How Much Car Insurance Do You Really Need?
🇩🇪 Diesen Artikel auf Deutsch lesenState minimum liability limits are often far too low to protect your savings after a serious accident. Many advisers suggest at least 100/300/100 ($100,000 per person and $300,000 per accident for injuries, $100,000 for property damage). Collision and comprehensive are worth keeping while your car is worth much more than the deductible plus about ten years of the premium for that coverage.
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Car insurance is required in almost every state, but the legal minimum and the amount that actually protects you are two very different things. Here is how to read the numbers and choose coverage that fits your car and your finances.
Liability coverage: the part that protects your wealth
Liability insurance pays for injuries and damage you cause to others. It is written as three numbers, such as 25/50/25:
- $25,000 bodily injury per person
- $50,000 bodily injury per accident
- $25,000 property damage
A single hospital stay or a crash involving a new car can exceed those limits quickly. Anything above your limits can be claimed from you personally. That is why many experts recommend 100/300/100 or higher, especially if you own a home or have savings.
Collision and comprehensive
Collision pays to repair your own car after an accident. Comprehensive covers theft, hail, flooding, fire, vandalism and hitting a deer. If you have a car loan or lease, the lender requires both.
For an older car you own outright, ask: how much would the insurer pay if the car were totaled? If the car is worth $3,000, you have a $1,000 deductible and collision costs $500 a year, the coverage may not be worth it.
Other coverages to consider
| Coverage | What it does | Worth it? |
|---|---|---|
| Uninsured/underinsured motorist | Pays your costs if the other driver has little or no insurance | Usually yes |
| Medical payments / PIP | Covers medical bills regardless of fault | Required in no-fault states |
| Gap insurance | Covers the gap between loan balance and car value | Yes for new cars with small down payments |
| Rental reimbursement | Pays for a rental while your car is repaired | If you have no second car |
| Roadside assistance | Towing and jump-starts | Only if you don't have it elsewhere |
How to lower your premium without cutting protection
- Raise your deductible from $500 to $1,000 if you have an emergency fund.
- Shop around every year or two. Prices for the same coverage can vary by hundreds of dollars between insurers.
- Bundle auto with home or renters insurance.
- Ask about discounts: good driver, good student, low mileage, safety features, paying in full.
- Consider usage-based insurance if you drive little and carefully.
- Improve your credit score — in most states, insurers use credit-based insurance scores to set prices.
Umbrella insurance
If your net worth is substantial, an umbrella policy adds $1 million or more of liability coverage on top of your auto and home policies, often for a few hundred dollars a year.
Frequently asked questions
Does my insurance follow the car or the driver?
In most states, insurance primarily follows the car. If you lend your car to a friend, your policy is usually the first to pay.
Will one claim raise my rates?
An at-fault accident often raises premiums for three to five years. Some insurers offer accident forgiveness for the first incident.