We all know that we have to have auto insurance. It is required by law almost everywhere in the United States, and protects us from almost unthinkable financial loss in the event of an accident. But exactly how much auto insurance do you really need? There is no one correct answer, and luckily almost all insurance providers will tailor a policy to meet your individual situation and needs.

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What Every Plan Needs

Every auto insurance plan should include liability coverage. It is required in most states and covers the costs resulting from accidents in which you are at fault. This includes medical, hospital, rehabilitative care, and pain and suffering judgments for anyone you might injure, and the cost of any property you may damage. When choosing liability coverage, consider a policy with the highest coverage limits which are affordable. This will protect you from financial ruin in the event that you are ever sued by an injured party after an accident.

Making Important Decisions

Once you have selected your liability coverage, you will need to decide if you should purchase comprehensive and collision insurance. Collision insurance covers the cost of damage to you car caused by an accident. Comprehensive insurance covers the cost of vehicle damage from causes other than accident such as storms and floods.

If you are leasing your vehicle, you are required to purchase both collision and comprehensive insurance, and if you are driving a new or expensive car you should purchase this coverage to protect your investment. You can choose your deductible for this type of insurance. The lower the deductible, the higher your premium payments will be.

As your car ages and depreciates in value, there will come a point where comprehensive and collision insurance costs exceed the benefits. A good way to decide if this insurance makes sense for you is to compare the current value of your vehicle to the sum of your annual premium and deductible. If your vehicle value is the lesser of the two, it is time to think about doing without comprehensive and collision insurance.

Considering Your Passengers

Another consideration when choosing auto insurance is how to cover the costs if you or your passengers are injured in a collision. Medical payments insurance will cover the cost of medical, hospital and funeral expenses that you or your passengers incur in an accident. Personal injury protection insurance, which is required in all no-fault states, is a broader coverage, which also includes lost wages, and replacement services for you and your passengers.

When deciding whether you need this type of coverage, take the time to understand the requirements of your particular state, and review your other existing insurance policies. If you are fortunate enough to have good medical and disability insurance, you may already have enough coverage in the event you or your passengers are injured.

If your vehicle is damaged in an accident and takes some time to repair, car rental insurance will pay some of the cost of renting a car. Most policies pay $15 per day for thirty days. To decide if this coverage is right for you, weigh the cost of the premiums against whether the cost of renting a car at full price would be affordable for you.

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