If you want maximum protection from your auto insurance coverage, then you shouldn't settle for the minimum coverage as prescribed by your state's insurance laws. You need to exceed the minimum limits, but you also don't need to go overboard about it. Below are some of the factors that can help you determine how much coverage to include in your auto insurance plan.
Value of Car
The value of the car determines how much you stand to lose if the car is stolen or is written off after an accident. Your collision and comprehensive insurance should at least cover the value of the car. The value of the car is determined not only by its purchase price but also by additional factors such as customizations, damage and repair history, and mileage.
When it comes to liability coverage, the main thing to consider is your level of exposure to liability claims. For example, you have high liability exposure if you drive on dangerous roads, you have a teen driver in the house, you drive a lot, or you carpool with others and regularly have passengers in your car. Any of those things mean you have a high risk of liability claims and should adjust your liability coverage accordingly.
If an underinsured or uninsured driver hits your car, you will be left to your own devices unless you have underinsured motorist (UIM) or uninsured motorist (UM) coverage. Some states make UIM/UM coverage mandatory while others leave it optional. Also, some states have unusually high levels of uninsured motorists. If you live or frequently drive in such states, you need to up your coverage to include UIM/UM so that you can protect yourself from such drivers.
You might wonder why your assets should be a factor in auto insurance, but the consideration makes sense if you remember that you stand to lose the assets if someone sues you for damages and you don't have adequate coverage. You protect your assets by buying liability coverage. Therefore, you should up your liability coverage if you have considerable assets to protect.
Lastly, the emergency savings at your disposal also determine how much coverage you need. Increase your coverage if your emergency cash reserve is low. That way, you can take care of your car repairs in case of an accident and you don't have any money.
Talk to an auto insurance agent for further help in building up the right coverage for your car. The agent can also help you figure out how to get the coverage at reasonable rates.