How Much Car Insurance Do I Need?

You need at least enough car insurance coverage to protect yourself if you are in a car accident. Several factors determine your insurance needs. These factors include State minimum requirements, the value of your vehicle, the value of your assets, and how much insurance you can afford. There are different types of insurance coverage designed to cover various repercussions of a crash. Ultimately, you should ask yourself:

Are you sufficiently insured for a car accident?

Most States require car owners to maintain a minimum amount of liability car insurance. Arizona requires car owners to purchase insurance coverage that is at least $25,000 per person for bodily injury coverage, $50,000 per accident for bodily injury coverage, and $15,000 for property damage. However, minimum requirements may not be appropriate for you.

The National Association of Insurance Commissioners provides its recommendations for buying automobile insurance.  One key component is understanding the different types of insurance coverage and not being fooled by the names given to them.  In Arizona, insurance options include:

• Liability Coverage, which pays for bodily injury you cause. It does not apply to your injuries.
• Uninsured Motorist Coverage, which pays for your bodily injuries if the person who caused the crash does not have insurance. There are a lot of people driving without insurance.
• Underinsured Motorist Coverage, which pays for your bodily injuries if the person who caused the crash does not have sufficient insurance coverage to adequately compensate you. There are a lot of people driving with the bare minimum insurance, which is woefully insufficient in moderate to severe crashes.
• Property Damage Coverage, which pays for damage you cause to other people’s property.
• Collision Coverage, which pays for damage to your vehicle from a crash (e.g., car crash, hitting a highway barrier or utility pole).
• Comprehensive coverage, which pays for damage to your vehicle from other non-crash causes (e.g., theft, fire, vandalism).
• Medical Payment Coverage, which pays for medical expenses for anyone injured in a crash, including pedestrians. It will also pay for funeral expenses.
• Rental Reimbursement Coverage, which pays for a rental car while your vehicle is being repaired from a crash.

Drivers who lease or finance their vehicles are usually required to buy collision and comprehensive insurance.

Recommended Insurance Coverage

Based on the sad stories we’ve seen over the years, we highly recommend people purchase all eight coverages.  This is the only way to ensure you have good protection if you are in a crash.  Great protection would be if you can afford to buy insurance with high limits.  Keep in mind that you can lower your insurance premium with a higher deductible, which is the amount you agree to pay out-of-pocket before your insurance company pays anything.

You should also buy gap coverage if you take out a loan to purchase your car.  With the rising costs of cars and interest rates, and minimal insurance coverage, we’ve seen crash victims who continue having to pay for a car that was totaled.