How much insurance coverage do I need?

How much auto insurance coverage do I need? The answer will likely depend on your vehicle and what it will need over its life. There are multiple types of car insurances with the ability to customize them, so it becomes more about what you can reasonably afford. If rates are too high, there may be ways to get lower automobile insurance rates.

Now that you know how much insurance you need, enter your ZIP code into our free quote tool to see what you could pay for insurance today.

How much insurance do I need?

How much insurance coverage do I need? Deciding on the amount of coverage is one of the most essential parts of enrolling in auto insurance. If you purchase too much coverage, you’ll likely have difficulty affording it. On the other hand, if you don’t get enough auto insurance coverage, you’ll be faced with the cost of repairs.

Finding a comfortable place in between can ensure that you get enough coverage at a price that you can easily afford. If you’re having trouble finding affordable rates anywhere, consider lowering the risk you pose to your auto insurance policy.

You should be aware that there is a minimum car insurance requirements in most states. Usually, this is a certain amount of liability insurance that covers other people and property you may damage with your car.

What is the minimum required auto insurance?

Each state determines its minimum liability coverage, meaning that you’ll need a different amount of liability depending on where you live in the country. The states that don’t require a minimum liability coverage will have the driver prove that they can meet the financial cost of an accident.

What should I consider when getting auto insurance?

There are multiple considerations when you sign up for an auto insurance policy. First, you’ll need a policy with the coverage you need at a price you can afford. If your policy doesn’t give you everything you need, you’ll likely have some problems with it down the road.

Some of the questions you should ask yourself when looking for an auto insurance policy include:

• How much does insurance cost?
• What coverage options are available to you?
• What is the value of your car?

If your car is more valuable or has a higher chance of being vandalized, you’ll likely pay more for that insurance coverage. On the other hand, if the opposite is true and your car has little value, you won’t see much benefit from collision and comprehensive auto insurance.

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Why do I need auto insurance?

Auto insurance is a great tool that can keep you from being held financially responsible when your car is in an accident. For instance, with liability insurance coverage, you won’t have to pay for the medical bills or property damage that occurs because of your vehicle. Of course, you may still face legal liability in those instances, but you’ll be financially secure.

Some of the things that auto insurance can protect against are:

• Fire, flooding, debris
• Car collisions that happen while driving
• Theft and vandalism
• Totaled car protection

With the availability of policies and riders on the market, you should have no problem getting auto insurance that fits you and your vehicle. However, it would help if you kept in mind that the more insurance coverage you have, the more it will cost you each period.

What happens if I don’t have auto insurance?

According to the Insurance Research Council, one in eight drivers doesn’t have any form of auto insurance. This isn’t one in eight Americans, but registered drivers who are out on the road. If you don’t have insurance and get pulled over, you’ll face fines and even jail time, if it’s a repeated offense.

Some of the consequences of driving without auto insurance include:

• Fines around $300 for first offenses
• Jail time for repeated violations or accident
• Suspended car registration until you get insurance
• Difficulty obtaining insurance after traffic incident

Auto insurance is a required tool in nearly every state. Even in the states that don’t need auto insurance, you’ll have to prove you have the financial means to pay for an accident yourself. Not having insurance can leave you financially and legally responsible for someone else if you injure them in your vehicle.

What are the different types of auto insurance?

A few main types of auto insurance will help you get your car to a safer place. If you aren’t sure where to start, you should consider liability since it is required in most states. Once you have that in place, you’ll be able to view more optional coverage options.

Some of the most popular auto insurance policies include:

• Liability. This is the minimum required auto insurance, as it covers other people and property that you damage with your vehicle.
• Comprehensive. This coverage protects against severe weather damage, as well as theft and vandalism.
• Collision. This protects your vehicle when you collide with something else while on the road or when someone collides with you.

This isn’t a limit to the coverage you can find, but it is the most popular. This list, also known as full coverage for all, will protect your vehicle in various situations.

So how much liability coverage should drivers have?

A “liability only” auto insurance policy is one of the most affordable policies you can possibly get — however, there are some very serious downsides to limiting yourself to such little coverage. Those include:

• Third-party and no-fault claims. If the accident was the other driver’s fault, or the accident is deemed a “no-fault” accident, then you are financially speaking up the creek without a paddle. Liability only pays out if you cause an accident, and the injured party comes after you for financial damages. You personally will not be compensated in any other situation.
• Acts of nature. If your car gets dented in a hail storm, flooded in a hurricane, swallowed up into a sinkhole by a giant earthquake, burnt to a crisp and a wildfire, or struck by lightning and rendered end mobile, you will be 100% financially responsible for finding a new means of transportation. Your liability coverage will not protect you in these instances. Payouts on these claims come from your comprehensive coverage, which is optional on almost all car insurance policies.
• Cosmetic damage From a collision. If your windshield cracks, if your bumper gets torn off, or any other physical damage happens to your vehicle as the result of a collision, your insurance will not pay out on any of these claims, either. these claims are paid out based on your aptly named Collision coverage. This is also an optional coverage and virtually every single car insurance policy.

If you’re only worried about costs, keep in mind that there are many cheap car insurance rates to be found for additional coverages, and you may end up spending more in the long run by buying the minimum required. If you want to find more coverage and save money while you do it, use our FREE comparison tool to get multiple quotes right now.

Understanding the importance of liability insurance

Whether you’re trying to save money by purchasing liability only insurance, or whether you’re concerned about the financial repercussions of not having enough liability coverage, it’s important to grasp the idea of what exactly liability does, who receives liability claim payments, and how to calculate the exact amount of coverage that you need in order to stay financially secure.

Here’s the thing: if you have tens or even hundreds of thousands of dollars in personal, private assets that you don’t want to be seized and liquidated in the event that you cause a catastrophic accident, then you need to purchase as much liability insurance as you can afford. In the event that you do cause an accident that severely injures, permanently disables, or even results in the death of one or more individuals, you are going to owe a lot of people a lot of money. And if you are deemed legally at fault for all of those damages, you won’t have any choice in the matter — your house, any vehicles you own, and any other valuable property (jewelry, art, electronics, financial investments, et cetera) will be sold to whoever can pay the most money in order to compensate the victims of the accident.

Understanding the anatomy of liability coverage

Liability insurance coverage is split into two different categories: bodily injury, and property damage. beyond that, your bodily injury liability coverage splits even further into two different subcategories: the amount you pay per person in the event that you cause an accident, and the amount you pay total for a single at-fault accident.

If all of that sounds a little confusing, consider the following example: you’re driving home late at night during a very bad storm and accidentally run a red light. You end up T-boning a car that was driving through the intersection. There are 2 passengers in that car: a mother and her small child. Everyone is alive, but the mother is seriously injured and her grand total and medical expenses comes out to $30,000. Her child on the other hand only has $21,000 in medical bills. And since you’re responsible for totaling her $25,000 car, your property damage liability coverage will pay for that too.

But here’s the catch: you live in Virginia, and you chose to only purchase the bare minimum liability requirement as mandated by state law. In Virginia, the mandatory State minimums only allow for a maximum of $25,000/$50,000 bodily injury liability, and $20,000 of property damage liability coverage. So in this scenario above, here’s how much you would owe with a bare minimum auto insurance policy:

• Since your insurance only covers $25,000 worth of medical expenses per person in an accident, you will be responsible for $5,000 of the mother’s remaining medical bills.
• Since you only have $20,000 of property damage liability coverage, the remaining $5,000 she needs to replace her vehicle will be coming out of your pocket.
• While the child’s medical bills are within the $25,000 coverage limit of your per person bodily injury coverage, it does exceed the $50,000 bodily injury liability coverage that your insurance company is willing to pay out per accident. That means that the child’s remaining $1,000 of medical bills will be your financial responsibility.

Now, let’s take a look at how much money you thought you were saving by purchasing a bare minimum liability only insurance policy. These are the average rates for Virginia drivers from various companies around the state for a liability-only auto policy:

Cincinnati Insurance
ALFA
State Farm
Nationwide
Encompass


10
20
30
40
50
60
70
80
90
100
110



$36

$39

$54

$74

$119

Here’s a graph of how much those same drivers in Virginia pay per month for an auto insurance policy that includes up to $100,000/$300,000 bodily injury liability and $100,000 property damage liability coverage:

Cincinnati Insurance
ALFA
State Farm
Nationwide
Encompass


15
30
45
60
75
90
105
120
135
150
165
180
195



$100

$108

$142

$151

$196

It seems as though the average Virginia driver saves about $900 per year with the liability only policy as opposed to the driver who has a sufficient amount of coverage. Over the course of five years, that savings would be $4,500. And over the course of 10 years, that savings would total $9,000. But as you can see, none of those numbers are even close to, let alone greater than, the $11,000 you would owe the injured family.

Purchasing higher amounts of liability coverage

The scenario above perfectly illustrates why it’s so important to buy a sufficient amount of liability coverage – both to protect your assets, and to adequately compensate people whose lives were turned upside down by an accident there was no fault of her own. Even if you don’t want all the optional bells and whistles of a truly comprehensive policy (such as comprehensive and collision coverage, roadside assistance, and more), you should still talk to your insurance agent about what the appropriate amount of liability coverage is for you. They will be more than happy to sit down with you, analyze your liquid assets, and help you decide on a number that can give you some financial peace of mind.

Most auto insurance companies are willing to sell you as much as $100k/$300k/$100k worth of liability coverage. This should be adequate for the average, middle-aged, suburban homeowner to protect himself and his family from financial ruin in the event of a catastrophic at-fault accident. But if you have more access to protect them that, then you should talk to your insurance agent about an umbrella policy. Umbrella policies are liability only, but they can extend and your coverage up to $1 million dollars or more. And, unlike bodily injury liability, there are no caps on how much you pay per person or per accident; the full amount of your financial responsibility is pulled from that $1 million dollar pool.

How can I further customize my auto insurance?

If you don’t feel that your insurance coverage goes far enough, you can always add riders at an additional cost. In addition, riders are an excellent tool for those who want specific things covered.

Some of the most popular auto insurance riders include:

• Accident forgiveness. One accident won’t affect your auto insurance rates.
• New car replacement. If your car gets totaled, your insurance company will replace it with the latest model.
• Rideshare. If you use your vehicle to transport passengers, this rider will cover the gap between personal insurance and what the app-based service offers.

Other riders protect the items inside your vehicle and custom parts coverage. Discuss your rider options with an insurance agent if you need something specific covered.

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How can I get lower auto insurance rates?

Auto insurance companies determine a person’s rates based on underwriting. During underwriting, an insurance agent will examine various areas in a driver’s life to determine the risk they pose. According to the insurer, if that driver has a higher potential to get into an accident, the more the driver will pay each period.

If you want to lower your auto insurance rates, you need to understand how you can reduce the risk that you pose. You can do this by understanding what areas the insurance company will look at.

Some examples of the areas that the insurer will examine during underwriting are:

• Past driving record
• Credit history
• Criminal record
• Demographics, like age

Inexperienced drivers and those with negative flags on their records will pay the most for auto insurance. If you need to lower your auto insurance rates, consider paying your bills on time and putting some distance between yourself and past issues.

Deciding on Coverage: The Bottom Line

If you don’t yet have insurance, you should know that getting your first policy isn’t as hard as it may seem. Once you decide on how much coverage you want and what you can afford, you’ll be ready to start your policy. There are multiple ways to customize your insurance, but it will cost more to do so.

Now that you know how much insurance coverage to have, enter your ZIP code into our free quote tool to see what you could pay today.

Enter your ZIP code below to compare auto insurance rates.

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