Figuring out how much car insurance you need can feel overwhelming. With so many options and coverage types, it's easy to end up with either too little protection or paying for coverage you don't actually need.
At OCHO, we believe everyone deserves A FAIR START® when it comes to car insurance. That means getting the right coverage for your specific situation—not too little, not too much—at a price you can actually afford.
In this guide, we'll break down everything you need to know about determining the right amount of car insurance for your specific circumstances.
Every state except New Hampshire and Virginia requires drivers to have some form of car insurance. However, these minimum requirements vary significantly from state to state.
Liability coverage is divided into two parts:
Minimum liability requirements are typically expressed as three numbers, such as 25/50/25, which means:
While meeting your state's minimum requirements keeps you legal, these limits are often insufficient for serious accidents. Medical bills from a single accident can easily exceed $50,000, and newer vehicles can cost more than $25,000 to replace.
Is state minimum coverage enough? For most drivers, the answer is no. If you cause an accident with damages exceeding your coverage limits, you're personally responsible for the difference—which could mean liens against your property or wage garnishment.
If you're financing or leasing your vehicle, your lender will typically require these coverages:
For older vehicles, you might consider dropping these coverages if the car's value is less than 10 times the premium. For example, if comprehensive and collision cost $500 annually for a car worth $4,000, it might make financial sense to skip this coverage.
Despite laws requiring insurance, approximately 13% of drivers nationwide are uninsured, with rates reaching as high as 29% in some states. Uninsured/underinsured motorist coverage protects you if you're hit by a driver with insufficient or no insurance.
This coverage is especially important if you have limited health insurance or high-deductible health plans, as it helps cover medical expenses regardless of who's at fault.
These coverages pay for your medical expenses after an accident, regardless of fault:
If you have good health insurance, you might need less of this coverage, but it's still valuable for covering deductibles and copays.
The more assets you own (home, savings, investments), the more liability coverage you need. A good rule of thumb is to carry at least enough liability to cover your net worth.
For newer or more valuable vehicles, comprehensive and collision coverage makes sense. For older cars with lower values, carrying only liability might be more cost-effective.
How comfortable are you with financial risk? If you prefer more protection and peace of mind, higher coverage limits may be worth the additional premium.
If you have a long commute or frequently drive in high-traffic areas, consider higher coverage limits since your exposure to potential accidents is greater.
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While every driver's needs are unique, here are some common coverage combinations to consider:
If you're a new driver or have a teen driver on your policy, consider higher liability limits and comprehensive coverage. Inexperienced drivers have higher accident rates, increasing your financial exposure.
For cars over 10 years old or worth less than $3,000, you might skip comprehensive and collision coverage. However, never skimp on liability protection, as accident damages can far exceed your vehicle's value.
If you've experienced a coverage lapse, you may face higher premiums. Maintaining continuous coverage is crucial for keeping insurance costs manageable in the long run. This is particularly important because most insurance companies consider coverage history for the past 200 days when determining rates.
Having adequate coverage doesn't have to break the bank. Here are some strategies to make comprehensive coverage more affordable:
Opting for higher deductibles on comprehensive and collision coverage can significantly lower your premium. Just make sure you could actually afford to pay that deductible if needed.
Many insurers offer discounts when you bundle auto insurance with other policies like renters or homeowners insurance.
Common discounts include safe driver, good student, multi-car, and professional organization memberships. Ask about all available discounts when shopping for quotes.
If you drive infrequently, usage-based insurance might save you money. However, be careful with traditional pay-as-you-go insurance, as these programs may not provide the consistent coverage needed to avoid being classified as high-risk.
OCHO offers payment plans that align with your paycheck schedule, making it easier to maintain continuous coverage without financial strain. Unlike traditional insurers who only give you 10 days before cancellation, OCHO provides extra time to make payments without imposing late fees.
One of the most important factors affecting your car insurance rates is maintaining continuous coverage. When you experience a lapse in coverage, even for a short period, insurers typically classify you as higher risk and charge significantly higher premiums.
Most insurance companies look at your coverage history for the past 200 days. If you've had a cancellation during this period, you'll likely be placed in the "non-standard" insurance category and face much higher rates.
OCHO helps you avoid this trap by offering:
Finding the right balance between adequate coverage and affordable premiums is the ultimate goal. Here's our final advice:
Remember, the cheapest policy isn't always the best value. Focus on finding coverage that provides adequate protection at a reasonable price with a payment structure you can manage.
Determining how much car insurance you need requires considering your state's requirements, personal financial situation, vehicle value, and risk tolerance. While it may be tempting to choose the minimum coverage to save money, having adequate protection can save you from financial devastation in the event of a serious accident.
OCHO makes getting the right coverage more accessible with flexible payment options, interest-free financing for down payments, and a commitment to helping you maintain continuous coverage. By understanding your needs and exploring all available options, you can find car insurance that provides both peace of mind and financial security.
Still overpaying? Start saving today with affordable car insurance coverage from OCHO. Get a free quote now!
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