How Much Auto Insurance Coverage Is Enough?

Whether you’re a seasoned driver who’s been behind the wheel for years or a novice on the road, you know the importance of having your car insured. But do you know how much auto insurance coverage is enough for your vehicle? The short answer is it depends. There are several factors that will affect what is good car insurance coverage — and it’s based on your vehicle. We’re here to help you better understand the recommended auto insurance coverage for your specific vehicle, so you can gain peace of mind that your rig is properly protected from the unexpected.


Common Types of Auto Insurance Coverages

While almost every state requires a minimum amount of car insurance, you have the option to select higher limits and other optional coverages to better protect your vehicle. You’ll want to familiarize yourself with the types of auto insurance coverages available and what they protect. Let’s take a look:

Liability coverage

If you cause an accident, there are two types of costs you could potentially be liable for: bodily injury costs and property damage costs. That’s where liability coverage comes into play.

Bodily injury liability coverage is probably required in your state — and for good reason. While this coverage doesn’t protect your car, it does protect your wallet. That’s because, if you’re deemed at fault for an accident, bodily injury liability coverage helps cover injuries to others and offers protection if you’re sued. This is an important coverage to have because bodily injury claims can be exceptionally expensive, and without this coverage you’d be left paying out of pocket and putting yourself at financial risk.

Property damage liability coverage helps cover the costs if you damage someone else’s property, like a vehicle or a fence. It also covers loss of use, which is the amount the other party can claim for a rental vehicle during the time it takes for their vehicle to be repaired or replaced in the event of a total loss. Imagine you run a red light and T-bone someone, totaling their brand new vehicle. You’d be responsible to cover the cost to repair or replace their vehicle as well as the cost of their rental car. Having liability insurance protects your pockets from instances like this.

Tip
Whether your state requires it or not — and no matter the type of vehicle you drive — liability coverage is a must have to help protect your finances.

A typical breakdown of liability coverage would look like this:

$250,000/$500,000/$250,000 or 250/500/250

$250,000 of coverage for bodily injury (per person)

$500,000 of coverage for bodily injury (per accident)

$250,000 of coverage for property damage (per accident)


Comprehensive coverage

Comprehensive car insurance is an optional coverage that covers damage caused by accidents that don’t involve colliding with another vehicle or object. You’ll pay a comprehensive deductible, which is a set amount of money you’ll pay out-of-pocket prior to your insurance payment coverage. This coverage helps pay for damages from things like:

  • Theft
  • Collisions with animals
  • Vandalism
  • Fires or explosions
  • Hail
  • Natural disasters
  • Certain falling objects

Having comprehensive coverage protects your vehicle from instances that are out of your control, and you’ll be glad you have this coverage to protect your vehicle investment. States don’t require comprehensive coverage, but if you have a lease or a loan on your vehicle, your lender will likely require it.

Collision coverage

Even though it’s an optional coverage, collision insurance is what you typically think of when you think of why you need auto insurance. Why? Because it helps pay the cost of repairing or replacing your car after being damaged in an accident, whether it’s your fault or not. Collisions involve anything from hitting another vehicle, to hitting an object, like a tree, guardrail or mailbox. Usually, if you’re involved in a covered accident, you’ll pay a collision insurance deductible and your insurer will then help cover the remaining damages.

Like comprehensive coverage, collision insurance isn’t required by any state, but if you have a lease or loan, you’ll almost always be required to have this coverage.

Uninsured (UI) and underinsured motorist (UIM) coverage

Some states require one or both of these coverages, while other states offer them as optional coverage. Either way, uninsured and underinsured motorist coverage are two inexpensive coverages that you’ll definitely want to consider. Uninsured motorist coverage protects you from drivers without insurance, while underinsured motorist coverage protects you from drivers with not enough insurance to fully cover your expenses after an accident. If you didn’t have these coverages, you’d be left to cover the expenses yourself if in an accident with an underinsured or uninsured driver.

Additional car insurance coverage options

It’s important to have well rounded insurance policy to protect you from any unexpected circumstance. Here are a few more coverages that are in your best interest to have:

Gap lease or loan coverage. Leases and loans tend to last for years, but your car depreciates rather quickly, which means at some point you may owe more on your vehicle than it’s actually worth. If you get into an accident within that time frame, your regular car insurance will cover up to the actual cash value of the vehicle, but that amount may not be enough to cover the entire loan balance. This is where gap lease and loan insurance steps in and helps cover the difference.

Emergency roadside service. This is a smart addition to any insurance package. When you need service and support for your car, it’s right there to help! Emergency roadside service helps cover towing, battery jumps, some tire servicing fees, delivery of gas or oil, locksmith services labor and some roadside repairs.

Rental reimbursement. When your car is in the shop or otherwise not drivable due to a covered loss, rental car reimbursement is an optional coverage that can help pay for a rental car. You’ll be covered up to your policy’s limit that you choose.

How to Choose Car Insurance Coverage

So, now you know a little more about your coverage options, but how do you choose car insurance? When it comes to choosing car insurance coverage, you’ll look at the car insurance requirements in your state as well as your vehicle’s unique needs.

An important thing to keep in mind when selecting coverage is that your state’s minimum requirement usually won’t provide enough coverage to fully cover you in the event of an accident. If your state requires $15,000 worth of property damage but you totaled someone’s $40,000 car, you’d be stuck paying the difference. Could you afford to pay $25,000 out of pocket? Whether that’s a large financial hit to you or not, it’s a lot of money to fork over.

Here are a few questions to consider when deciding what kind of coverage to get:

Do you have a lease or loan? If you have a lease or loan, your lienholder or lender will likely require you to have both comprehensive and collision coverage. You’ll also want to consider gap lease/loan coverage in case you owe more on your vehicle than what it’s worth.

How much liability coverage can you afford? Accidents happen and you never know what types of financial hit that will have on you. It’s recommended to get as much liability coverage as you can afford to help cover the full value of your assets, like your home, car and savings.

For additional liability protection, consider adding an umbrella policy. Umbrella insurance is extra, affordable liability coverage that goes above and beyond the limits of your other insurance policies, like auto and home. For instance, if you cause a large accident that results in expenses above the liability limits of your auto policy, umbrella coverage will step in to help cover the remaining costs — and you can keep your wallet safe. Think of umbrella insurance as an additional financial safety net. You hope to never need it but it provides significant protection of your assets and future, as well as peace of mind. Your American Family Insurance agent can answer your questions about umbrella insurance and help you add this important coverage.

Do you have a teen driver? If you have a young or new driver, you’ll want to consider increasing your liability coverage limits since they run a higher risk of getting into an accident. This is extra important to do because if you're the sponsor of their license (and most parents are) you could be responsible for any costs related to an accident for which they're at fault.

What is your car worth? If you flat out own your car, you won’t be required to get collision and comprehensive coverage. But you may still want to add these coverages. After all, if you get into an accident and damage your car, you’d pay out of pocket for all of the repair costs. Or say your car is victim of a hail storm and has dents on every surface, you’d be left paying for that, too. Some people do opt to remove collision and comprehensive insurance if their car isn’t worth very much, but that’s up to you. When it comes to collision and comprehensive insurance, it’s important to think about what you’d be comfortable paying out-of-pocket if your car was totaled or damaged and you needed to buy a new one.

Do you live in an area prone to wildfires or floods? If your answer is yes, you’ll want comprehensive coverage, since this type of coverage protects you from natural disasters.

Want the Best Coverage? Connect With an Agent!

The best way to determine if you have the right coverage in place is working with an American Family Insurance agent. They’ll ask you questions about you your vehicle that’ll help them build a policy customized to your unique needs. Insurance with us means peace of mind on the road.

Need on-the-go access to your proof of insurance or want to quickly sign up for Auto Pay? The MyAmFam app is the perfect way to manage your American Family Insurance account — anytime, anywhere. It’s never been more convenient to protect the things that matter most.

 

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Related Topics: Insurance Needs , Car Insurance