How to determine the amount of auto insurance coverage you need
Everyone loves to save money. With the cost of owning a car increasing, it makes sense to cut back on some of the things you pay for. Insurance is likely to be the first thing on the chopping block. There are many ways to save on auto insurance, as there are often complete items that are not always necessary.
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However, just like having a extended warranty, there are things in your policy that you think you don’t have to pay for and decide to get rid of them. Then you end up regretting it later. The trick is that you need to understand which parts of your policy are consumable and which you need to keep. In this article, we’ll look at how to find out how much insurance coverage you need in case you want to cut it down to save money.
Responsibility vs value
You can read all Geico auto insurance reviews online and figure out if this is the right insurance company for you, but that doesn’t help you figure out if you’re buying a policy you really need.
You have to think of a simple formula to start your research as it will help to shed some light on some things. You can subscribe to two types of insurance: civil liability and multi-risk.
Liability insurance only covers damage to another vehicle and injury to others if you are responsible for the accident. The other will also cover damage to your own car and your own injuries.
To understand whether you only need civil liability or if you need both, you need to consider the value of your car. If your car is valuable and would cost you a lot of money to repair yourself, you should have coverage for damage to your car and not just liability.
Are you a good driver?
Have you been driving for a few years without an accident or speeding ticket? If so, you may want to opt for the minimum liability required by your state. Each state has its own idea of how much coverage you should have, so if you are at fault, damages will be paid. If you don’t have enough coverage, anything the insurance company doesn’t pay will be your responsibility.
As a good driver, you are unlikely to have to go for the maximum coverage in this case. Drivers with a bad driving record should definitely consider opting for a higher amount of coverage.
The 100/300/100 rule
A good rule of thumb is to you covered for a variety of liability scenarios. There is a formula that generally works well to protect you in the event of an accident.
You should have a 100/300/100 ratio. The first 100 is $ 100,000 in coverage that covers the bodily injuries of each individual. 300 represents $ 300,000 that the company will pay for total accidental bodily injury claims. Then the last 100 is $ 100,000 of property damage coverage in a given accident.