Auto Insurance Coverage According to a Financial Expert

Dave Ramsey's recommends auto insurance that is enough to transfer risk of financial loss from you to your insurance company. Dave Ramsey's auto insurance recommendations are $500,000 worth of auto insurance coverage with a $1,000 deductible. You can put these Dave Ramsey insurance suggestions to work for you when you comparison shop online to find the best car insurance coverage in your area.

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Rachel Bodine graduated from college with a BA in English. She has since worked as a Feature Writer in the insurance industry and gained a deep knowledge of state and countrywide insurance laws and rates. Her research and writing focus on helping readers understand their insurance coverage and how to find savings. Her expert advice on insurance has been featured on sites like PhotoEnforced, All...

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Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products including home, life, auto, and commercial and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, largely in the insurance...

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Reviewed by Leslie Kasperowicz
Farmers CSR for 4 Years

UPDATED: Oct 8, 2021

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What You Should Know
  • Dave Ramsey recommends a $1,000 deductible for auto insurance.
  • He also recommends $500,000 worth of coverage, more if your net worth is greater.
  • According to Dave Ramsey, people should insure for what could financially devastate them, rather than what inconveniences them.

Dave Ramsey is a financial guru who has helped millions of Americans improve their financial futures. Although he is best known for his debt management strategies, Dave Ramsey also has opinions on everything from car insurance to college loans. Dave Ramsey home and auto insurance tips can easily be found on his website.

How much auto coverage does a financial expert like Dave Ramsey recommend? Today, we’re looking at Dave’s car coverage advice, including the types of car insurance policies Dave Ramsey recommends and how much coverage you should have. Understanding auto insurance and how much you need is important.

Read on for more information about Dave Ramsey’s auto recommendations. There are no Dave Ramsey quotes, but we can help with that.  Get affordable quotes now by entering your ZIP code in the box above.

What does Dave Ramsey say about car insurance?

Many are curious about Dave Ramsey’s recommendations. Dave Ramsey has published several detailed guides on the subject. You can view those guides on DaveRamsey.com.

Dave Ramsey has spoken plenty about how much coverage individuals should have. Here are some of the most important beliefs, opinions, and tenets Dave Ramsey has about car coverage policies. So how much coverage do I need per Dave Ramsey?

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What does Dave Ramsey say is the primary purpose of insurance?

Dave Ramsey is famously cautious. Most of his financial advice revolves around the idea of avoiding debt. He introduces most of his car coverage advice with the following sentiment:

“The primary purpose of coverage is to transfer the risk of financial loss from you to the insurance company.”

Car policies cover unexpected circumstances — like an accident where you roll your brand new $50,000 SUV. Most of us cannot afford to cover the cost of replacing a $50,000 SUV out of pocket, which is why we buy car coverage (obviously, there are also state requirements).

How much of a deductible does he recommend?

In multiple discussions, Dave Ramsey has specifically recommended a $1,000 deductible:

“We recommend a $1,000 deductible because that usually means you’ll pay a lower premium.”

When you have a lower deductible, your car insurer views you as a higher risk. You are more likely to make a claim.

When you have a higher deductible, you are a lower risk, and you are less likely to make a claim, which is why you pay lower insurance premiums.

However, Dave Ramsey cautions that higher deductibles are not a great deal with every insurer.

Some companies only reduce your annual premiums by $50 when you increase your deductible by $500, which means you need to go 10 years without an accident to break even.

“Before you sign up for a $1,000 deductible, however, work with your agent to make sure it’s worth the extra risk by conducting a break-even analysis as you compare rates.”

How much coverage does Dave Ramsey recommend? 

When asked how much auto liability drivers should have, Dave Ramsey typically recommends at least $500,000 worth of coverage:

“So, how much liability coverage should you have? That can be answered in two words—a lot!”

“Even if your state doesn’t require liability coverage, it’s a good idea to have at least $500,000 worth of coverage that encompasses both types of liability coverage—property damage liability and bodily injury liability.”

“That way, you’re covered for costs related to getting the other driver’s car fixed (property damage) as well as costs related to their lost wages or medical bills (bodily injury) that resulted from an accident where you’re at fault.”

An ideal Dave Ramsey-approved policy might be expressed as 250/500/250, indicating you have $250,000 of bodily injury coverage per person, $500,000 of bodily injury coverage per accident, and $250,000 of property damage coverage per accident.

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When should you upgrade your liability coverage?

Dave Ramsey claims that everyone should have $500,000 of liability coverage regardless of their net worth. However, he also believes you should increase your liability coverage as you build more wealth:

“The more wealth you build, the more you also want to get a liability umbrella policy that attaches to the top of that policy and keeps going for another million dollars. And that’s only a couple hundred dollars a year.”

Umbrella policies can extend your coverage to $1-$2 million and higher.

Does Dave Ramsey recommend comprehensive coverage?

Dave Ramsey believes comprehensive coverage is a smart, low-cost investment for drivers with newer or older vehicles:

“Like liability, comprehensive coverage is inexpensive—so you’ll want to have it whether you’re driving a beater or a brand-new car.”

Comprehensive coverage covers storm damage, hail damage, certain natural disasters, thefts, vandalism, fires, and more.

How much does Dave Ramsey say you should be insured for?

Some people buy too much coverage. They purchase it to cover unexpected expenses of $1,000 or $2,000, for example, when in reality, a self-insured emergency fund might work better in this situation.

Here’s how Dave Ramsey explains the idea in one of his articles:

“A good rule of thumb is to insure for what could financially devastate you, rather than what inconveniences you.”

Dave Ramsey mentions this advice specifically when talking about a disappearing deductible, where you pay extra money today in exchange for having your deductible drop by $50 or $100 every year you go accident-free. In Dave Ramsey’s opinion, disappearing deductibles are rarely a good deal.

Check out the table below for average annual auto insurance rates in the United States.

Average Annual Auto Insurance Rates by Coverage Type

Coverage TypesAverage Annual Rates
Comprehensive$148
Collision$323
Liability$538
Commercial$900-$1,700
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As you can see, there’s a major difference in price between coverage coverage types.

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Does Dave Ramsey recommend getting uninsured and underinsured motorist coverage?

Interestingly, Dave Ramsey does not recommend uninsured or underinsured motorist coverage (unless your state requires them). He acknowledges that one in eight Americans drive while uninsured. However, he claims most drivers don’t need this coverage:

“If UM, UIM, and UMPD coverages aren’t required by your state, they’re likely not something you need to add to your auto insurance policy if you already have health insurance and collision coverage in place.”

Are you taking advantage of discounts? 

Dave Ramsey recommends telling your insurance agent about every possible feature on your vehicle, including safety features and security devices.

He also suggests telling your agent about your family situation, including any teen drivers you have at home. When you tell your agent all of this information, you get the most accurate policy while also taking advantage of all available discounts.

“Countless factors affect the type of insurance you need and the premium you’ll pay … your insurance agent needs to know [certain information] to not only pick the right policies for you but to also save you some hard-earned money in the long run!”

Who are Dave Ramsey’s endorsed local providers (ELPs) agents?

Dave Ramsey has an Endorsed Local Providers (ELP) list for car insurance agents. Dave recommends only working with insurance agents on his ELP list.

How did they become Dave Ramsey approved insurance agents? These agents, according to Ramsey, shop hundreds of companies to find the best deals. They also find customized auto insurance that works for your needs.

Of course, each insurance agent pays Dave Ramsey a membership fee to be on the ELP list, so it makes sense that he’s recommending them.

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What’s the final word?

Dave Ramsey has helped millions of Americans improve their finances. If you trust Dave Ramsey’s financial advice, then you might appreciate his car insurance advice as well. What does Dave Ramsey say about car insurance?

Maintain at least $500,000 of liability coverage, skip unnecessary optional policies, and get comprehensive coverage on new or old vehicles. For more information, check out Dave Ramsey’s car guides. The daveramsey.com blog also offers plenty of useful information.

What other types of insurance does Dave Ramsey recommend?

Dave Ramsey has given advice about many different types of auto insurance. If you want to find out about Dave Ramsey’s health insurance recommendations, then do a quick search on his page. You’ll find Dave Ramsey’s home insurance tips, health insurance tips, and more.

Does Dave Ramsey offer tips on buying a car?

On his site, Dave Ramsey has car buying guides and much more information on buying both new and used cars. Dave Ramsey also covers how to save for a car.

Dave’s car recommendations can help you find a good policy. Enter your ZIP code below to compare rates from companies in your area.

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