Car Insurance: What to Have and When to Have It

3 Minute Read

We spend a lot of time talking about insurance on your health and life, but what about the car?

You might drive a nice car or a beater. You might have enough money to buy a car if your current one is totaled. There are policies that cover you financially if your car is stolen, damaged by another driver, hit by a natural disaster, or if another driver isn’t insured.

Two of the most important types of auto insurance are liability and comprehensive coverage.


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Liability Coverage

When it comes to how much liability insurance you should have, that can be answered in one word: lots. Liability auto insurance is the cheapest and best buy in the entire insurance world. It really does pay to have a large amount—around $500,000 or so. If you are in an accident that is “your fault,” the liability insurance covers what is considered to be your fault, like the costs to get a car fixed or someone’s medical bills.

If you don’t have liability insurance at that time, you would be responsible for paying that amount out of pocket, which would not be a good situation. Liability auto insurance is a definite must-have, no matter what kind of car you drive.

Comprehensive Coverage

You should have comprehensive auto insurance as well. Comprehensive insurance pays for when your car is damaged (not due to a collision) or stolen. If your car is expensive, you need it for obvious reasons. If you are driving a beater, it doesn’t cost much to insure, so just keep the coverage. If you have no money, don’t take the risk of having your vehicle totaled, leaving you with no way to get around. Since you wouldn’t get money from the insurance company or your savings, you would be stuck. Don’t put yourself in that situation. Just eliminate the potential stress by having comprehensive coverage.

If you have some money set aside and are driving a less-expensive car, do a cost-benefit analysis. If it only costs $20 a month to insure a $3,000 car, that’s a good deal, since it will take you a longer time to pay more in insurance costs than it would to replace the car if you had no coverage.

Always make sure you are covered in case life decides to hit you ... or your car.

Got more questions about car insurance? Check out these calls from The Dave Ramsey Show where Dave answers specific questions.

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