Getting the Most Value for Your Auto Insurance Dollars


When you're buying auto insurance, trying to figure out how much coverage to get is a balancing act. You want to be sure you have enough coverage if you're in an accident, but you don't want your auto premiums to break the bank. To get the right coverage, you look for discounts and adjust deductibles to lower your premiums—but there's more to consider. 

What You Need
Each state requires all drivers to carry a certain amount of liability coverage. In addition, if you have a loan on your car, your lender may require you to carry comprehensive and collision coverage.

Once your car is paid for, you might consider dropping coverage like comprehensive, collision, uninsured motorist and underinsured motorist to save money. However, you are assuming a lot of risk that way. Not having a car payment is nice, but what if a tree falls on your car or you are hit by someone who doesn't have insurance or doesn't have enough insurance? You will have to pay to have your car fixed yourself, or drive it around damaged (if it's even drivable).

You might also consider increasing your deductibles to save money. Before you make that decision, consider how much each deductible costs you versus how long it would take to break even if you had a claim. You will likely find in the long run you are far better off with a lower deductible. This same consideration applies to uninsured motorist (UM) coverage, underinsured motorist (UIM) coverage and medical payments (Med Pay) coverage. 

How Much You Need
Each state has its own requirements when it comes to the minimum amount of liability coverage drivers carry. The rest depends on factors like your financial situation and your personal risk tolerance. If you're just starting out in life and don't have a lot of assets to protect, it makes sense to spend more on UM, UIM and Med Pay. If you have a lot of assets to protect like a house and multiple vehicles, you might think you need the highest amount of liability insurance you can get, but it's actually smarter to consider purchasing an umbrella policy instead. Just be aware that the liability coverage under a homeowners policy or an auto policy isn't exactly the same as the liability coverage under an umbrella policy. Although some things aren't covered under an umbrella policy, it does offer other benefits. Your agent can explain the differences and help you determine what's best for your situation.