Car Insurance 101: How Much Insurance Do I Need?

For many people, the question of how much insurance is enough is tough to answer. Picking from the many different insurance options often feels a guessing game. Some people err on the side of safety, electing much more coverage than they need. Others do not have adequate insurance or are in such heavy debt after buying a car that their loan is considered “upside down.” Yes, in the end, insurance becomes an a la carte menu. To get the most out of it, you need to know what you’re ordering. And you should have a trustworthy agent.

While every driver is different, everyone’s auto insurance rates and needs are based on similar factors. These include years of driving experience, driving record, location of the vehicle and the value of the vehicle. Each driver’s personal needs dictate which coverage is right for them. Working with a knowledgeable and reputable Insurance Specialist is helpful in figuring out what works for you. Speak with one today at (855) 919-4247 to see how much insurance coverage you need.

For now, we’ll provide some general ideas about figuring out how much insurance you really need.

Do I Still Make Payments on My Car?

how much insurance do i needYou’ll have little wriggle room in terms of having a choice in coverage if you still owe money on your car. Lienholders usually require owners to carry Collision and Comprehensive Insurance. This extra coverage protects their investment. If your car gets damaged, they don’t want to risk you not being able to fix it on your own. How much insurance you’ll need is based on whether or not you can fix it out of pocket.

Sometimes vehicle owners forget to report to the insurance company that they’ve paid off their loans and have become the title holders. Once you’re the rightful owner of the car, you can choose to pass up coverages like Collision and Comprehensive Insurance.  Whether or not that is a wise decision is another story. In fact, forgoing additional coverage may not be the wisest thing to do, especially if you don’t have savings that would cover the cost of damages if you’re involved in an accident.

How Much Insurance Does My Car Require?

If your car is worth a lot of money, you’d be wise to protect that investment. How much insurance will you need? When you lease or finance, a lienholder wants the peace of mind with additional coverage, so why wouldn’t you? On the flip side, if your car is worth, say $1,000, it makes little sense to carry much more than the minimum Liability Insurance necessary to drive it. You’ll still be protected if you hit that brand-new Mercedes, but you won’t get much for your car even with the extra insurance because its Blue Book value is very low. If you owe more than what your car is worth, you should definitely consider Gap Insurance. Otherwise, you’ll be digging into your pocket if you cause a collision.

What If I Have a Used Car?

how much insurance do i needThe best way to figure out how much insurance coverage you should carry is to see what the car is worth on Kelley Blue Book. An insurance company will only pay out what the car’s worth the day of the accident. See if you’d be paying more by electing an add-on, like Collision or Comprehensive Insurance, than what your car is worth.

How Much Should I Pay in a Deductible?

Everyone has to pay a deductible before their insurance company will reimburse them for a loss. With Collision Insurance, you will have the option of how much you want that to be. The higher your deductible is, the less you pay every month to keep your insurance in place. If you have a lower deductible, your out-pocket costs will be less. Sometimes, an insurance company will reimburse the deductible if it’s determined that an accident was not your fault and they are able to collect the damages from the other party. Don’t assume, however, that an accident will never be your fault. Instead, make your decision based on a scenario where you are found at fault. Also, choose the deductible after evaluating how a loss would affect you financially in the short term. Can you pay a $2,000 deductible if you had an accident today?

How Does My Driving Record Affect Insurance?

If you’ve had an accident that was your fault in the past, your insurance rate probably increased because of it. If you have a record that shows multiple accidents, you may be required to buy more coverage for an insurance company to insure you. Not being a careful driver ends up being pretty costly. If you know you’re prone to accidents, you should probably elect more coverage. Also, if you drive long distances to work, your insurance rate may go up. If it doesn’t, you may want to consider buying more coverage just to be safe. The more you drive, the more prone you are to an accident.

Does Where I Live Affect My Insurance?

how much insurance do i needOh, yes! Your rate will rise based on crime rates in your neighborhood, like vandalism and car theft. Protect yourself with Comprehensive Insurance if your vehicle has a higher chance of getting broken into or vandalized. Also, the conditions of roads and streets in your area may be a good reason to consider Collision Insurance. Any increase in risk for an accident, theft or vandalism should have you considering Collision and/or Comprehensive Insurance.

How Much Do I Drive?

If you’re a casual driver and amass no more than 5,000 miles or so a year, your car insurance rate will be low. Collision or Comprehensive may still be necessary, especially if there is much crime or poor roads in your neighborhood. However, your chances of getting into an accident are far less than someone who commutes 20 or 30 miles to work ever day. Always consider what your chances are of getting into an accident when buying auto insurance. As a general rule, the more you drive, the more coverage you should carry.

If Share My Car with Other People, How Much Insurance Do I Need?

how much insurance do i needIf the other people are your children, it would be wise to increase your coverage. This is due to the fact that teens and young adults have very little driving experience. Anyone sharing their car with children, a spouse or anyone else, should consider that person’s driving history before electing the types of coverage they need. Always consider years of experience and previous accidents.

What Coverage Can I Afford?

Obviously, if you’re having a hard time just getting by, you may not be able to get full coverage on your car. Still, make sure you have the minimum that’s required by state law. Otherwise, you may end up in a far worse financial situation after an accident. You could even lose your driver’s license. Our Insurance Specialists will search to see if you qualify for the many discounts available through most insurance carriers. We also find you the lowest rates for the coverage you elect. If you’re interested in receiving multiple auto insurance quotes in minutes, call (855) 919-4247.


The information in this article was obtained from various sources. This content is offered for educational purposes only and does not represent contractual agreements, nor is it intended to replace manuals or instructions provided by the manufacturer or the advice of a qualified professional. The definitions, terms, and coverage in a given policy may be different than those suggested here. Such policy will be governed by the language contained therein.

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