While it may be tempting to cut corners on car insurance coverage, it’s important to know the answer to the question: “How much auto insurance do I need?”

When looking at this issue, there are three important considerations to keep in mind and ask your auto insurance agent about – before you purchase your policy.

1. Auto Liability Coverage Limits – Accidents are unpredictable in that you never know when they’re going to happen. What you need to ask yourself is how you’d pay for any damages over and above your auto insurance coverage limits incurred if you cause an accident. Many times people underestimate just how much a devastating accident can cost. The best way to guard against the unknown is to maintain as high a liability coverage as you can afford – or that is required by state law. To check your state’s minimum requirements, follow this link. Remember that the higher your liability limits are, the more likely it is that the auto insurance policy you have will be able to pay off all the damages. Experts recommend that you make sure you’re covered for an amount equal to the total of all your assets. 

2. Amount of Collision and Comprehensive Deductibles – Having the least expensive deductible may sound like a great idea, say $250 to $500 that you’d have to pay before your auto insurance coverage kicks in, but in the long run, it really isn’t. The truth is that the higher the deductible, the lower your monthly insurance premium will be. The downside, of course, is that you’ll have to pay up to that deductible out of your own pocket if you incur a covered loss. When trying to decide how much auto insurance you need, ask yourself how much you’re willing and able to pay right now out of pocket as a trade-off to save on your monthly premium.

3. Whether Collision and Comprehensive Coverage are Needed – If you lease or finance your vehicle, you may be required by the leasing company or lender to carry collision or comprehensive auto coverage. On the other hand, if you own your vehicle free and clear and the value of your car decreases, you may wish to consider eliminating collision and comprehensive coverage to save money on your auto insurance policy. What you also need to take into consideration is whether you’ll be able to replace your older vehicle (or the vehicle that’s paid off) in the event that your vehicle is totaled in an accident. Is the savings you’d realize by dropping collision and comprehensive coverage enough to offset paying the entire cost of replacing your vehicle?

In the end, answering “How much auto insurance do I Need?” is a process that involves careful research and evaluation of your personal situation and how much risk you’re comfortable taking on. Always keep in mind that it’s better to be prepared for the unexpected than to have to unexpectedly deal with something you’re not prepared for.

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