How To Choose The Best Car Insurance Coverage Limits For You

You know that you’re required to have car insurance to register your car. But how much coverage do you really need? It can be difficult to determine how much insurance is enough if you aren’t familiar with how it works.

In this guide, we’ll help take the guesswork out of buying insurance as we take a look at how to choose car insurance coverage limits.

Why is Car Insurance Required?

In every state but Alaska, you’re required to have proof of car insurance before you register your car with the Department of Motor Vehicles (DMV). Even in Alaska, only some regions allow you to drive uninsured.

With that in mind, you may be wondering why states have this requirement. Put simply, it’s for your own protection. Accidents can’t be predicted. Whether it’s a wreck with another vehicle or a run-in with a deer on a country road, you never know when you’re going to need vehicle repairs or medical attention.

There are two primary types of insurance you’ll buy when you select your policy. The first is bodily injury protection and the second is property damage. You’ll pay a small premium every month to protect you against the financial obligations associated with car repairs, hospital stays, time missed from work, and more.

You definitely need to have insurance on your car. But how much is enough? Let’s take a look.

Choosing Your Minimum Coverage Amount

The first component in how to choose car insurance coverage limits is obviously determining what your state requires. With few exceptions, your state will require:

  • Bodily injury liability protection
  • Property damage liability protection
  • Uninsured/underinsured motorist bodily injury liability protection
  • Uninsured/underinsured motorist property damage liability protection
  • Personal injury protection

If you have questions about your state’s requirements, check with an insurance agent or your local DMV to find out what’s necessary by law.

How Much Bodily Injury Liability and Property Damage Liability?

You can legally drive with only the state’s minimum requirements, which often includes a very basic amount of bodily injury liability and property injury liability on a per accident and/or per person basis.

However, in the event of an accident, this may not be enough to protect you. So, when choosing your car insurance coverage limits for liability insurance, you’ll consider two aspects of coverage:

  • Your current medical coverage. Your bodily injury protection will be capped at the limit you choose. However, in the event that you’re hospitalized or need additional, long-term treatment, your existing medical policy may step in to cover you. Consider both your auto insurance coverage and your health insurance when determining your insurance coverage limits.
  • The value of your vehicle and your assets. Property damage liability coverage will help you repair or replace your vehicle, as well as pay for other damage that may occur as a result of your wreck. Consider the value of your assets and base your decision on that number.

In many cases, your state’s minimum requirements will not fully cover the expenses you may actually have to pay if you’re in an accident. Speak with your auto insurance agent about your current coverages and the value of your assets to help you choose car insurance coverage limits.

Additional Car Insurance Coverage Limits

We mentioned earlier that you may be required to purchase personal injury protection and insurance to protect you against uninsured and underinsured motorists. Even if it’s not the law in your state, you might consider adding these coverages to your policy.

Underinsured and uninsured motorist protection will protect you in the event that an accident is caused by a driver without insurance. This coverage is generally quite affordable and covers you if your car is damaged in a hit and run, or if the at-fault driver doesn’t have insurance. Because it’s so affordable, consider adding this to your policy.

Personal injury protection is another optional coverage you can add to your policy. In some states, such as no-fault states, this coverage is required. If you’re not required to purchase personal injury protection where you live, you may not need it. This is a protection that can usually be covered by your health insurance policy.

Finally, there are additional protections you can choose to add to your car insurance policy. Roadside assistance, rental reimbursement, collision and comprehensive insurance are all options. Once again, consider the protection you already have, and the value of your assets.

If your comprehensive and collision coverage will cost more than around 10% of the value of your vehicle, it’s okay to decline it. Similarly, if you have roadside assistance through an auto club or other source, you may not need emergency road protection. Your agent can help you navigate the process of purchasing the insurance that’s best for you.

Conclusion: Auto Insurance Coverage

If you don’t know how to choose car insurance coverage limits, take a look at the coverages you already have and the value of the assets you own. Carefully review the insurance options available to you, and pick the policy that will give you peace of mind in the event of an emergency.