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How Much Auto Insurance To Buy
Getting quotes and purchasing car insurance can be confusing and financially taxing if you are unfamiliar with the types of coverage you need. Many people make the mistake of purchasing only the minimum coverage, but just as many others make the mistake of purchasing too much, e.g., buying comprehensive coverage when they don’t need it. Knowing how much auto insurance you should carry can get confusing.
Fortunately, once you understand the purpose of each type of auto insurance coverage, you can better determine if you require that particular coverage for your vehicle.
First, know that liability coverage is a requirement in nearly every state so, unless your state offers some other option (such as posting a surety bond of a certain amount) and you choose to take that option, chances are you have to purchase liability insurance.
Now, it boils down to determining how much to purchase.
The purpose of liability insurance is to cover damages to another person’s property and the medical costs of another person in an auto accident you cause.
Each state mandates its own liability insurance requirements, but you will typically not be required by law to carry more than $100,000 bodily injury coverage and $25,000 property damage coverage per accident.
However, in the event of a serious accident, the minimum car insurance coverage required by law might not be enough. The amount of liability insurance you need depends on the worth of your personal assets, but insurance professionals typically recommend carrying no less than $300,000 bodily injury protection and $100,000 property damage protection.
Often, when drivers hear these recommendations they become concerned about how much liability insurance is. Remember, you don’t pay $300,000 for a $300,000 limit. Also, on average, car insurance tends to get relatively cheaper as you purchase higher limits.
Additional Types of Auto Insurance Coverage
In addition to liability insurance―which is usually mandatory―you might also consider the following optional coverage types:
- Collision coverage, which covers damage to your vehicle if your vehicle hits another car or object.
- Comprehensive coverage, which covers damage to your vehicle due to non collision-related incidents like theft, vandalism, natural disasters, and weather conditions.
- Uninsured or underinsured motorist coverage, which covers you in the event of an accident with an uninsured―or insufficiently insured―driver.
- Personal injury protection (PIP), which covers any medical expenses not covered by the other driver’s liability insurance policy. PIP is also referred to as no-fault insurance, and is required in several states.
Typically speaking, you will want to consider these types of coverage if you drive an expensive vehicle, if you live a highly populated area, or if you often commute in heavy traffic. On the other hand, if you live in a rural area, or if your vehicle is fairly inexpensive, you will likely not require these types of coverage.
Note that these are not all of the coverage types available to you. Visit our Coverages section to learn more.
How Much Car Insurance to Buy
Remember, you need to at least meet the minimum car insurance requirements for your state. Most often, you’re required to have certain amounts of liability insurance (and sometimes personal injury protection (PIP), or no-fault insurance).
However, it’s a good idea to purchase higher limits and more coverages than what is required. Base your decision on:
- Your personal assets. The more valuable your assets, the more protection you need. For example, if you didn’t have very high limits and got into an accident, the other driver could sue you for damages your policy won’t cover. Your assets, such as your house, could be in danger.
- Your budget. While insurance agents often recommend certain limits, you should only buy what you can reasonably afford. If you can’t pay your premium, you risk nonpayment of premium, which can lead to cancellation and lapse of coverage.
- How much risk you can handle. If you feel you can pay a lot of out pocket in the even of a claim, you may be fine with higher deductibles and/or lower limits.
- Your vehicle. If you have a new or very valuable car, you’ll probably want comprehensive coverage. You may even be required to have collision and comprehensive by your lienholder. However, if your vehicle is not worth much, the cost of comprehensive coverage may not be worth it.
How Much Is Car Insurance?
Many drivers ask, 'how much is car insurance a month?' There is really no way to answer this until you have a set policy. The cost of a car insurance policy can vary greatly, based on your company, your driving record, other rating factors, and the coverage types and limits you choose.
Your best bet for finding cheap car insurance is to compare multiple quotes and ask any insurance companies you’re interested in purchasing from about discounts that may apply to you.
How Much Is Insurance for a New Driver?
This will also vary by insurance companies, but you can expect to pay more if you’re a teen or new driver. Because you have less experience, you’re considered higher-risk on the road and therefore more likely to file a claim. The insurance company will offset this risk by charging you higher rates.
If you’re the parent of a teen driver, you can add your teen to policy to save some money; however, you will most likely see a rise in your premium.
See our section on Teens and New Drivers for more information.
Obtaining an Insurance Quote
You can compare car insurance policies online, or by contacting the Insurance Department in your state.
Be aware that the more coverage you purchase, the higher your annual premium will be. You can reduce this premium by assuming a higher deductible, and by taking advantage of every discount available to you. Be sure to talk with an agent with each insurance company you're considering about all discounts for which you might be eligible.
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