Knowing the Amount of Auto Insurance You Should Purchase

The right amount of car insurance coverage to purchase is $100,000 for bodily injury and up to $300,000 per accident. Check your state's minimum insurance requirements to know how much insurance to buy.

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Zaneta Wood, Ed.S. has over 15 years of experience in research and technical writing bringing a keen understanding of data analysis and information synthesis to reach a wide variety of audiences. She studied adult education and instructional technology at Appalachian State University as well as technical and professional communication at East Carolina University. Zaneta has prepared technical p...

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Joel Ohman is the CEO of a private equity backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Jo...

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Reviewed by Joel Ohman
Founder & CFP®

UPDATED: Jul 8, 2020

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Here's what you need to know...

  • Liability requirements are mandated by each state
  • You may wish to purchase more liability than the requirement
  • Collision and comprehensive insurance coverages may be in your best interest depending on the worth and condition of your vehicle
  • Consider changing your deductible to the best fit for your finances

Many people wonder how much car insurance they should buy. A good place to start is to find out your state’s minimum requirement. Then, consider your total net worth and the value of your assets.

If your net worth is significant, a single car accident can have devastating financial results. Next, discuss the proper deductible level for your needs.

If you’re thinking about car insurance rates, there’s no better time than right now to request FREE car insurance quotes. Just enter your ZIP code to get started!

A good driving history—with no accidents or moving violations in at least three years—can save you money on car insurance rates.

Selecting a higher out-of-pocket cost per car insurance claim is another strategy to consider in order to keep your car insurance rates as low as possible.

What are the components of car insurance coverage?


Car insurance combines several forms of insurance that help protect you against property and casualty losses.

  • Your liability insurance helps to pay for expenses in an at-fault car accident. The coverage compensates the other party in the accident.
    • Bodily injury coverage helps to pay for medical costs of the drivers and passengers in an at-fault accident.
    • Property damage liability helps to pay for damage or repairs to another vehicle when you’re considered at-fault. Property liability is often quoted with bodily injury coverage as “20/50/10.” The “10” refers to a $10,000 liability limit for property damages to another auto in an at-fault accident.
  • Personal injury protection (also known as “PIP”) helps to pay for passengers’ medical care in a car accident. PIP also helps pay your medical bills. If injuries prevent you from an immediate return to work, PIP can also help to pay for lost work hours.
  • Collision coverage helps to repair your personal vehicle after an accident. Collision is sometimes considered less important when the replacement cost of your vehicle is low (such as an older car).
  • Comprehensive insurance coverage helps to recover the expenses of a damaged or stolen vehicle.
  • Underinsured or uninsured motorist coverage helps when an uninsured/underinsured driver hits your car.

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Should a driver buy more than the minimum car insurance level required by his state?

Almost every state in the U.S. requires a minimum level of auto coverage for drivers. The purpose of car insurance is to demonstrate financial responsibility in the event of an accident.

Your personal financial statement should be considered first when deciding how much car insurance you need.

If your medical expenses exceed your policy minimum, you’ll pay for additional medical costs out-of-pocket. Minimum property liability levels, like the $5,000 to $10,000 demanded by some states, won’t cover the repairs of many cars.

If you suffer a total loss of the vehicle, low minimum levels will prevent the purchase of an average-priced new car at about 320,000.

Many people seek higher car insurance coverage limits for that reason. If your personal financial balance sheet is substantial, a claimant may seek your personal assets to pay for personal care and property damage suffered in an at-fault car insurance claim.

Discuss your net worth, or the value of your assets less liabilities, with your financial advisor to determine the amount of coverage you need.

How should a driver evaluate their car insurance needs?


Discuss how much personal injury protection you really need with your financial advisor. If you have employer health insurance and disability coverage, your needs in the event of an accident should be covered. Purchase the minimum level of PIP required by your state in that case.

Purchasing enough coverage against underinsured and uninsured drivers is crucial.

If such a driver is deemed at-fault in an accident in which you are injured, this coverage will help to pay for medical bills that may be waived by your health and medical insurance policy. Consider purchasing higher than state-required minimums for that reason.

Comprehensive and collision coverages are important when replacing or repairing your car after an accident is necessary. These forms of insurance include a deductible level. The insured driver must pay an out-of-pocket co-pay before the insurance company pays the claim.

How does the deductible level affect the price of car insurance?

Most people benefit from selecting an affordable deductible level. A higher deductible may lower your car insurance rates. If your car is severely damaged, many items may require repair. A higher deductible saves current car insurance premium dollars.

Paying an extra $50 a month for a lower deductible may ultimately cost much more than a $500 deductible to repair your car.

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