How Much Auto Insurance Coverage Should You Buy

When it comes to auto insurance coverage, the gamble of not carrying any coverage will always end up costing more than the actual cost to purchase coverage.

However, how do you determine how much coverage you should buy? And what auto insurance coverage options should your policy include?

It is important to answer these questions before making your auto insurance purchase in order to ensure that the policy you do buy is the right one for you.

Auto Insurance Coverage Options to Consider

There are several coverage options to consider when shopping for auto insurance.

The two primary coverage options you will need to purchase is bodily injury coverage and liability coverage. Bodily injury coverage relates to the medical costs associated with injuries to other parties resulting from an accident caused by the policyholder. Liability coverage relates to damages to another party's vehicle or property resulting from an accident caused by the policyholder.

Some other auto insurance coverage options that many consumers purchase are collision coverage, comprehensive coverage and uninsured/underinsured motorist coverage. While bodily injury and liability coverage pertain to damages sustained by individuals other than the policyholder, these three coverage options provide protection for the policyholder's vehicle.

Collision coverage relates to damages to the policyholder's vehicle caused by another vehicle, while comprehensive coverage relates to damages to the policyholder's vehicle caused by a non-vehicular incident, like vandalism or fire.

The third option, uninsured/underinsured motorist coverage, provides additional protection for the policyholder if he or she is involved in an accident caused by another driver in which the other driver either does not have auto insurance or does not have enough insurance to sufficiently cover the policyholder's damages.

Some additional coverage options that you also can consider are rental car reimbursement coverage, towing and labor cost coverage and personal bodily injury coverage.

State Minimum Auto Insurance Coverage

All states require by law that all drivers carry auto insurance, and most states mandate a minimum auto insurance coverage level that drivers need to meet.

This minimum coverage level is conveyed as three numbers, two of which pertain to bodily injury coverage and the third pertaining to liability coverage.

For example, the state minimum auto insurance coverage for California is 15/30/5 - or $15,000 for bodily injury coverage for a single person, with a maximum of $30,000 for all injured persons, and $5,000 for liability coverage.

Is the State Minimum Auto Insurance Coverage Enough

While purchasing the state minimum auto insurance coverage might keep you out of jail, it does not guarantee that you will not find yourself in court. Often, the state minimum auto insurance coverage will not be enough to cover damages resulting from a vehicular accident.

Take for example the averages charges associated with a typical hospital stay - in 2006, it cost an average of $23,958 for an average hospital stay of 4.6 days, according to the U.S. Department of Health and Human Services. And this figure does not include any non-hospital-related costs, such as prescription drugs or physical therapy.

If you were to carry California's minimum bodily injury coverage for a single person - $15,000 - it is very likely that your insurance would not be able to cover all of the injured person's medical expenses. However, you would still be on the hook for these costs so the injured person would likely sue you for the remainder of his or her medical costs.