How much car insurance do I need?

Most states require at least a minimum amount of liability coverage to drive legally, but it may be in your financial best interest to purchase more robust coverage. Carrying only minimum liability coverage could leave you with significant out-of-pocket expenses in the event of an at-fault accident. Factors like the actual cash value of your vehicle, whether you have medical insurance, if you frequently have passengers in your car, your budget and many others can dictate what level of coverage is best for you. Bankrate’s insurance editorial team, which includes licensed insurance agents, knows that balancing affordability and coverage is key.

How much car insurance does my state require?

Almost every state has minimum car insurance coverage requirements its residents must carry to drive legally, and car insurance laws vary state by state. It’s essential to understand your state’s minimum limits to ensure that you comply with the law. Additionally, this information can serve as a baseline when requesting auto insurance quotes.

An easy way to understand your policy is to know which coverage types are required and which are optional. For example, drivers are almost always required to carry bodily injury and property damage liability by their state.

For instance, your state may require you to carry a minimum liability amount of $25,000 per person, $50,000 per accident in bodily injury liability coverage, and $10,000 for property damage liability coverage. Your policy documentation will usually list these as 25/50/10 to make reading your policy easier.

In other words, a 25/50/10 state-required minimum limit means that you must carry:

• $25,000 bodily injury coverage per person: This coverage pays for injuries to other parties if you cause an at-fault accident. This can be the other driver, passengers in the other vehicle(s), bicyclists and pedestrians who were injured as a result of a crash that you caused.
• $50,000 bodily injury coverage per accident: This number represents the total amount of money that your insurance company will pay for bodily injury coverage to the other party or parties in a single accident.
• $10,000 property damage coverage: This coverage pays for property that you damage in an at-fault accident. This is usually the other party’s vehicle, but this coverage will also pay for damage to buildings, mailboxes, light poles, fences, street signs or other stationary objects that you damage.

Other state car insurance requirements

Some states also have requirements for:

• Personal injury protection (PIP): If you live in a so-called no-fault insurance state, you will also be required to carry personal injury protection coverage (PIP). This coverage pays for medical costs for injuries sustained by you and passengers in your vehicle, regardless of fault, as well as lost wages. It does not mean that fault is not assigned for the accident itself, but each driver involved will file a claim with their own insurer.
• Medical payments: Medical payments coverage is similar to PIP but is generally an option in states that are not considered no-fault. It pays for injuries sustained by you and your passengers, regardless of fault, but does not cover lost wages.
• Uninsured and underinsured motorist coverage: These coverage types pay for your injuries if you are hit by someone who doesn’t have car insurance or doesn’t have enough insurance to cover your medical expenses. In some states, uninsured motorist property damage is available to provide coverage for your vehicle since it is not usually covered under your uninsured liability limit. This type of coverage may require you to pay a deductible for claims, even if you are not at fault for the accident.

How much auto insurance do I need?

Determining the appropriate amount of car insurance often involves considering various factors, such as the individual’s budget, financial situation and level of risk tolerance. Your coverage needs can also change over time. If you experience a big life change, like moving or buying a new car, you’ll likely want to review your coverage selections and carrier. The amount of liability coverage included in a car insurance policy typically requires a balance between these personal considerations.

Opting for state minimum coverage levels may mean a lower premium, but those coverage limits may not be enough to pay for medical bills or property damage expenses if you cause an accident. If the costs of the accident exceed your car insurance coverage, you will be responsible for the difference out of pocket. Additionally, state minimum requirements do not cover damage to your vehicle.

For this reason, most insurance experts recommend purchasing higher liability limits and full coverage car insurance if you can afford to. It may result in a little extra premium, but you will have better protection from financial losses if you cause an accident. This is especially true if paying for another person’s injury and property damage out-of-pocket could be a massive financial burden for you and your family.

What is minimum coverage car insurance?

Minimum coverage car insurance is carrying only the coverage types and limits as required by your state. A minimum amount of liability insurance is required in all states except New Hampshire, but many states also require additional coverage like underinsured or uninsured motorist coverage, PIP or medical payments. And even in New Hampshire, you will be required to either pay the state a fee each year if you do not carry insurance or prove that you are financially able to pay for damages out of pocket if you cause an accident.

While opting for minimum coverage may result in the cheapest car insurance, most insurance experts recommend purchasing more robust coverage for enhanced financial protection. That said, it’s important to assess your situation. If your vehicle is old, for example, and not worth much, it may make sense to have liability-only coverage. However, in this case, you could purchase higher liability coverage limits to avoid leaving you financially vulnerable by only purchasing your state’s minimum liability requirements.

What is full coverage car insurance?

Minimum coverage car insurance usually only refers to liability coverage, which is designed to pay for damage you cause to other parties. It doesn’t include coverage for your vehicle. For that, you will need full coverage.

While there isn’t an industry-standard definition for full coverage, it usually means adding  comprehensive and collision coverage to your auto insurance policy. Collision insurance pays for damage to your vehicle if you collide with an object or another vehicle. Comprehensive insurance, sometimes called “other-than-collision” coverage, pays for damage caused by theft, vandalism, fire, storm damage and hitting an animal. If you have a loan or lease on your car, your lender will likely require these two coverage types while you are still making payments. Comprehensive and collision coverage also require separate deductibles.

To round out full coverage car insurance, you may consider some popular coverage add-ons such as roadside assistance and rental reimbursement. Although these options may not be mandatory, they could prove invaluable if you experience a flat tire or need to rent a vehicle while yours is repaired due to a covered claim. When choosing optional coverage, it may help to consider the age and value of your car, how often you drive and your financial situation. If you’re unsure, you may want to speak with a licensed insurance agent.

How to choose your deductible

When you choose comprehensive and collision coverage, you’ll need to decide on a deductible amount. This is the amount you are responsible for paying in the event of a covered claim. Most deductibles range from $250 to $1,000.

• Lower deductibles such as zero, $50, $100 or $250 are easier to meet when a loss occurs. However, choosing a lower deductible means a higher premium.
• Higher deductible like $500, $750, $1,000 or $2,000 means you have a higher out-of-pocket expense at the time of a loss. But since you assume more of the risk, the premiums are lower.

After you file a claim, your deductible amount will be deducted directly from your insurance payout, so you’ll need to pay the shop or individual completing the repair work any amount not covered by your insurance company. The insurance company will pay the rest up to your policy limits. In some situations, the payout (minus the deductible) is paid directly to the repair shop.

If you want to save on your car insurance premium, you could consider a higher deductible. Keep in mind that this amount will be your out-of-pocket expense in the event of a claim, so it should be set with your finances in mind. Although a high deductible may provide you with cheap car insurance, it can also cause financial hardship if you need to use your comprehensive or collision coverage. Consider which level is best when determining your car insurance deductible needs: a lower premium or a lower out-of-pocket cost.

If you want to keep your premium costs low but still maintain a low deductible, it may also benefit you to consider a policy from an insurer that offers a diminishing or vanishing deductible. A vanishing deductible typically means the company will lower your deductible over time if you stay free from at-fault accidents or meet other requirements.

Additional coverage options

Most auto insurance companies offer additional coverage options that some policyholders may want to take advantage of depending on their insurance needs. These are not usually required by the state, but could help to create a policy that better fits your unique needs. Some common add-on coverage options include:

• Gap insurance: Newer vehicles depreciate quickly. Gap insurance is designed to cover the “gap” between your car’s actual cash value and how much you still owe on your financing. This way, if your vehicle is totaled or stolen and unrecoverable, you don’t have to pay the difference out of pocket to pay off your loan or lease.
• Accident forgiveness: This means that in most cases your first at-fault accident would be waived and you won’t experience a premium surcharge. This option isn’t available from every company, but if it is available to you, it can help keep your insurance costs in check if you cause an accident.
• New car replacement: New car replacement isn’t available with every company, but this coverage could offer financial protection if your car is one model year or newer. If you carry this coverage and your insurance company declares your new vehicle as a total loss, you would be able to replace your vehicle with a similar new car.
• Rental car reimbursement: Should your car be in the shop due to a covered insurance claim, rental car reimbursement coverage could help cover the cost of a rental vehicle. This may be particularly useful if you only own one vehicle or live in an area with limited public transportation options.

Every company has unique coverage offerings. Talking to a representative from your insurance company or your agent can help you understand what options your insurance company offers.

What happens if you get caught driving without insurance?

Driving without insurance is a serious offense and can leave you open to a variety of consequences. You could face fines, license suspension and suspension of your vehicle’s registration if you are caught. If you cause an accident without insurance, you will be responsible for the damages out of pocket, which could be financially devastating. If you are unable to pay, you could be sued, your assets could be seized and your wages could be garnished.

In some states, drivers convicted of operating a vehicle without insurance are required to file an SR-22 or FR-44 with the state certifying that they meet minimum coverage requirements.

Frequently asked questions

• How do I choose an insurance company?

  A number of factors go into determining what coverage you need and what your insurance will cost, which can make shopping for car insurance feel like a daunting task. In many cases, choosing an insurance company starts with weighing the factors that are most important to you, whether it’s price, customer service, coverage options, or something else entirely. Once you’ve narrowed down the options to the companies that meet your needs, it can be helpful to review the average car insurance rates for your area so you have a general idea of what to expect and then request quotes from each so you can compare the cost, available discounts and other factors to choose the right one for you.
  

• Do I still need insurance if I do not drive my car?

  If you store a vehicle such as a sports car or classic car in the off-season, you may be able to remove the state-required liability coverage and only insure your vehicle with comprehensive coverage. This is sometimes called “storage insurance,” as the comprehensive coverage will cover the vehicle for damage that could happen in storage, such as weather damage or damage caused by animals. Check with your insurance agent before you request this change, though — your state may not allow you to remove the required limits, and if you have a loan or lease on your vehicle, you may need to keep full coverage on it even if you are not driving it.
  

• Does car insurance cover the car or the driver?

  Broadly speaking, a standard auto insurance policy covers the car, not the driver. If you allow someone to borrow your vehicle and they get into an accident, your car insurance will usually provide coverage. This type of accident is called a lending loss. However, it is essential to note that every company has its own guidelines regarding lending losses, and coverage may or may not apply. When determining if coverage applies, your company may consider other factors, such as how often the driver uses your vehicle, whether they live in your household or if they are excluded from your policy. Additionally, lending losses can still affect your premium, although you were not the driver.However, there are instances where car insurance covers the driver. For example, you borrow a friend’s vehicle and get into an at-fault accident. The accident is severe enough that it exceeds the liability limits on your friend’s policy. In that case, your liability limits may cover the balance (up to the limits you carry).
  

• Does my age affect how much car insurance I need?

  Your age can influence the amount and type of car insurance you might need. Typically, younger drivers, especially those under 25, are considered higher risk by insurance companies and pay higher insurance rates as a result. Despite higher rates, younger drivers with less experience on the road may want to select higher liability limits in case they cause an accident. Younger drivers typically have fewer savings than older drivers, so choosing high coverage limits and a low deductible may help limit your out-of-pocket expenses if you need to file a claim. Regardless of age, it can be helpful to evaluate your specific situation and risks to determine the appropriate level of car insurance coverage. Massachusetts and Hawaii prohibit the use of age in auto insurance rating, but Massachusetts does allow carriers to consider the number of years you’ve been licensed for.
  

• How can I save money on car insurance?

  When you are considering how much auto insurance you need, cost is likely to be an important consideration. There are several strategies you can use to save money on your policy, and one of the best is to consider discounts. Almost all insurance companies offer at least a few discounts, and they can be surprisingly easy to earn. Many insurers, for example, offer a discount if you agree to receive your policy documents by email rather than postal mail. You may earn savings by agreeing to pay your bill electronically, as well. Other discounts could be available for common safety devices such as anti-lock brakes or airbags. One way you may be able to save significantly is by driving safely, since many insurers offer a discount to policyholders who go a certain amount of time without filing a claim. Another increasingly popular option is to sign up for your insurer’s telematics program. This generally involves installing a small device or downloading an app that monitors your driving in real time.