What options for car insurance do I really need?

The car insurance options you need depend on your specific circumstances. 48 states have minimum liability coverage requirements, but liability doesn't fully protect you after an accident.

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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 30, 2021

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Here's what you need to know...

  • There are several types of insurance coverages to consider
  • The state-required minimums are not sufficient for financial protection
  • There are many things to consider when deciding what level of coverage and what types of insurance to carry

The car insurance options that you really need are determined by your unique circumstances.

In doing a thorough analysis of your own requirements as well as those imposed on you by the state you live in, you will come to an educated decision about how to best protect you, your loved ones, and your property through car insurance.

Some of the most important insurance types include:

  • Liability
  • Collision
  • Comprehensive
  • Uninsured motorist coverage

All are explained in further detail.

Read on to learn which auto insurance option you need. Then, make sure to enter your zip above to compare free auto insurance quotes!

You Really Need Liability Coverage

Most states require that their residents purchase liability insurance. The states that don’t specifically require car insurance have provisions in place that dictate the need for “proof of financial responsibility.”

For a majority of drivers, “proof of financial responsibility” takes the form of liability insurance.

Liability insurance protects you by covering damages to other vehicles or people. Without sufficient liability insurance, you open yourself up to the risk of lawsuit and financial ruin when you cause an accident.

Failure to provide proof of insurance or financial responsibility will leave you susceptible to punishments such as:

  • Fines
  • License suspension
  • Vehicle impoundment
  • Jail time

Fines can range from $500 to $3,000 depending on the state. Driving suspensions of six months can be handed out. Repeated violations increase the number and severity of the penalty.

When minimum levels of liability insurance are required by the state, they are formulated with specific amounts for bodily injuries per person, bodily injuries per accident and property damage.

In Missouri, for example, the minimum levels of liability insurance that every driver must carry are represented like this: 25/50/10.

A driver in possession of this level of coverage will be protected against $25,000 in bodily injuries per person, $50,000 in bodily damage per accident, and $10,000 in property damage. The driver may be personally responsible for any damages that exceed those amounts.

Determining what liability options you really need involves finding the balance between too little insurance and too much insurance. An industry standard is 300/300/100; however, even this is not the right amount for everyone.

You will need to figure out how much insurance you need to adequately protect yourself while not paying for coverage you will probably never use.

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You May Really Need Collision and Comprehensive Insurance

If you owe the bank any money on your vehicle, you need collision and comprehensive insurance. These forms of insurance protect the vehicle (and thus the bank’s investment) in the event of accidents or destruction caused by forces of nature.

Collision insurance gets its name from the fact that it covers damages to a car received in a collision with another car or object. Comprehensive insurance covers non-collision situations resulting from:

  • Weather
  • Fire
  • Theft

While you may really need collision and comprehensive insurance, you have the ability to decide on your own deductible.

The deductible is the portion of a claim you must pay yourself before your car insurance adds its own contribution.

You will pay less in premiums if you pay a higher deductible. If you prefer to pay a lower deductible with each claim, you will pay more for the policy.

Be sure you can cover the deductible you select because if you don’t your insurer won’t pay anything either.

You may not need collision or comprehensive, however, if you own an older car. Depending on the value of the car, it might not make financial sense to pay for such protections.

Some experts suggest that collision and comprehensive insurance is not necessary if the amount you pay for coverage each year is less than 10 percent of your car’s value.

If you pay $250 a year in premiums for a car that’s worth $2500, you may be better off to drop the insurance and set that money aside in an emergency fund that you can access when you must pay for damages to your vehicle sustained in an accident.

When Uninsured or Underinsured Motorist Insurance is a Practical Necessity

You really need to consider Uninsured Motorist (UM) or Underinsured Motorist (UIM) insurance if your financial future and physical well-being will be compromised when you are in an accident caused by an uninsured or underinsured driver.

Statistics prove that certain areas have a more significant amount of uninsured drivers than others. More uninsured drivers indicate a higher likelihood that the driver who hits you will not be able to cover any or all of your damages.

If you live in a high-risk jurisdiction, UN or UIM should be on the list of car insurance that you really need.

The best way to look into all the forms of car insurance available to you is to compare the offerings from different car insurance companies.

Online quote comparison tools like the one on this page let you do this in an easy and efficient manner. Starting your search today will get you on the road to a safer and more secure future. Compare quotes today!

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