No one who drives a car can afford to be without sufficient insurance coverage, but it can be hard to know how much coverage is enough. Simply purchasing the minimum amount of coverage your state requires may not provide you with the protection you need in the event of an accident, so it is important to review your coverage options carefully.

Check Your State Minimums

One of the first things to do when shopping for car insurance is to determine how much coverage your state's law requires. The state minimum coverage requirements vary from state to state, so it is important to research the laws in your state before you start shopping. States do not require you to carry collision coverage on your car, but those state laws do require you to provide liability coverage that will cover the medical costs and property damage you may inflict on others. While the state minimum coverage can provide a guideline, you should use it only as a starting point. Many states set their minimum coverage levels very low to encourage every driver to carry insurance, but that does not mean that those minimums will be sufficient. It is important to consider a number of other factors-- not just the state minimum--when shopping for car insurance.

Know Your Risks

The whole purpose of insurance is to provide protection against the unexpected. In the case of car insurance, that coverage provides protection in the event you are involved in an accident that is your fault. If you damage another vehicle, for instance, the insurance coverage you carry will pay to repair that car, or replace it if it is a total loss. When you consider the fact that so many cars on the road today cost $40,000 to $50,000 or more it is easy to see why you should carry at least that much coverage.

Know What You Need to Protect

Protecting the other driver is not the only purpose for insurance. It is also important to carry enough liability insurance on your car to protect your personal assets in the event of a lawsuit. If you are involved in an accident in which another person is injured, the other party could sue you for damages, and if your liability insurance is not enough to cover any resulting judgment, you could be on the hook for the rest. That is why it is important to look at the value of the assets you need to protect, including your home, stock market investments and other assets. If you have a home to protect, you may be able to save money by purchasing a special umbrella policy that covers both your home and your car. Consumers may be able to add $1 million of coverage or even more for only a small additional premium.

Source:

MSN article on umbrella insurance coverage

Optimizing your car insurance