Determining How Much Auto Insurance Coverage to Buy

The amount of auto insurance coverage any driver needs will inevitably vary from state to state. Nearly every state requires you carry at least liability insurance, which covers injuries to parties outside your vehicle with whom you may have gotten into an accident. New Hampshire and Wisconsin instead have financial responsibility laws, which require that you prove you are financially able to cover the liability costs that you might incur if you get into an accident.

Minimum Auto Insurance Coverage

You should consult your state insurance department to find out what the minimum standards of coverage in your state are. A typical minimum policy might be 20/40/15. A 20/40/15 policy means that you are covered for $20,000 worth of bodily injury liability per person injured (up to $40,000), with $15,000 worth of property damage liability.

Auto Insurance Coverage Recommendations

Keep in mind that any damage that exceeds these amounts is the personal responsibility of the vehicle's owner. Since medical bills for a severe accident can be extremely high, it is recommended that people purchase coverage at a level of $100,000 per person up to $300,000 to be safe. Another option is to buy an umbrella policy. These policies are relatively expensive and cover the excess liability after your existing liability coverage is used up. It is possible to obtain a million dollars of excess liability coverage for only a few hundred dollars per year.

Additional Types of Auto Insurance Coverage

Also remember that the minimum coverage only covers the other parties in an accident. If you want protection for yourself, your passengers, or your vehicle, then you will need to consider personal injury protection, collision and comprehensive coverage. Personal injury protection covers you and the passengers in your car in case of an accident, while collision covers damage to your car resulting from a car accident. Comprehensive coverage refers to damage to your car from something other than an accident, such as vandalism or fire. Some standard policies also come with uninsured or underinsured motorist coverage. This type of coverage protects you if you are in an accident with an individual who is driving without insurance, or if you are the victim of a hit and run.

What to Do if the Minimum Auto Insurance Premiums Are Too High

If the premiums for the minimum legal standard policy are too high, some states may provide special coverage standards and rates for low-income drivers. In addition, you may consider opting for a higher deductible, which will result in a lower premium.