Everybody likes to save money. With the rising cost of car ownership, it makes sense to cut back on some of the things you are paying for. Insurance is likely to be the first thing on the chopping block. There are many ways to save on car insurance as often there are comprehensive items that aren’t always necessary.
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However, much like having an extended warranty, there are things you may feel like you don’t need to pay for in your policy and decide to get rid of them. Then you end up regretting it later on. The trick is that you have to understand what parts of your policy are expendable and which you should keep. In this article, we will go over how to know how much insurance coverage you need in case you want to cut it down to save money.
Liability vs Value
You can read all the Geico car insurance reviews online and understand if it’s the right insurance company for you, but that doesn’t help you understand if you’re buying a policy that you actually need.
You need to think of a simple formula to start your research as this will help illuminate a few things. There are two types of insurance you can get: liability and comprehensive.
Liability insurance only covers the damage done to another vehicle and injuries to others if you are at fault for the accident. The other will also cover damage done to your own car and your own injuries.
To understand if you need liability only or if you need both, you should take into account the value of your car. If your car is valuable and would cost you a lot of money to fix on your own then you should have coverage for damage to your car and not just liability.
Are you a good driver?
Have you been driving for a few years without any accidents or speeding tickets? If so, then you may want to go with the minimum liability your state requires. Every state has its own idea of how much coverage you should have so if you are at fault then the damages will be paid. If you don’t have high enough coverage then whatever the insurance company doesn’t pay will be your responsibility.
As a good driver, it is unlikely that you need to go for the maximum coverage in this case. Drivers with a poor driving record should definitely consider going for a higher amount of coverage.
The 100/300/100 rule
A good rule of thumb is to have yourself covered for a variety of scenarios when it comes to liability. There is a formula that usually works well to keep you protected in case you cause an accident.
You should have a 100/300/100 ratio. The first 100 is $100,000 of coverage that pays for personal injury for each individual. 300 represents $300,000 which the company will pay for the total bodily injury claims per accident. Then the last 100 is $100,000 of coverage of the property damage in any given accident.