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How much car insurance should you get - Your complete guide

How much car insurance should you get - Your complete guide

How much is to much? Or how little is to little? Let us help you answer these questions below. With Luna's car insurance cost calculator, you can compare auto insurance quotes for free!

This article will guide you in determining the appropriate amount of car insurance for your specific needs. It will cover state and lender minimum coverage requirements, options for additional coverage to protect your vehicle or assets, and ways to avoid overpaying for unnecessary coverage. Additionally, Luna's car insurance calculator will be provided to assist in finding the best deal.

What is the appropriate amount of car insurance for my situation?

  1. Auto insurance state requirements
    When determining the appropriate amount of car insurance for your situation, the first step is to consider the minimum requirements set by your state, lender, and/or leasing company. These requirements vary by state and can include liability, collision, and comprehensive coverage. Failure to meet these requirements can result in penalties such as fines and loss of driving privileges.
  2. Finance and lease requirements
    If you are financing or leasing your vehicle, you will typically be required to carry full coverage with specific policy limits and deductible amounts. It's important to be aware of these requirements as they will help you to make sure that you have the right amount of coverage.
  3. Personal requirements
    In addition to meeting legal insurance requirements, it's crucial to evaluate your personal needs and assess the extra protection you wish to have in place to safeguard your family and assets. Keep reading to gain a deeper understanding of the different types of coverage available.

Types of auto insurance coverage

This is a breakdown of the different types of auto insurance and how they can protect you.

Liability coverage
This type of coverage is mandatory for most states except for Virginia and New Hampshire. Liability insurance generally covers damages you cause to another person or their property, up to your policy limits. It is typically divided into two parts: bodily injury (BI) which pays for the other party's medical expenses, and property damage (PD) which pays to repair damages to another person's property. Your coverage limits are usually listed as BI limit per person, BI limit per accident, and PD limit, for example 25/50/25 means that you are covered up to $25,000 for BI per person, up to $50,000 for BI per accident, and up to $25,000 for PD.

Do you need it?
It is important to have enough liability coverage to protect you in case of a claim, but also avoid overpaying by having too much coverage. A good rule of thumb is to set your limits equal to your net worth.

Comprehensive coverage
Comprehensive coverage protects your vehicle from damages caused by events other than collisions or rollovers, such as wind, fire, theft, vandalism, animal strikes, falling objects, and hail. It typically requires you to pay a deductible, after which your policy will cover repairs or replacement up to the policy limit. If you are leasing or financing your car, comprehensive coverage is usually required to protect the lender or leasing company's collateral.

When deciding whether or not to purchase comprehensive coverage, consider how much it would cost to replace your car if it were damaged in a covered event. According to data from the Insurance Information Institute, 78% of drivers with insurance have comprehensive coverage along with liability insurance. If the cost to replace your car after subtracting your deductible and premium would be too high for you to pay out-of-pocket, comprehensive coverage may be a worthwhile investment.

Collision coverage is typically required if your vehicle is financed or leased, but is optional for those who own their car outright. It covers the cost of repairs or replacement for your vehicle if you are at fault in an accident, rollover, or hit another object like a tree or pole.

Additionally, it may also cover damages if another driver is at fault but does not have enough insurance to pay for your damages. Upon filing a covered claim, you will be required to pay a deductible and your insurer will cover the rest of the expenses up to your policy limit.

When deciding whether to invest in collision coverage, consider factors such as your driving history and your ability to pay for repairs or replacement out-of-pocket. It's advisable to avoid filing a claim if the cost of repairs is less than your deductible as this can lead to higher policy costs in the future.

Uninsured and underinsured motorist
Uninsured and underinsured motorist coverage (UI/UIM) protects you in the event of an accident caused by a driver who either doesn't have insurance or doesn't have enough insurance to cover your damages. This type of coverage is often required by some states and is typically combined together. If you already have collision coverage, it may provide similar protection, so you may not need to purchase UI/UIM coverage separately.

Personal Injury Protection (PIP)
Personal injury protection (PIP) is an auto insurance coverage that covers you and your passengers in the event of an accident, regardless of who is at fault. It pays for medical bills, lost wages, death benefits, ambulance fees, and sometimes, it can also cover additional services like home care and housekeeping. This coverage is mandatory in certain states.

When deciding whether or not to include PIP in your auto insurance policy, consider the peace of mind it provides. If you are involved in an accident, you can have the assurance that you and your passengers will have financial protection for medical expenses resulting from bodily injury.

Medical payments
Medical payments coverage is designed to cover medical expenses for you and your passengers in the event of an accident, regardless of who is at fault. However, the coverage limits tend to be lower than those of Personal Injury Protection (PIP). While this coverage is typically optional, some states do require it as part of your liability insurance package.

When deciding whether or not to include medical payments coverage in your policy, consider whether your state requires it and if the lower coverage limits align with your needs. If PIP is available in your state and you have the option, it may be a better choice for more comprehensive coverage.

Luna can help you find your best car insurance rates

When you've determined the types of car insurance and coverage limits that are right for you, it's a good idea to compare rates from multiple insurers. Each insurance company evaluates policyholders differently and uses different methods to calculate premiums. Additionally, some companies may offer discounts or other incentives to attract customers. By using a tool like Luna's auto insurance calculator, you can quickly and easily compare quotes from multiple insurers and find the best value for your needs.