How to Figure out How Much Car Insurance I Need

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Selecting appropriate amounts of car insurance is a difficult undertaking, with competing considerations. On the one hand, duplicative or unnecessary coverages should be avoided to avoid unnecessary premiums. At the same time, liability and uninsured motorist coverages are extremely important to avoid personal losses and liability exposure due to catastrophic personal injuries. By assessing individual vehicle and personal needs, an adequate protection plan can be assembled.

Things You'll Need

  • Automobile blue book.
  • Awareness of other insurance coverages held.
  • Determine your vehicle’s fair market value, which is the most an insurance company will pay if the vehicle is damaged in an accident.

  • For a vehicle with a low fair market value, drop all collision and comprehensive coverage, as the potential benefit is not justifiable for the required premium.

  • Evaluate separately your need for liability insurance, which provides coverage for liability to a third-party injured as a result of your negligence. Liability coverage is required by state law, as specified by a minimum coverage amount. Select a liability coverage greater than the required minimum, as you are personally liable for any third-party damages beyond the covered liability amount.

  • Assess separately uninsured motorist coverage needs. This coverage protects you from damages caused by other drivers who have either no, or too little, liability insurance coverage. Because there is a surprisingly high number of such drivers, a high uninsured motorist limit is strongly recommended.

  • Miscellaneous coverages, such as emergency towing and medical payments, are often times unnecessarily and duplicative of benefits provided by other sources. For example, a health insurance plan will generally provide for payment of necessary medical expenses. Thus, rendering medical payment coverage unnecessary for many drivers.

Tips & Warnings

  • Emergency towing is unnecessary if you have AAA. In addition, certain automobile manufacturers provide free roadside assistance for the first several years of ownership.
  • For most cars, there is no point in maintaining collision or comprehensive coverage after five years. A vehicle this old generally holds a low fair market value, which significantly lowers the potential for an insurance payout in the event of accident damage.
  • Premiums for comprehensive and collision coverages can be lowered by carrying a higher deductible. Select as high a deductible as your finances will allow.
  • Consider purchasing a liability umbrella policy, which provides further protection from high liability claims. Umbrella policies are an excellent value, and typically cost far less than expected.

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