Auto insurance is an important part of car ownership since it protects the owner against liability when driving and can protect the owner's investment in the vehicle. There is often confusion, however, about how much car insurance is required and what types of insurance one should carry on a car. The level of insurance that is best will depend on many factors such as the value of the vehicle, driving habits and even personal income.

Minimum Requirements

No matter what kind of car you drive or how safe a driver you are, everyone who owns and uses a car is required to carry a certain level of liability insurance on the car. The minimum amount of insurance required by law varies from state to state, so it is important to find out the laws of your state if you plan to buy the bare minimum of insurance. The minimum insurance covers bodily damage liability and property liability, meaning that if you cause damage to another person or someone else's property with your car, your insurance will kick in and help pay for the damages. While it is a good thing that there is a minimum requirement for liability insurance, the minimums required by many states are much lower than the cost of damage that is likely to be caused in an accident. For this reason it is a good idea to buy more liability coverage than is required by your state; having at least $50,000 of bodily injury coverage per person injured and $50,000 of property damage coverage is a good idea. The more personal assets you have the more liability coverage you should carry to protect your assets. If you don't have many assets you probably don't need to carry much more than $50,000 in coverage since it wouldn't do much good for someone to try to sue you for damages.

Optional Coverages

Aside from liability coverage, there are two main types of optional coverage that protect against damage to your car: collision coverage and comprehensive coverage. Collision coverage insures against damage caused to your car from driving accidents while comprehensive coverage protects against damage to your car from other non-driving events such as fallen trees, fires and theft (hitting animals like deer, however, is often covered under comprehensive rather than collision coverage). Whether you should use these optional coverages and what deductible to choose should be based on the value of your vehicle and how much damage you could afford to pay for yourself. For instance, if you drive an old car that is worth $3,000, you might not need these optional coverages, since any significant damage to the car would be worth as much as the car itself. If you have a new car that is still worth tens of thousands of dollars, you should have both comprehensive and collision coverage. To save money on premiums, choose a deductible as high as possible while still being able to afford paying for it if you have to. Keep in mind that any claim you make on your car is likely to increase your insurance premiums; carrying higher deductibles makes you responsible for covering minor damage, but this avoids insurance hikes, which can result in less cost over time. Another type of coverage to consider, especially if you have an expensive car is uninsured motorist coverage; this protects against damages caused to you buy motorists that don't have insurance or have to little insurance.

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