How can I estimate car insurance coverage that I need?

How to estimate the car insurance coverage that you need starts by checking your state’s insurance requirements. Every state requires some level of liability coverage, and you need to include it in your car insurance estimate. Then consider the cost of an accident and how much it would cost if you were unable to work to estimate the auto insurance coverage that you need. Enter your ZIP code below to see how local insurance quotes compare to your auto insurance estimate.

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Tonya Sisler has a Bachelor’s Degree from the University of South Carolina in Journalism and has worked for 15+ years in management. She has also completed a proofreading certification and is currently a professional writer.

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Brad Larson has been in the insurance industry for more than a dozen years. He started out as a claims adjuster for a national carrier. He has since switched to the agency side of the business. Brad is licensed in all P&C lines.

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Reviewed by Brad Larsen
Licensed Auto Insurance Agent

UPDATED: Jun 4, 2021

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Car insurance is a “must” for drivers today. It can minimize the expense of ownership related to accidents, theft, fire and more. Make sure to look for cheap car insurance quotes to protect yourself from too many expenses. These events can and do happen to drivers each and every day, and the expenses drivers face because of them can be significant.

While car insurance reviews are important for drivers because they help people with how much insurance they buy, no driver wants to pay an excessive amount of money for the benefits insurance can provide. Comparing rate quotes can help you to minimize the cost of this expense. To find and compare auto insurance easily, enter your ZIP code into the FREE tool above!

Another way you can minimize the cost of this expense is to purchase only coverage that is beneficial to you. So how can you estimate how much car insurance coverage you need?

Some Coverage May Be Required

While it is estimated that approximately 13 percent of drivers in the U.S. do not have car insurance, and an even greater amount are uninsured, many drivers fully understand the need for car insurance. In fact, car insurance is not just beneficial for some drivers, it is required.

Most U.S. states require drivers to show proof of financial responsibility behind the wheel.

Some of these states do specifically require drivers to purchase coverage, and others offer different options such as making a very large cash deposit with the state in lieu of car insurance.

In addition to state requirements, may car lenders and car lessors also have coverage requirements in place. Most drivers do have some coverage requirements in place that will determine minimum coverage needs.

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Determining Minimum Coverage Needs

Failure to meet state and lender or lessor requirements can be expensive and can have damaging effects on your life. For example, some states will penalize drivers who are not properly insured with monetary fines, the revocation of their driver’s license and more.

In some cases, imprisonment for several months or even several years is an option. Determining minimum coverage needs based on state and lender or lessor requirements is critical as a first step toward determining what the lowest level of coverage you need to purchase is. Consider these steps:

  1. Contact your state’s motor vehicle’s department to determine state financial responsibility requirements. This information is often posted on the motor vehicle department’s website as well.
  2. Contact your auto lender or lessor to determine insurance requirements. Keep in mind that the state’s requirements often differ from the lender or lessor’s requirements, and both of these requirements will have to be satisfied.

The Cost of an Accident

Car accidents can be costly. According to a AAA study completed in 2009, the average cost of a car accident that has one or more injuries exceeds $125,000. The cost of an accident with a fatality is far more significant. AAA’s estimate of costs for a car accident with at least one fatality was over $3 million in 2005. Car insurance coverage will pay for damages related to your accident, provided they are covered by the policy you purchased. Minimum insurance requirements typically are very low and may not cover the entire cost of an accident.

A Costly Example

Consider that Wyoming’s requirements include $25,000 for bodily injury liability coverage for a single person, $50,000 for bodily injury liability for multiple people and $25,000 for property damage. For an injury accident with multiple injuries that resulted in $125,000 in damages to the other party, this policy would pay for $75,000 of those damages. What happens to the other $50,000? This is your responsibility to pay for out-of-pocket, and the other party can sue you for damages.

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Different Types of Coverage

In the example above, the only type of coverage the driver has is liability coverage. This coverage is not fully protective, as it only pays for some expenses that a driver may be responsible for during an accident. Understanding the different types of coverage available can help you to determine which types of coverage you need.

  •  Liability: covers damages expenses related to the other party involved in a collision
  •  Collision: pays for rep expenses on a driver’s vehicle after a collision based on replacement value of the vehicle
  •  Comprehensive: pays for repairs or replacement of a driver’s vehicle related to a range of events including fire, collision, weather events and more
  • Uninsured Motorist: pays for your expenses if you are hit by an uninsured motorist

These are among the most common types of insurance a motorist may purchase. Other optional coverages may be available by certain insurers, such as gap insurance, rental car reimbursement coverage and more.

Liability Coverage Suggestions

Experts recommend that drivers purchase at least a 100/300/100 liability policy. This can minimize the risk that you may be sued for damages after an accident.

However, you should keep in mind that when sued for damages, the injured party can only take assets that you own.

For a driver with very few assets, this type of policy may be more costly than is necessary. Because of this, when purchasing liability coverage, consider what the minimum requirements are as well as the value of what an injured party may take from you if you are sued.

Additional Coverages

An insurance company may also provide you with reimbursement for the replacement value of your vehicle after an accident as well as for your own medical bills. Those who have a good health plan may not need to purchase additional medical coverage under their car insurance policy.

Further, because a car insurance company will not pay out more for car repairs or replacement than the car is worth, consider only purchasing enough coverage for your own repairs that meets the cars values. For cars that have a very low replacement value, the cost of collision or comprehensive coverage may exceed its benefit to a driver. If you have a car with a low replacement value, you may consider purchasing only liability coverage.

Buying an appropriate amount of car insurance that meets state and lender or lessor’s requirements and that fully protects you from liability can be expensive. You can take a step now to minimize this expense by entering your ZIP into the FREE rate comparison tool above.

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