After buying a new vehicle, there’s always a recurring dilemma that’s hard to ignore: how much auto insurance coverage should you get. On one hand, being prepared for the worst, that is, taking the most comprehensive auto insurance is smart – but costly. On the other hand, getting an insufficient coverage, and paying lower amounts of premium, may cause us to later pay dearly (literally speaking).

 
If you are like me, many times you pick the easy road, and just take the default option, or the most popular one. But that is not the right way.

 
The right way to determine the amount of auto insurance coverage

First, you must remember that the amount of car insurance, quite obviously, should be customized to the requirements of you and your family.

 
Second, you want to avoid paying too much every month, and yet you need to be prepared for the most likely – statistically speaking – scenarios. The trick is in striking a balance between choosing the most important aspects in the insurance and paying a reasonable amount.

 
Third, you must keep in mind that auto insurance rates are also affected by various factors out of your control such as gender, credit rating and age. The location of your residence also plays a major role for two reasons, both because are some neighbourhoods are more dangerous than others (again, statistically speaking), and the second reason, is because auto insurance criteria in every state are governed by a different set of standards and rules.

 
A good starting point would be to start with the minimum coverage you need to buy in your particular step, and the range of protection offered by this coverage. Once you do this, you need to find out other options and how much they would could.

 
For example, if you do live in a bad neighbourhood, it might not be a bad idea to go with a comprehensive coverage plan, which covers your primary vehicle and any other vehicle you own, and protects you against losses that may be incurred for many different reasons, including collisions – and also protects you if your car is damaged or stolen.

 
If you drive a lot, you should probably get collision coverage, which offers coverage for the damage caused to your vehicle in case of an accident – all the repair costs minus the deductibles are covered under this scheme. That being said, if your car is pretty old, then this scheme may not help you as the amount of coverage depends directly on the value of your car – in this case, you probably want to skip this type of insurance.

 
Additionally, if you drive a lot in the city, you may want to opt for medical coverage, which protects you against medical expenses for you or anyone hurt in case of an accident – you may even be covered (depending on the plan) if you, while being a pedestrian, are injured in an accident regardless of whose fault this is.

 
Uninsured motorist coverage is highly recommended as well, as it will protect you in case your vehicle is hit by an uninsured driver.

 
In conclusion, you need to weigh your personal circumstances and factor those in. Once you see things from this perspective, making the decisions of the amount of coverage – and options to choose from – should be much easier.

 
Legally, every car owner in United States must be covered under some type of auto insurance as stated by the Department of Motor Vehicles or DMV. This protects the owner of the car against damage to himself or his car, as well as protects other people from damages he may inadvertently cause.

Auto Insurance Coverage includes several definitions. These definitions determine the responsibilities and obligations of the policy holder, as a car owner, in case of damage to one’s car, the theft of his car, or an involvement in a car accident.

 

Definitions:

Property Coverage: this term generally covers the damage made to a policy holder’s car by whatever means, and also includes the theft of his car. Clearly this is a necessity when it comes to insuring one’s car, and every car owner should be insured against property damage.

 
Liability Coverage: this term involves one’s legal responsibility for bodily injuries and for property damage caused by him. This assures the policy holder that whatever happens, the insurance company will protect him – to some extent – from bodily or property damages he has caused.

 
Medical Coverage: this term applies to the amount of money paid for the hospitalization and treatment of injuries incurred during an accident, as well as the costs of rehabilitation, and wages lost by the injured person during this time of incapacitation.

Standard policies:

There is a great variety of auto insurance policies which exist for the purpose of indemnifying the car owner in case of loss, injury or damage. These also can be classified into several types.

Third Party: this is the most basic insurance policy available and protects a policy holder in the event he accidentally damages someone or their property. It is also the cheapest car insurance available.

 
Fire and Theft: this type of policy offers more protection to the policy holder, and will cover the cost of a car that is burnt or is stolen. Note that it does not cover any damages incurred if involved in a car accident.

 
Collision: this type of policy covers the cost of repairs to a car when the policy holder is liable for the accident. Basically, if you cause the accident, you still get paid for repairs if covered by this type of insurance.

 
Personal Injury Protection (PIP) or Medical Payments (MedPay): this type of policy reimburses medical bills of the driver and his passenger regardless of who’s at fault for causing the accident. It also protects against lost wages while the injured person cannot work.

 
Comprehensive: this type of insurance offers the most protection to the policy holder, and covers everything from accidents, to auto theft, to fire damage, to “act of god” (vandalism, hurricane, flood). It can even cover the cost, at least partially, of medical expenses suffered during an accident and of items stolen from a car. Unsurprisingly, this is also the most expensive car insurance.

 

Specialized policies:

There are also specialized policies that suitable to some scenarios.
 
Classic car insurance: covers a car that is older than 25 years. In principle it is equivalent to a standard comprehensive car insurance, however, it may have a limitation on the number of miles the owner can drive per year.

 
Rental Reimbursement: this type of policy simply insures a policy holder in case his car is unavailable – he is given a replacement rental car for this period.

 
Regardless of the policy a car owner has, it is important for him to be familiar with his policy. Some auto insurance providers do not reimburse 100% of the value of a stolen or damaged car, but rather return only 80%, with the rationale being that this prevents frauds – accidents or thefts initiated by the owner of a car who simply don’t want them anymore.