Deciding on how much car insurance you actually need comes with a lot of choices. It is easy to get lost in the sea of insurance lingo. It is important to know your state’s requirements, your risk factors, and the value of your vehicle when trying to determine how much car insurance you actually need. Focus on your specific situation and weigh the options when deciding on coverage. Knowing what you can afford to pay and what you can afford to lose in an accident are two vital pieces of information which will help you select the appropriate coverage.

Check Your State’s Minimum Requirements

Car insurance requirements vary from state to state in the U.S. Each state has its own set of minimum requirements anyone who drives a car. Knowing what your state’s minimum requirements are, should be the first step in knowing how much insurance you need. Any coverage above and beyond your state’s minimum requirements is optional according to state law. However, lenders can require you to sign an agreement which will require more coverage for the term of your car loan.

Lender Requirements

A lender wants verification that your collateral is protected at all times. They can require set liability limits and maximums on deductibles for physical damage coverage. Most lenders require comprehensive and collision coverage to be on the vehicle which is used as collateral for a loan. Lenders get their verification directly from your insurance provider by being listed as a loss payee. Read your loan paperwork carefully to determine exactly what the lender requires of your car insurance.

Know the Value of Your Vehicle

Lots of people think their vehicle is worth more than what it is truly valued. Sentimental feelings or all the hard work you have put in to taking care of your vehicle can alter your perspective on how much your vehicle is worth. Knowing the value can help you determine if you would like to purchase physical damage coverage on your vehicle. Check the value of your vehicle on reputable websites such as kbb.com or nadaguides.com. One thing is for certain, you do not want to pay more annually for car insurance than what the vehicle is actually worth.

As the value of your vehicle declines, consider reducing your car insurance coverage. Full coverage usually covers liability, comprehensive, and collision. When reducing coverage start with removing collision. Then take the next step by removing comprehensive. Finally you can consider lowering your limits of liability to your state’s minimum requirements. Find out the cost of each coverage from your insurance agent or you declaration page to determine your savings.

Know What You can Afford

Car insurance decisions should not be made on a whim. Serious consideration should be taken when selecting coverage and deductibles.

• Selecting Coverage: Know whether you can afford to self insure the physical damage of your vehicle or if you would be better off purchasing insurance coverage. The value of your vehicle combined with the amount of money in your bank account will help you calculate which option is best.


• Deductibles on Physical Damage: It is important that you can afford both your car insurance payments and the deductible at the time of loss. Selecting a higher deductible to lower your premium is only helpful if you are able to pay the deductible when the time comes. Otherwise you will be stuck with a damaged vehicle which could possibly be unfit to drive.

Get Expert Advice

Ask your insurance agent how much insurance you need. An agent will help guide you through the insurance process. Getting quotes on each individual coverage will give you the ability to weigh your options. An alternative is to run different quotes on your own through an online car insurance site.

Beyond the state laws, you have the final say in how much car insurance you need. All the extras like roadside assistance, car rental, and OEM only parts should be considered. Extras can be inexpensive and worthwhile additions to your car insurance policy. Establish the basics first then look at what perks which might interest you.