How Much Auto Insurance Coverage Do You Need?

Filed under: Auto Insurance, Insurance

There are a bewildering array of auto insurance options out there these days.  Consumers are constantly bombarded by advertisements hawking everything from state minimum coverage to comprehensive collision, theft, etc.  The good news is that whether you’re in the market for cheap car insurance for young drivers or just the most inexpensive auto insurance with comprehensive coverage you can find, there’s something out there for you.  The bad news is, it’s a giant pain to sift through all the options and it’s all-too-easy to end up with more coverage than you really need, draining your wallet in the process.

How Much Auto Insurance Do You Need?

The amount of insurance you need depends on your individual situation.  Specifically, it depends on the value of the car you drive, the amount of deductible you can afford, and the relatively likelihood you will be in an accident.

How Much Is Your Car Worth?

It’s rather silly to buy full comprehensive auto insurance coverage on a beater.  One rule of them is that if your car is worth less than 5 years’ worth of premiums, you should drop comprehensive coverage entirely and go with liability-only coverage.  If your car is totaled and you’re at fault, it’s generally wise to take the loss from a financial perspective.

How Much Deductible Can You Afford?

The higher your deductible, the lower your premium will be and the more coverage you can afford.  The rule of thumb is that you should go with the highest deductible allowed.  Sure, you’ll pay more in the event of an accident, but the monthly savings will probably more than make up for it (unless you’re just a really, really unlucky driver).

Are You A Good Driver?

Let’s face it, some people are better drivers than others.  If you are an excellent driver, it’s likely thato insurant most accidents you would be involved in would be somebody else’s fault (don’t kid yourself, are you really a good driver or do you just think you’re a good driver?).  In that case, you can probably save a few bucks by skipping comprehensive coverage, or at least scaling it back.  Realize you’re taking a pretty significant risk here, however.  And you should never skip the uninsured driver insurance.  There are more uninsured drivers out there than you might think.