medical coverage, like income replacement.
  • Uninsured coverage’s are super cheap to have on my auto insurance policy. They aren’t as big of a deal to me and my situation. Because of the low cost, the cost vs benefit makes it a no-brainer to carry them at a high limit as well.
  • Towing and Rental Car Reimbursement are two coverage’s that I will always have regardless of other coverage through AAA or the dealership, or auto manufacturer. Sometimes these services from other sources have a mileage limit on them or a service radius limitation. No matter the situation, I don’t want to be stranded someone and have to pay out of pocket for towing or a rental car. I especially don’t want my wife and kids to be stranded somewhere without multiple options to fix the situation the fastest.