How Much Auto Insurance Coverage Do You Need?
If you had to take out a loan when purchasing a new vehicle, you likely had no choice but to purchase full coverage insurance. After all, the lending institution wants to make certain the loan will get paid off in full if your car were to become damaged or stolen. Once you have paid off your loan, however, you have the choice to maintain full coverage or to reduce the amount of coverage you have. Clearly, by reducing your coverage, you can save yourself quite a bit of money when it comes to your insurance premiums. Therefore, you need to take several things into consideration when determining the amount of coverage you need.
The Value of Your Car
The most important thing to consider when determining how much insurance coverage you need is the value of your car. You can easily check the current value of your car by consulting with Kelley Blue Book, a copy of which you can find at your local library. Or, go online to www.kbb.com to do an instant search. Clearly, the higher the value of your car, the more you should consider maintaining a full coverage policy.
Your Financial Situation
After determining the value of your car, you need to consider your current financial situation. If the car is valued at $5,000 and you would have no problem absorbing that expense if your car were to be totaled, paying for full coverage insurance may not make sense for you. If $5,000 would be financially devastating to you, on the other hand, having full coverage insurance in place will provide you with comfort in knowing that you won’t have to go without a car if you are involved in an accident.
While no one can predict whether or not an accident is in their future, you should be able to gauge your overall risk. If you have a long work commute or if you do a lot of driving in accident prone areas, your risk is much higher than someone who is retired or who only drives a few minutes to work. If you are of a greater risk and your car is of great enough value to make full coverage insurance worthwhile, you should put some serious thought into maintaining a full coverage policy.