Buying the right auto insurance means purchasing a policy to adequately cover you if you suffer losses. To determine how much coverage you need, you must determine the amount of risk present.
Your DJW Insurance agent can provide insight to you about those risks. But you can also calculate some facts on your own. These three steps can give you some insight into how much coverage you need.
#1: The Worth Of Your Car
If damage occurs to your car and it is a total loss, how much do you expect your auto insurance policy to provide to you? The importance of knowing the worth of your car here is easy to see. You want to be sure you get enough money back to help you replace the car. To estimate the value of your car, consider two things:
- How much is your car worth on the open market? If you tried to sell it, what would you get for it?
- How much is the loan on your car? If it is higher than the worth of your car, you may need to also invest in gap insurance.
An overall idea of your car's worth is a good starting point. It gives you the base amount of coverage you need to protect your vehicle. However, you also need to consider if you need actual value or replacement coverage. Actual value pays what the vehicle is worth at the time of the accident. The vehicle's value depreciates over time. On the other hand, replacement value gives you enough to purchase a new vehicle just like your own. Therefore, if you want the full replacement value, you don't need cash value coverage.
#2: How Much Liability There Is
Liability insurance is the second largest component of your car insurance policy. The value of it should be enough to cover any type of accident you cause to others.
First, start with your state's minimum requirements. This is the base level of liability coverage you must carry. Most drivers should increase this to $100,000 to $500,000 or more, depending on the risks in your area.
#3: Consider All Loss Types
While having a coverage values is important, you also need to ensure you have all types of insurance products that apply to you. This includes the following:
- Collision Insurance – This works to pay for damages to your car when you cause them by hitting an object.
- Medical Payments – This can help cover medical bills in an accident you cause.
- Comprehensive Insurance – This helps cover losses associated with fires, theft, and vandalism. It will cover damage not related to wrecks.
- Underinsured and Uninsured Coverage – This helps cover your losses if the responsible driver does not have enough insurance.
Your DJW Insurance agent can help you with this process. Be sure to learn as much as you can when making this decision.