How Much Auto Insurance Do I Need?

Man in car accident calling insurance company

Whether you experience a minor fender-bender or a major accident, your auto insurance policy is there to help ease the financial burden and reduce your personal liability. It’s something that protects you, as well as other drivers. The idea is to find an affordable policy that also offers adequate protection, but settling on the right one can be confusing. There are different levels of coverage, and every state has its own minimum requirements.

Here’s a brief but comprehensive guide to help you determine how much auto insurance you need.

What Is Auto Insurance?

Auto insurance, also known as car insurance, is purchased by vehicle owners and lessees. Your policy helps reduce your costs should you get into an accident, whether it’s a collision with another vehicle or someone else’s property. Some auto insurance policies also extend to cover medical bills and legal expenses. General car insurance is typically designed to protect the policyholder when they’re using their car for personal use. (You may need to purchase an additional commercial policy if you do a lot of business-related driving.)

Once you’ve selected your car insurance policy, you’ll pay regular premiums to keep it active. If you experience a covered event, you file a claim and then submit it to your insurer. Just keep in mind that you’ll have to meet your deductible before your insurance provider picks up any expenses. Like homeowners insurance, auto insurance deductibles generally reset every time you file a new claim.

Different Types of Auto Insurance Coverage

The right car insurance policy for you comes down to your budget and your state’s minimum insurance requirements, which you should be able to locate on your state’s Department of Motor Vehicles website. Most states require liability insurance. This is what covers you if you cause an accident that results in damages to another person or property. It also protects you if you’re sued as a result.

While liability coverage extends to other vehicles and people, collision coverage is what covers your car if it’s damaged in an accident. It’s an important thing to think about that could have serious financial repercussions. If an accident you caused results in your car being totaled, would you be able to afford a down payment for a new car? If not, collision coverage may be worth it.

Going a step further, comprehensive coverage can cover a wide array of events, such as vandalism and theft. The truth is that there are many different types of auto insurance coverage. Depending on your risk tolerance and budget, you may choose to add coverage that goes beyond your state’s minimum requirements.

How Much Auto Insurance Do I Need?

The answer to this question begins with where you live. Virginia and New Hampshire are the only states that don’t legally require car insurance, though they do enforce other mandates for drivers who go uninsured. If you’re leasing a car or financing it with an auto loan, you’ll likely be required to obtain some degree of coverage. With that said, uninsured drivers are vulnerable to all kinds of risk. Depending on your state, you could be sued and held personally responsible for damages or injuries you caused in an accident. Uninsured drivers could also have their license suspended or revoked. 

All of these details come into play when choosing an auto policy. On top of what’s required, you’ll want to think about the level of coverage you need to feel comfortable. Like homeowners insurance, going with a higher deductible typically translates to lower premiums. Again, you’ll likely have to meet that deductible every time you file a new claim. For this reason, it’s wise to have your deductible amount socked away in your savings account should you need it. At Matic, we understand these complexities and may be able to help guide you to the right level of coverage.

How Are Auto Insurance Rates Determined?

A number of other factors, including your age and gender, could determine your car insurance rates. The type of car you drive may also be important as it can help insurers predict the likelihood that you’ll file a claim. You may be at an advantage if your car boasts robust security and safety features. Your daily commute may also play a role. Those who regularly make long drives might be seen as riskier since there’s a higher chance of an accident occurring.

Your driving record is another key factor. Having a history of moving violations, traffic tickets or accidents will most likely increase your car insurance premiums. Fortunately, the opposite is also true — many insurers offer safe driving discounts.

This is all to say that car insurance rates can vary widely. The average cost to insure a medium sedan in 2020 was $1,245, according to the Insurance Information Institute. Of course, there are ways to save. Bundling your auto insurance with your homeowners insurance, for example, can potentially reduce your premiums. You may also be able to score a loyalty discount if you stay with the same insurer for an extended period of time. Students, seniors, and military service members may be eligible for certain discounts, as well.

No matter how safe a driver you are, there’s no way to predict an accident caused by someone else. Auto insurance is designed to protect you, your passengers, and your car from the unexpected. At Matic, our goal is to make it simple and affordable to find the best car insurance for you. Get started with a quick, personalized quote.

This Blog/Vlog/Website is made available by Matic Insurance Services, Inc. for educational and informational purposes only. Matic makes no representation or warranty of any kind, express or implied, concerning the accuracy, completeness, or suitability of the information contained herein. Insurance products and services described may not be offered in all states. Eligibility for insurance will be determined at the time of application based upon applicable underwriting guidelines and rules in effect at that time. A Matic Insurance Agent can offer you practical guidance and answer questions you may have before you buy.