When it comes to shopping for auto insurance, you may be tempted to choose the cheapest coverage — not necessarily the most comprehensive insurance. That’s a mistake that can leave you underinsured.

The result can be inadequate coverage and hefty bills later.

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Insurance helps you prepare for the unexpected. You need to make sure you have enough protection for your situation. For instance, a person with a new, fancy car needs more auto insurance than someone with a 15-year-old vehicle. The same goes for other types of insurance, including home, health, and life insurance. 

To avoid being underinsured, you need to go beyond state coverage minimums, make sure you have enough coverage, and buy additional insurance if you find your policy is lacking. The good news is that expanding coverage is often affordable.

Here are some pieces of advice to make sure you’re not underinsured.

State minimums aren’t enough

Most states require a minimum of liability insurance of $25,000 per person for bodily injury and $50,000 per incident. That type of coverage protects you if another person is injured in an accident. However, minimum coverage is usually not enough.

“Medical bills and costs to repair or replace vehicles have gone up, so if you only have $20,000 for bodily injury but cause a serious accident where the person that you harmed has $100,000 in medical bills, you would be underinsured by quite a bit,” says Penny Gusner, a consumer analyst with Insure.com.

Gusner says it’s the same for physical damage liability.

“New cars now cost $30,000 on average, so if your liability limits are only $20,000, you are underinsured.”

What’s a good auto insurance coverage level? Gusner suggests at least:

• $100,000 per person
• $300,000 per accident for bodily injury
• $100,000 for physical damage

The good news is that it’s affordable to increase bodily injury and property coverage.

“It doesn’t cost that much to move up your liability limits if you look at the amount of extra protection you receive. It is less than a 10 percent increase in rates, less than $100 annually normally, to up liability limits from state minimums,” Gusner says.

Here’s how increasing coverage beyond state minimum will affect your rates:

Increasing Liability Limits by State

Make sure you have enough personal injury protection

Personal injury protection covers the cost of your, a passenger’s, and a pedestrian’s treatment after an accident.

It also provides replacement income if you’re out of work due to accident-related injury. Your health and disability insurance may offer similar coverage. It’s important to understand the covered benefits before you determine how much personal injury protection you need.

Going with low coverage amounts could leave you having to pay for your passenger’s care after an accident. Or you could get sued.

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Protect your assets

At a minimum, you should have enough insurance to protect all your assets should someone sue you after an accident.

A good place to start is to determine the total value of all your assets. That includes savings, investments, and property. Once you get that amount, you can figure out what level liability coverage you need.

Liability coverage often extends to $1 million.

If your assets are more than that, umbrella insurance is a way to protect your assets. Umbrella insurance goes beyond your car. It protects your home and finances, too.

A $1 million umbrella policy costs about $150 to $300 a year. Umbrella policies often go to $5 million. The average annual costs of a $5 million umbrella policy are between $375 and $525.

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Don’t skimp on collision coverage

Collision coverage protects you if you’re involved in an accident with another vehicle or you hit a stationary object like a tree. Collision covers your car from accident damages, regardless of fault.

Gusner says you need to determine if you need this coverage in the first place.

“If you have a new car, you absolutely do. If your car is financed or leased, the financing company will require it,” she says. “If your car is more than 10 years old, then you need to determine if the cost of these coverages is worth it. A rule of thumb is if the cost of this coverage — plus the deductible associated with them — are more than the value of your car, drop the coverage.”

The average cost of collision coverage is $289.

Comprehensive protection, meanwhile, covers your car for non-collision damage. That can include vandalism, theft, and damage from falling trees and branches.

The cost of comp and collision depends on your driving record, the vehicle, and where you live. Here’s the average cost of comprehensive and collision coverage by state.

Average Comprehensive and Collision Costs by State

Source: Insure.com commissioned Quadrant Information System to field rates for full coverage with a $500 deductible from up to six major insurers for 10 ZIP codes in each state.

Protect against uninsured and underinsured drivers

You care about being insured properly. Not all drivers show that level of care.

That’s why you want to make sure you have enough insurance to protect against those who don’t have enough coverage.

There are about 30 million uninsured drivers in the US. That’s nearly 13 percent of all drivers. The percent is more than 20 percent in Florida, Mississippi, New Mexico, Michigan, and Tennessee.

If you get into an accident with one of those millions of people, uninsured/underinsured coverage (UM/UIM) can help you. UM/UIM is a part of auto insurance that covers damage and injuries if the other driver doesn’t have any or enough auto insurance. It also helps if you’re a victim of a hit-and-run.

Twenty-two states and the District of Columbia have uninsured and underinsured coverage requirements.

It’s a good idea to get UM/UIM coverage that’s similar to your bodily injury limit. So, if your limit is $500,000, it’s wise to get the same coverage for the uninsured portion.

UM/UIM insurance costs about 5 percent of auto insurance premiums. So, if your policy is $1,000, it could cost $50 to add the coverage. That’s a minor increase for coverage that could protect you, especially in a state with high uninsured rates.

Gap insurance

If you have a new car, you may want to buy gap insurance. Gap insurance bridges the difference between what your auto insurer pays for a totaled vehicle and what you owe on your lease or loan. If you don’t have gap insurance and your new car is damaged, you may be responsible for part of your car loan.

A vehicle’s value depreciates as soon as you leave the lot. So, you may spend $30,000 for a new car, but a day later its value could be $22,000. Auto insurance companies only pay up to the vehicle’s value. So if you owe more than the car is worth, gap insurance is the only way to cover the difference.

How to save on auto insurance

You want to avoid being underinsured, but that doesn’t mean you have to break the bank.

Here are some tips for saving on auto insurance:

• Shop around and compare rates for the same level of coverage between multiple insurers.
• Raise your deductible. Higher deductibles result in lower rates.  
• Forgo comprehensive coverage if you have an older model car.
• Improve your credit. Most states allow insurance companies to base their rates partially on a person’s credit history. The better your credit, the lower your rates.
• Reduce your driving. Many insurers offer low-mileage discounts.
• Bundle your auto and home policies with one company and enjoy a bundled discount.

Regardless of what auto insurance company you choose, make sure that you have enough coverage, so you’re not underinsured. That requires going beyond the state minimums and having enough to protect your assets.