Whether or not you need car insurance is a decision most states make for us. What we’re left to decide is how much insurance we need.

A minimum amount of insurance is mandatory in all states except New Hampshire. Virginia doesn’t specifically require auto insurance per se but state law does require drivers to have a way to pay property damage and/or injuries as a result of a car accident.

So how much insurance coverage is enough? That’s not as hard to figure out as you may think.

Liability, Collision, Comprehensive…Oh, My!

You absolutely must conform to the laws of your state and carry the minimum insurance coverage required. Once you’ve determined what you must have, you can look at adding additional coverage if you want it.

There are basically three types of insurance coverage. Knowing the difference is the first step in figuring out how much of it you need.

  • Comprehensive. This coverage takes care of loss and damages to your vehicle not resulting from an accident. Some of the covered scenarios include:
    1. Natural disasters. A tornado flips your car onto your neighbor’s garage.
    2. Fire. Your battery leaks, the acid eats through a wire, sparking a fire in the engine block.
    3. Animals. A deer runs out in front of you. A bird crashes into your windshield. A rat chews through your wiring harness.
    4. Gravity works. A tree limb falls on the roof of your parked car.
    5. _Vandalism and theft. Y_our high school daughter’s ex-boyfriend keys your car. Your car disappears from the mall parking lot.
  • Collision. This is the type of insurance you’ll need if you want your insurance to cover the costs of repairs and/or replacement for your vehicle. Some possible scenarios where this coverage comes in handy:
    1. Your mangled front end is unrecognizable after you crash into another vehicle.
    2. Your back end is hanging in pieces after you lost an altercation with a concrete parking block.
    3. Your car looks like a pancake after you rolled it over a few times. The good news is you didn’t hit the squirrel. The bad news is obvious.
  • Liability. This is the minimum that most states require. Liability insurance takes care of the damage you cause to someone else’s property or injuries they sustain in the wreck for which you’re found at fault.

Steps to Choosing Your Insurance Coverage

When you start drilling down on your insurance needs, there are a few points to consider up front. In addition to meeting your state’s minimum requirements, you’ll need to know the total value of your assets. This figure is the amount of coverage you probably need to carry.

Your auto insurance policy is actually a collection of different types of coverage. Here’s how it usually breaks down:

  • Liability covers the costs when you’re at fault. This money goes to the people you hit. It does not cover the people in your car.
  • BIL (bodily injury liability) pays the medical expenses of people injured in the crash when you hit their car.
  • Property damage liability pays for the damage to the other car you hit in the wreck you caused.

If you want to cover yourself, your passengers and your car in an accident, these are the options you can choose from:

  • PIP (personal injury protection) covers any medical expenses you or your passengers incur in an accident. This provision may cover you for time missed from work as a result of an accident.
  • Collision covers repairs to your car. This pays the body shop, mechanics who replace the motor, etc.
  • Uninsured/underinsured motorist coverage will pick up part or all of the tab for repairs to your car if someone without insurance, or with minimal coverage, T-bones you at an intersection.
  • Comprehensive protection means the insurance company will cut you a check if someone steals your car or it incurs damage not caused by an accident.

Value of Your Assets

The best course of action? Make sure your coverage is equal to an amount of the total value of your assets. Look at your home, your car(s), your savings and investments. Add up the current dollar value of each of these. Check your car’s value online at Kelley Blue Book.

Now you’re wondering, “What does the value of my home have to do with my car insurance?” The answer is simple: if you’re liable in an accident, they’re coming to you for any costs that exceed your insurance coverage limits. Some people don’t ask nicely, either: they may seize your assets to cover medical costs and repair bills.

Final Points to Consider

Once you’ve got a dollar amount for your assets, start considering how much coverage you want to pay for.

If you don't have great health insurance and/or disability insurance through your employer, you may want to get more in PIP coverage. It can protect you from a lifetime of crushing medical bills.

And being certain you’ve got enough coverage against uninsured and underinsured drivers is a must. It tends to be relatively inexpensive and will be worth it if you’re rear-ended by an uninsured driver. This coverage can help cover costs your personal insurance won’t.

Collision and comprehensive is a judgment call. It is worth the premium payments if you’ll need to repair or replace your car following an accident. Remember that there will be a deductible attached here and the policy will pay the value of your car, not what you originally paid for it.

Know what you've got, know what you need, then shop around to find the best coverage for you at the best price. Then rest easy; you got this.