Nearly every state requires you to have auto insurance, and most states have set minimum values for different policies. The state can impound your vehicle if you aren’t insured. To find out what your state’s minimums are, check out this website.

“The least you can have,” though, isn’t necessarily all you should have. In New Jersey, for example, you’re required to carry a 15/30/5 liability package. Now, in a bad enough collision, it’s entirely possible that an individual’s medical expenses could exceed $15,000, or a group to have more than $30,000. Not to mention that $5,000 isn’t necessarily a large amount of damage, considering that the average car now costs a little more than $20,000.

And where do you think the lawyers look for money when there’s no more insurance? Yeah, that’s right: you. That’s why many people get more than the minimum required liability policies, particularly if they have a lot of assets that can be seized by said lawyers.

A good rule of thumb is to get liability coverage that is equal to the value of your assets (you know, your house + your car + any money in the bank + investments).

What about insurance for yourself?

Well, you probably don’t need to spend a lot of money on a Personal Injury Protection policy. You should be covered if you have health insurance and some disability insurance through your employer. Just buy the minimum if it’s required.

Uninsured or Underinsured Driver insurance, on the other hand, is worth having. First off, it’s cheap (something like $40 a year for $100,000 worth of coverage). Second of all, it can help cover costs your health insurance won’t pick up. If you’re covering the people you injure for $100,000/$300,000, do the same for yourself.

Collision and comprehensive coverage is worth having if the car you’re driving is worth repairing or replacing. A couple of things here: These policies have a deductible (the amount you have to pay for a repair before coverage kicks in), and they pay you based on the current value of your car (taking into account the fact that it’s depreciated in price over time), not what you paid for it.

As far as the deductible is concerned, you want the highest one you can afford. Why? Because it will significantly lower your premium (i.e. your regular monthly payment). Remember, you’re getting this coverage for major damage to your car, not for every little thing that can go wrong. It’s better to spend $500 out of your own pocket every couple of years on minor repairs than cough up an extra 30 or 40 bucks a month because you don’t want to pay a nickel for anything. Save collision insurance for when the damage is in the thousands, not the hundreds. Remember, if you decide to make a claim for every little thing, your premium will go up.

Also, a handful of states require no-fault insurance. Florida, Hawaii, Kansas, Kentucky, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Dakota, Pennsylvania, Utah and Puerto all do – though the rules around how these policies work vary by state. Basically, the states require you to have an insurance policy that pays out no matter who was at fault in the accident (known as personal injury protection or PIP) and they also limit your ability to sue other drivers. These policies tend to be expensive, so be sure to shop around for the best deal if you live in a no-fault state.

Want to Know More?

• What is Car Insurance?
• Advice on Getting a Good Deal on Car Insurance
• Grilling Guide: Questions to Ask Potential Car Insurers