How much insurance coverage do you need?

At a minimum, you should purchase your state's minimum auto insurance requirements. However, state minimums are woefully inadequate and don't offer any coverage for your own car repair bills. If you want better coverage, you'll need to buy more than the minimum requirements. The price of replacement cost coverage for homeowners is about 10 percent higher, but it's generally a worthwhile investment in the long term.

If you live next to a golf course, you may have wanted to have a glass cover to pay for the cost of fixing or replacing your car windows. But even in these states, drivers are still responsible for paying for the damage they cause, and the best way to ensure that you can do that is to have car insurance instead of driving without insurance. Some insurance companies offer disappearing deductibles at an additional cost for drivers with a long history of safe driving. This coverage is similar to that of extended warranties and service contracts, but unlike those products, you pay a monthly premium instead of paying a lump sum upfront.

Consequently, you should have sufficient bodily injury liability coverage to match your assets, rather than simply burdening your state's minimum. A good rule of thumb is to supplement the car insurance required in your state with enough additional coverage to fit your net worth. For example, there are policies that offer an unlimited amount of coverage for a limited period of time, while others can only set limits on the amount of coverage. Liability insurance covers costs such as medical or repair costs for other people if you cause an accident.

However, if you're in an accident that isn't your fault, the other driver's liability insurance will pay for your windshield repairs. A full coverage policy with comprehensive and collision coverage costs approximately twice as much as a policy with only minimal liability coverage. Comprehensive and collision coverage is paid to repair physical damage to your car, including paying for replacement parts, repainting, or replacing the car in the event of loss, theft, or total destruction. Supplemental liability or franchise policies provide coverage that exceeds the standard limits of your home (or auto) liability policy.

These can include roadside assistance, which covers things like changing flat tires, starting quickly and towing, or replacement coverage for a new car, which pays for replacement if the new car breaks down, usually within a year or two of owning it.

Marcie Macvicar
Marcie Macvicar

Typical food expert. Evil zombie lover. Evil troublemaker. Hipster-friendly troublemaker. General social media nerd.