Obtaining Recommended Car Insurance Coverage

Recommended car insurance coverage varies depending on your individual needs. Full coverage includes liability, collision, and comprehensive coverage at average rates of $79.58/mo.

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A former insurance producer, Laura understands that education is key when it comes to buying insurance. She has happily dedicated many hours to helping her clients understand how the insurance marketplace works so they can find the best car, home, and life insurance products for their needs.

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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: Jan 17, 2021

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Here's what you need to know...

  • Adequate auto insurance coverage will vary according to individual needs
  • Liability insurance is required in every state but other types of coverage are optional
  • Often the state minimum requirement for insurance is not enough to protect your assets

Adequate car insurance coverage is not an official insurance term. “Adequate” refers to one having the requisite qualities or resources to fulfill a task.

Therefore, a person who is interested in having his or her car insured would seek to have low-cost coverage that still legally and materially protects him or her in the event of a collision or damage.

Liability, collision, comprehensive, medical payments, and uninsured driver coverage can all combine to create adequate car insurance coverage.

To find adequate auto insurance coverage for your vehicle at the cheapest rates, enter your ZIP code to compare FREE auto insurance rates from different companies!

Defining Recommended Car Insurance Coverage

Adequate coverage will help you meet your financial needs and obligations. In all states, there is a basic requirement of liability insurance or proof of financial responsibility to pay for damages you cause.

Liability insurance protects individuals other than you who are involved in situations that involve damages resulting from your driving.

Liability insurance covers bodily injury and liability coverage.

Bodily injury coverage protects your own personal assets up to a certain limit and covers medical bills, lost wages due to medical stay, scarring or disfigurement, loss of earning capacity, disability, and even pain and suffering.

You will notice that most states have a minimum liability coverage requirement, sometimes as low as $15,000, which is hardly anything when it comes to paying medical expenses.

Besides this price limit, there is also a limit per accident. If you have a $40,000 per accident coverage limit, insurance won’t cover any damages beyond $40,000 for everyone injured in the collision.

However, if you cause the accident you could still be held personally accountable for those medical payments.

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Are those minimum liability limits enough?

According to the Wall Street Journal’s “How Much Car Insurance Do You Need?” minimum liability amounts are rarely sufficient in today’s marketplace, especially in states where those limits are exceptionally low.

The Journal cites the state of New Jersey, where minimum bodily injury coverage is $15,000.

But considering the cost of healthcare, the injuries suffered in a moderately serious accident could well exceed $15,000 just in emergency room care alone.

There’s no way to say for sure exactly how much liability coverage you need.

Perhaps the best way to assess your own situation is to speak with an insurance agent and a financial adviser.

Regardless, if you have valuable assets, you should certainly consider increasing your minimum limits.

Liability and Beyond

It’s your choice whether you want to purchase liability insurance with split limits or combined single limits.

Some motorists who fear losing personal assets are not satisfied with any insurance coverage unless they are covered for upwards of half a million dollars.

Industry recommendations are for 100/300/100 limits on liability.

Beyond the basic of required liability, collision and comprehensive represent are the next step up. These type of coverage are what will pay for damage to your own property.

Only as cars get much older does it become safe to remove these options.

Medical payments protection is also intended for the financing of your medical costs or for others riding in your vehicle.

Another insurance option usually included in an “adequate” insurance policy is uninsured/underinsured motorist protection.

This coverage will actually protect your car and some of your own medical bills in the event that the person responsible for hitting you has no insurance.

Some believe that uninsured motorist (UM) protection is one of the most important coverages, even more so than collision or comprehensive coverage.

Do I need personal injury protection?

Personal injury protection (PIP) coverage is required in a small handful of states but elective everywhere else.

As long as you have a standard health insurance policy, you probably don’t need to purchase this protection unless it’s required by law.

Some states require drivers to choose between PIP or coverage for uninsured/underinsured motorists (UM).

UM is a better choice because it generally provides more coverage, including extended hospital care and rehabilitation services.

If you don’t have health insurance, personal injury protection coverage is certainly less expensive than covering the full cost of an accident on your own.

You’ll need to check with your individual car insurance carrier to find out exactly what their PIP coverage entails and whether or not it’s worth your money.

Keep in mind that the more PIP coverage you purchase, the more you will add to your annual premiums.

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How much collision and comprehensive coverage should I carry?

  • Collision insurance pays for damage done to your car as a result of a traffic accident
  • Comprehensive coverage takes care of damage sustained in other ways

In both cases, your coverage should be an amount that will completely replace your vehicle in case it’s ever totaled.

To be on the safe side, you should have enough coverage to equal the value of your car when it was brand new.

You might also consider purchasing gap coverage if you’re taking a loan out on your vehicle. Gap coverage covers the difference between the value of your car and your outstanding balance.

Should I purchase an umbrella policy?

An umbrella policy is something most of us will never need, but it is very important for those who do need it.

Simply put, umbrella coverage protects you for just about anything not already covered by your other insurance policies.

For individuals who own high-value assets, such as real estate and securities, umbrella insurance is probably a good idea. You need to protect your valuable assets in the event you are ever sued after a crash.

If you decide umbrella insurance is something you need, it’s wise to speak with a financial adviser before determining the limits of that coverage.

You’ll need to add up all of your assets, project some increasing value into the future, and then buy an amount of coverage to meet that value.

In doing so you will limit the amount of losses you could suffer through civil litigation.

What Coverage Can You Afford?

Motorists concerned with avoiding lawsuits and other legal entanglements should invest more in liability coverage.Liability costs more money in the short-term, but if you are ever involved in an accident, then it will save you a huge amount of money.

Liability costs more money in the short-term, but if you are ever involved in an accident, then it will save you a huge amount of money.

Although some consider collision and comprehensive insurance to be mandatory for their own lifestyle, these coverages are not required anywhere in the U.S.

Full coverage includes liability, collision, and comprehensive coverage at average rates of $79.58/mo. Full coverage, by definition, is optional.

Only you can determine what counts as adequate insurance and what coverage is excessive.

Accidents do happen out there. Are you prepared financially to deal with a totaled vehicle?

Use our FREE tool to compare insurance rates that are localized to your area. Just enter your ZIP code above to start!

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