How much car insurance do I need?

I'm buying my car insurance online but I don't know what limits to use. How much car insurance do I need?

Bodily Injury Liability Limits

That is the $64,000 question! If there was a simple answer we'd give it to you but every has different needs based on their financial and personal situation.

Each state has mandated minimum liability limits that you have to abide by. View our state-by-state car insurance guide and find your state's minimum limits.

The minimum liability limits are just the LEAST amount of coverage you are required to buy in your state. The Insurance Information Institute recommends a minimum of $100,000 of bodily injury protection per person and $300,000 per accident. As your net worth rises, you will need higher liability limits because basically, you have more to lose!

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If your net worth exceeds the limits you can get with your car insurance company, consider buying a personal umbrella policy. This type of policy provides coverage over-and-above the limits on your car insurance policy. So if you have a $1,000,000 umbrella policy and a $500,000 limit on your car insurance policy, you actually have $1,500,000 in coverage to protect you in the case of an accident in which you were liable.

Comprehensive and Collision Coverage

If you drive newer vehicles and want to pay a lesser amount to repair them if they are involved in an accident (a deductible) then you will want to purchase collision coverage. You can choose the amount you are willing to pay out-of-pocket, ranging from $250 to $1,000 or more.

When it rains, it hails (at least it does where I live). If you want to protect your vehicles from damage from mother nature, fire, theft and collision with animals, then you want to buy comprehensive coverage. This is also known as OTC or other-than-collision coverage. Insurance companies prefer the OTC term because the word 'comprehensive' leads the consumer to believe that everything is covered, which it's not.

If your cars are getting older, you have a decision to make about whether or not you want to carry full coverage on them. Look up the Kelley Blue Book ( values on your cars. If the actual cash value of your vehicles is getting down to the level where it makes more sense to pocket the car insurance premium you would pay for full coverage, then you might want to consider dropping it.

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This is a personal decision and there are no cut-and-dried guidelines on when you should do it. If you are in a financial situation where you can absorb the cost of repairing your car in case of an accident OR even buying a new (used) one in a total loss, then you should probably drop the OTC and collision coverages. If it would place a financial burden on you and your family to do this, then maybe you need to keep coverage in place a little longer.

Rental Coverage and Roadside Assistance

These are optional coverages that you can buy on just about any car insurance policy. The cost is not very much, but you may not need them.

Does your family have an extra vehicle or do you know someone who does? Then if you car is involved in an accident and needs to go into the shop, you can simply use that extra vehicle instead of a rental and save yourself the premium. If you don't have access to transportation, then it might be good coverage to buy.

Roadside assistance is generally pretty limited coverage that may include towing to the nearest repair facility within a certain number of miles, unlocking your car if you left your keys inside, or providing gas if you run out. If you travel longer distances where you wouldn't have access to help, then this coverage may be good to have. For more comprehensive coverage, you might look at a motorist club such as AAA to get more benefits. The cost is higher, but the benefits are usually much more extensive than the roadside assistance you can buy on your car insurance policy.

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