Auto Insurance

Determining how much you need

It's easy to take driving for granted, but it's probably one of the most dangerous things we do. Auto insurance is another must-have, and most states actually require it. Check with your state's department of insurance for more information.

Liability insurance—the basic coverage

Most states require you to have a minimum amount of liability insurance for accidental bodily injury and property damage to others. Liability insurance is typically stated in threes: for example, 25/50/10 describes coverage of $25,000 per person, $50,000 for bodily injury per accident and $10,000 for property damage per accident.

Some states with no-fault insurance laws also require personal injury protection insurance. If your state doesn't have minimum insurance requirements, you'll likely have to prove that you have enough assets to cover the damages caused by an accident.

Other things to consider:

  • If you have a car loan, you may need additional coverage. Financing companies usually require you to have comprehensive and collision coverage as a condition of your loan.
  • Evaluate whether comprehensive and collision insurance is worth the expense. Collision insurance protects against damage to your vehicle resulting from a collision with another vehicle. Comprehensive insurance protects against damage that results from events other than collision (like theft, vandalism or fire). Look at the Kelley Blue Book value of your car compared with the cost of premiums and deductibles for these types of insurance.
  • Think about raising your deductible—the amount you would have to pay in the event of an accident. Higher deductibles mean lower premiums.
Our Two Cents
State-mandated insurance minimums often aren't enough to cover the costs of an accident. It's a smart idea to purchase at least $100,000 of bodily injury protection per person or $300,000 per accident.

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