How Much Car Insurance Should I Carry?

How much car insurance should you have? This is determined by (1) how much you can afford, (2) if you are leasing or repaying a car loan, and (3) how much risk you are willing to tolerate.

1. On a budget? Cheap insurance it is...

If you're on a tight budget, cheap car insurance may be all you can afford. In this case, it's best to select the cheapest insurance available, as it's better to carry cheap insurance than none at all. But, if you go with a cheap plan, don't expect much when it comes time to file a claim. At least you'll be covered for major disasters and compliant with state insurance laws.

2. Got nice wheels? Better insure that car

If you are leasing a car or currently repaying an auto loan, your lender may require you to carry full coverage or extra coverage on your car. There's still some room to shop around, but you'll need to make sure that whatever coverage you select is compliant with the terms of your loan or lease. You'll likely need to opt for some form of "full" coverage, and can look to save money on things like property theft -- the theft of goods from inside the car -- or maximum covered amounts for certain types of claims.

3.Want the extras? Top-of-the-line insurance

Finally, if you're the type of person who prefers to minimize stress, you might shop around for car insurance that offers free loaners, road service, or other perks. Many auto insurance companies still offer free rental cars if your car is in the shop on an insurance claim, as well as other things like 24-hour on-call road service -- even to change a tire or bring gas if you run out.