Just like everything out there trying to create a need in our mind, auto insurance is no different. If you feel vulnerable and susceptible to purchasing all kinds of liability and protection because you can’t make heads or tails as to what’s really important and relevant to you, hopefully after reading this you’ll know exactly what’s worth getting and what’s hype. More power to ya!

Let’s look at 5 coverage types often encountered and get to the bottom of this! Despite the fact that some of these coverage types are mandatory, you still must decide how much coverage to take.

1- Property Damage Liability

In the case of an accident this coverage looks after the repair and/or replacement of the other person’s property or car. Because nobody chooses who they will have an accident with, a lemon or a Porsche, we recommend a minimum coverage of 50,000. If you can afford it go higher. The minimum State-required coverage is 5,000.

2- Personal Injury Protection

This coverage is only useful if you don’t already have health, life and disability policies. If you do, take time to review them just to be sure everything is covered. PIP coverage covers medical and funeral cost related to the accident for you and your family regardless of who is to blame.

3- Uninsured or Underinsured Motorist

Due to the number of uninsured drivers this policy is essential. Its average cost is $40 for $100,000 coverage and will pay whatever you medical insurance will not cover. In the event of a hit-and-run driver who is underinsured this policy will take care of you and your families medical and funeral costs related to the accident. Bike and pedestrian accidents also fall under this coverage.

4- Collision and Comprehensive

Collision pays the full amount for repairs or the replacement of your car in the event of an accident. Comprehensive covers natural disasters, vandalism and theft. A deductible is what you pay out in order to repair your car after it has suffered damages due to a collision or vandalism. The greater the deductible you agree to pay the lower your policy cost. For this coverage type it’s worth seeing how much you can budget for deductibles. If your car is old and not worth much, chances are the cost of repairs will outweigh the value of your car. So in such a case this coverage is not needed. Here’s another way to determine if your car is worth covering; if your car is damaged and totaled, the insurance company will use the Kelly Blue Book to find the value of your car. A car’s value depreciates quickly as it ages, and collision and comprehensive is 30% to 40% of the total premium price. A good think to know is if your collision and comprehensive is 10% more than your car’s Blue Book value it’s probably a good idea not bother with this coverage.

5- Bodily Injury Liability

In a nutshell this coverage type protects you against lawsuits steaming from a car accident, because you can still get sued even if it’s not your fault! It compensates both passengers in your car and the other car as well as its driver. Most states required this coverage.

The way it works is that there’s one amount attributed to the coverage per person and the other amount which represents the maximum coverage allowed per accident. For example; $100,000/$300,000 translates as each person you injury can be compensated $100,000, but only a limit of $300,000 can be dispensed for the totality of the accident. The example provided works for someone who earns more than $75,000 a year, owns a house worth approximately $150,000 and has $40,000 in mutual funds. The coverage you get should really depend on what assets you need to protect. To increase your coverage the insurer will take into consideration where you live, your age, marital status and driving record to establish the cost. If you live in a large city it could cost you an average of $240 or more a year to increase your coverage compare to someone living in a rural area whose increase would cost roughly $86 per year.

Remember that although insurance companies will try their best to make you feel like it’s better to be safe than sorry, most of the extras they offer are not worthwhile. So the next time you’re shopping around and looking to compare car insurance, show them what you know.