This is a very important question that everyone needs an answer to at one time or another, and the answer will be different for each person. There are different types of car insurance that you need to consider: liability, comprehensive and collision. Most states have a legal minimum of liability car insurance that you must purchase, but be aware that the legal minimum is often not enough. If a judgement goes against you for an amount more than your coverage, your entire savings (and more) can literally be wiped out with just one accident.
This type of coverage will protect you from being sued for personal damages. The Insurance Information Institute recommends that you carry at least $100,000 per person and $300,000 per accident. Again these are minimums and may not be right for your particular situation. If you have more at risk, you may want to consider a liability umbrella policy. This sort of policy will kick in once you have surpassed the limits on your standard liability policy. You can easily get an extra $1 million dollars of coverage for just a few hundred dollars per year added to your premium payments. It’s a good idea to enquire where you have your house insurance about this type of policy, as you will probably get the best rates with a bundled package.
The amount of comprehensive coverage you require depends on the value of your car and whether you lease or own. If you own an old beater, then you can probably skip this type of coverage. With a new car you will want some coverage to assist in repairs to the vehicle after an accident. If you lease, your finance company will insist that you have this type of coverage.
Comprehensive coverage is intended to kick in when you have damage to the vehicle that is a result from something other than a collision. For example, events like a rock that damages the windshield, or damage from a fire or flood, or someone vandalizing your car would all be covered with comprehensive insurance.
You can keep your premiums under control by upping the deductible. This is the portion of the repair bill that you are willing to pay for. The lower the deductible the higher the insurance premium.
Collision insurance is important for when you hit something or something hits you (even if you are parked). Just like comprehensive, the insurance company will pay for the repairs if they total beyond the agreed upon deductible amount. Your premiums will depend on the value of the car and the amount of the deductible. Coverage will also max out at the value of the car at the time of the accident, although it is possible to get what is called replacement insurance, but this is much more expensive.
Other Things To Consider
You may also want to consider individual circumstances when it comes to car insurance. For example, if you have a child in your family that is learning to drive, you might want to consider getting insurance to insure learner driver when they start driving. These are special short term policies that are just for beginners learning to drive.
You are required to purchase a minimum amount of liability insurance as determined by the state where you live, but this is rarely “enough” coverage. Consider an umbrella policy and bundle it with your home insurance to save on premiums, but do not go cheap in this area. You don’t ever want to be found without enough liability coverage.
Comprehensive and collision is where you can save the most money on car insurance premiums. If you lease, you will be required to purchase this type of coverage, but you can limit the premiums by increasing the deductible. If you own an older car, you may choose to go without this type of insurance. As with most insurance products, be sure to consult with an experienced professional before making any purchase.