Buying Auto Insurance: How Much Coverage to Carry?

You can save time and money shopping for auto insurance if you know what you want and need. Here’s how to find out:

Research Insurance Requirements in Your State: Requirements differ from state to state. Look up your state's insurance requirements on the Consumer Action Web site or the National Association of Insurance Commissioners Web site
Find Out What Your Automobile Is Worth: You can look up the current value of your car on the Kelley Blue Book Web site
Have a Rough Idea of Your Net Worth: Buy enough liability coverage to protect your assets in case of an accident.

Here are some specific guidelines for the different types of coverage:

Bodily Injury Liability Coverage: Experts agree this is the most important type of coverage to carry. Consumer Reports recommends people with a home and other assets buy coverage of at least $100,000 per person and $300,000 per accident. People with fewer assets can buy the state minimum. The biggest mistake consumers make is being underinsured on bodily injury liability coverage and overinsured on collision and comprehensive coverage.
Property-Damage Liability Coverage: Consumer Reports recommends purchasing at least $100,000 per car.
Medical Payments Coverage: Whether you need optional medical coverage and how much you need depend on what your health insurance coverage includes. Some experts recommend that people with excellent health insurance benefits and low copayments purchase just the state minimum. It's important to remember that medical payments coverage also pays the medical expenses for passengers in the car who may not be so well-insured, which your regular health insurance won't cover.
Collision and Comprehensive: You should take the highest deductible you can afford on collision and comprehensive, especially if you have a newer car. If you have an older, modestly priced or inexpensive car, you may want to consider dropping collision and comprehensive coverage altogether. However, you should drop collision only if you can afford to repair or replace the car in the event of an accident.
Umbrella Policy: Some experts recommend that people with more than $300,000 in assets purchase a $1 million liability umbrella policy in addition to other auto insurance. This added protection will cost you an extra $150 to $300 a year in insurance fees.
Uninsured/Underinsured Motorist Coverage: Consumer Reports suggests buying at least $100,000 per person and $300,000 per accident.

Written with the help of Courtney Nash, General Research Specialist at Ceridian Corporation.