Determining the correct amount of auto insurance coverage needed is an important question for all drivers to consider. Not having the proper coverage could end up costing you a lot of money. While there are many different areas to think about, three of the major keys in determining your auto coverage would be the value of the vehicle that you are insuring, your personal tolerance for risk and liability, and the cost, or affordability of the insurance in order to maintain coverage.

Let’s start with the vehicle that you’re insuring. Since not all vehicles are the same, it makes sense that the repair and replacement cost will vary from different makes and models. The more expensive the vehicle, the more it will cost to replace it. Therefore the cost to insure it must be more than that of a less expensive vehicle. Then there are other factors which will effect your rates such as the vehicle type. For example, some vehicles are rated higher risk because they’re considered a sports car and while each drivers individual risk factors such as age and experience will have an effect, the overall cost is increased from that of a family car. It’s not a bad idea to check with your insurance company regarding rates before purchasing a new vehicle. You may be surprised to compare your monthly savings between many different vehicles and especially vehicle types. The associated cost for this type of consideration may be determined in your collision and comprehensive coverage. 

Another important consideration is that of asset protection. In other words having enough or sufficient coverage to extend above and beyond traditional coverage. This might include coverage such as GAP (Guaranteed Asset Protection), which was designed to help cover the “gap” or difference between what your car is worth (actual cash value) and your loan balance to the bank. Additionally, this coverage could protect you should a judgement exceed the dollar amounts set forth in your present coverage. These type of liability considerations are determined based on your liability coverage. Each person must decide the cost and risk associated with how much liability coverage is the right amount as this may also effect your policy premium.

Lastly, consider how much you are willing to pay out of pocket towards potential medical or repair expenses (determining your deductible). As previously discussed, having a higher deductible may reduce the cost of your policy but at the same time, it may increase the amount you are responsible to pay should an accident occur.

The bottom line is there are many factors which will go into determining the cost of your auto insurance policy. While saving money is good, it’s also equally important, and perhaps even more important, to purchase adequate coverage.