How much car insurance you need depends primarily on two factors. Where you live and your personal situation. All states have different minimum car insurance requirements which make it mandatory for any vehicle registered to carry a certain amount of coverage but responsible drivers need to look past state guidelines and focus on the benefits of additional insurance based on their needs.

What type of car insurance should you buy?

At the very least you need to comply with state law. Driving with no insurance not only exposes you to great personal liability in a car accident but also subjects you to heavy fines and penalties. The fines can range from a few hundred dollars to well over a thousand dollars, suspension of your vehicle registration tags and/or driver’s license and possibly even criminal charges in some situations.  Additionally, if you convicted of driving with no insurance it will be practically impossible to find affordable car insurance when you are forced to pony up and buy a policy.

What is Liability Insurance?

Liability insurance is the gold standard of car insurance requirements but this type of coverage only provides insurance against damage and injuries to other people and their property. Imagine buying a new car, purchasing a policy which only has the minimum coverage limits and getting in an accident. If you were at-fault ALL the costs associated with repairing your vehicle and medical injury costs are up to you pay out of pocket!

Sure, you get some relief from having car insurance to cover other people’s expenses but isn’t the point of having car insurance for most people to have everything covered?

The catch with liability insurance however is that states only require very small levels of coverage which are insufficient for most drivers. Most states only require between $10,000 to $50,000 in liability insurance coverage. This may seem like a lot of money but when you really think about it many new cars start at more than $50,000 and surely a couple nights in an ER will cost more than $10,000. Purchasing the right type of coverage is equally as important as purchasing the right policy limits. Even if you only purchase the state minimum types of coverage you should always consider higher policy limits!

Oh, and did we tell you that any costs above your policy limits you are personally responsible for!

Once you understand the restrictions of a liability insurance only policy (hint: you and your vehicle are not covered) its time to analyze what types of car insurance you really need. From comprehensive and collision coverage to GAP insurance there are many various types of auto insurance. Depending on your situation however you may need all the bells and whistles.

What types of car insurance do most drivers purchase?

Let’s assume you have a budget which allows a well-rounded policy. Most drivers opt for a car insurance policy that has at least the following types of insurance:

• Liability
• Collision
• Comprehensive
• Personal Injury Protection * (some states)
• Medial Payments * (some states)

GAP insurance is usually only purchased by people who have financed a new vehicle and there are many extra options you can buy like roadside assistance, rental car reimbursement, towing and labor etc… but these generally play no real significance in your coverage. Your main concern is having insurance to cover vehicle repair, medical injuries and litigation. Whether or not you get stuck with a $90 towing bill is insignificant in the whole scheme of themes.

Before purchasing a vehicle or renewing a car insurance policy always make sure you understand what types of car insurance coverage you need and purchase a policy not just to comply with state law but one which provides the financial protection that applies to your current situation.

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