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How Much Car Insurance Coverage Do I Need?

Moneymagpie Team 3rd Mar 2023 No Comments

Reading Time: 3 minutes

Learn About Car Insurance Policies Before You Apply

Any type of insurance application can be stressful, but it’s necessary to figure out the process, especially if you want to save money. Finding car insurance isn’t just a good idea if you get into an accident – most states require you to have some form of insurance to drive legally.

The answer to how much car insurance you need can depend on several factors, like where you live, how often you drive, and how much your vehicle is worth. There are also many insurance policies you can take out depending on the factors mentioned, so it’s essential to understand the difference between them when deciding!

If you don’t fully understand the differences between policies, you may end up with more coverage than you need and therefore end up paying more! Below is a guide for navigating the car insurance system to find the right coverage for your circumstances.

What Is Car Insurance Coverage?

A car insurance policy can potentially cover certain damages to your vehicle and medical bills if you or another passenger is injured in an accident. In essence, your policy can protect you, your passengers, and other drivers on the road from unexpected expenses due to an accident.

Driving without car insurance is illegal in most states, so you must apply for some before you hit the roads! It is not only against the law to drive without coverage, but it can also be hazardous to get into an accident without insurance. You could be entirely liable for the expenses, so that’s important to remember!

Some states don’t require car insurance, but they require compliance with financial responsibility laws! In most cases, you cannot drive on the road without coverage.

Types of Car Insurance

You can choose between about five different types of car insurance coverage when applying. Although some of these coverages can vary by state, some standard form is available for most drivers. Below are your options when choosing between car insurance coverage:

Liability Coverage: Most states require liability coverage for all drivers as the “bare minimum” when it comes to car insurance. Liability coverage protects other people on the road in case you get into an accident. If another driver is injured due to an accident you’re both involved in, this coverage can cover the costs of medical bills and vehicle repairs.

The amount of liability coverage you choose is up to you, but it’s recommended to opt for a higher amount to cover any future expenses.

Collision Coverage: Collision coverage can be optional in some states, but it’s still an important insurance policy to consider. That’s because it protects you and your car from injuries or damages due to accidents caused by other drivers or objects you hit.

This insurance policy is only required if you are leasing or loaning your car, but it can be helpful if you drive a lot or are prone to accidents!

Comprehensive Coverage: Comprehensive coverage is only legally required if you lease or loan your vehicle. This coverage protects you from damages not sustained by other drivers. Examples include severe weather, fire, theft, or hitting an animal like a deer.

Personal Injury Protection Coverage (PPI): Personal Injury Protection coverage is only legally required in some states, so check the laws where you live! This coverage can pay for medical expenses, lost wages, or funeral bills for you and the other drivers involved in an accident.

Uninsured Motorist Protection: Even though every state requires some form of car insurance, many drivers end up living without any. If you get into an accident with an uninsured driver, this coverage can protect you from expenses the other person may not afford.

Consider Your Driving Habits When Deciding on Car Insurance Coverage

As mentioned earlier, you must have car insurance to drive in the U.S., depending on where you live. You can choose between the different types of coverage depending on how often you drive, what kind of city you live in, and how expensive your vehicle is.

The more you pay for car insurance, the more you are covered if an accident happens. However, you may not be at a high enough risk if you don’t drive often! Life is full of unpredictable events, and car insurance can help you pay for the bad things that happen while driving.

Also, make sure you ask your prospective insurers what will happen if your car is totaled. Ask them “what happens if my car is totaled and I have a title loan in Virginia or if I still owe on my car loan?” It’s important to know whether they cover the value of the car or any negative equity as well. You may need to look into adding gap insurance depending on the answer.

DisclaimerMoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence.



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Jasmine Birtles

Your money-making expert. Financial journalist, TV and radio personality.

Jasmine Birtles

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