When shopping for auto insurance, you may be tempted to find the plan with the lowest premium and stick with it. However, this can lead to missing out on necessary coverage. Depending on where you live, how you pay for your car and how you use your vehicle, you may need more coverage than the cut-rate policies will offer. Here’s how you can determine how much coverage you need.
How much liability coverage can you afford?
Liability coverage is crucial. This coverage is required by law in most states, and it’s the coverage that pays for any injuries and damages you cause in an accident. Generally, the amount of liability coverage that’s required by law is less than you should opt for if you can afford more. Your net worth determines how much coverage you need. You can figure out your net worth by adding up the value of all your assets and subtracting your debts.
Are you leasing or financing your vehicle?
Leasing or financing your vehicle means that you need more coverage. Whether you’re leasing or financing, you need comprehensive coverage, which covers damage caused by events you can’t control, and collision coverage, which covers damage caused by other drivers or objects you hit. You may also want to consider gap insurance, which some leases include. This type of insurance pays the difference between what you owe on your vehicle and what it’s worth in the event of a total loss.
