If you’re wondering how much car insurance you need, the short answer is that you need the minimum car insurance required by your state to drive legally. Insurance is required in most states, so learn about your state’s car insurance minimum requirements.
But the state minimum is rarely enough to protect your finances in case of a costly accident. Keep reading to find out more about recommended car insurance coverage.
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- What is the recommended level of car insurance coverage?
- What are the types of car insurance coverage?
- How much liability auto insurance do I need?
- Do I need full coverage car insurance?
- Do I need uninsured motorist car insurance?
- Do I need medical payments or personal injury protection coverage?
- What are other types of car insurance?
- How can I save money on car insurance?
- Resources & Methodology
What is the recommended level of car insurance coverage?
CarInsurance.com editors recommend liability limits of 100/300/100 with full coverage for most drivers. These limits mean you’re protected within the following amounts:
- Up to $100,000 for the medical bills of those you injure
- Bodily injury liability of up to $300,000 per accident
- Up to $100,000 to repair other drivers’ cars and property that you damage.
You should purchase enough car insurance to protect yourself from financial ruin if you have a car accident. Liability insurance covers other drivers in the case of an accident. Still, the minimum limits are so low they won’t provide adequate coverage – they also won’t help cover the cost of repairs to your car.
Still, says Aniruddha Pangarkar, assistant professor of marketing at the Austin E. Cofrin School of Business at the University of Wisconsin-Green Bay, “a cautious and careful driver who is not likely to get into accidents could consider taking lower coverage limits as mandated by their state.”
What are the types of car insurance coverage?
There are six basic types of car insurance: liability, collision, comprehensive, uninsured/underinsured motorist protection, personal injury protection and medical payments coverage.
- Liability: Liability coverage insures you if your car causes injury or damage to another person’s property. Most states require liability coverage to drive on the road legally.
- Collision: Collision coverage pays for damages to your car caused by collision, whether or not the accident was your fault.
- Comprehensive: Comprehensive insurance covers damages caused to your car due to factors other than collision, such as weather, fire or theft.
- Uninsured motorist coverage (UM/UIM): Uninsured/underinsured motorist coverage pays for damage to your vehicle if the other party does not have enough or no insurance after an accident.
- Personal injury protection (PIP): PIP pays your medical bills and covers lost wages and other expenses for you or your passengers, regardless of who is at fault in an accident.
- Medical payments coverage (MedPay): MedPay or medical payments coverage is similar to personal injury protection. It covers your medical expenses related to injuries resulting from an accident, regardless of who was at fault.
How much liability auto insurance do I need?
Minimum liability coverage is rarely advisable, but it’s better than nothing if you can’t afford more. In most states, the minimum liability required by your state is not enough to pay for serious injuries or to replace a newer car — it is only enough to drive legally.
“While it is important to choose coverage you can afford, it is only one factor. You also want to be sure you have the coverage you need, that you are working with a responsive company if you need to file a claim, and that you take advantage of discounts you may be entitled to,” says Kandie Landers, owner of Brightway Insurance. “Your coverage needs are not just determined by your car, but also understanding the whole of the assets you own, your family makeup, and many other factors.”
Here are a few different liability limit options.
State-minimum liability limits
State-minimum liability coverage is not recommended.
50/100/50 coverage limits
This level of coverage is recommended for those who have an older car, few assets, don’t drive often or are on a tight budget, such as college students or retirees.
100/300/100 auto insurance limits
This level is adequate for middle-income earners with a typical level of savings in most circumstances. The cost of liability insurance, once you have bought the basic levels, does increase, but not exponentially, according to 2022 data:
- The average annual rate for state minimum liability-only coverage is $511.
- The average annual rate for liability coverage with limits of 50/100/50 is $637.
- The average annual rate for full coverage with limits of 100/300/100 and a $500 deductible is $1,682.
To see how much the average driver pays for liability coverage in each state, and how much more you would pay to boost your coverage, refer to the table below.
250/500/100 coverage limits
If you own an expensive home or have a high net worth, consider supplementing this coverage with an umbrella liability policy that extends your protection by $1 million or more. It’s relatively cheap – an average $1 million umbrella policy costs $150 to $300 yearly, according to the Insurance Information Institute.
Do I need full coverage car insurance?
Full coverage comprises comprehensive and collision: Comprehensive insurance pays for damage to your car from severe weather, fire, collisions with animals and theft; collision coverage pays to repair your car if you have an accident, regardless of fault.
If you owe money on your car, your lender requires you to have collision and comprehensive coverage, which would repair or replace your car. Liability insurance pays only for others’ cars. You must choose a deductible amount for collision and comprehensive coverages. Damage below this amount is your responsibility to fix.
Do I need uninsured motorist car insurance?
If you have health insurance and purchased collision coverage, you may be able to skip uninsured motorist coverage if your state allows it. It is a good idea to keep uninsured motorist coverage if you can afford to as it minimizes financial losses from deductibles and coverage caps.
And getting into a crash with an uninsured motorist could be disastrous. In 2019, 12.6% of motorists, or about one in eight drivers, were uninsured, according to a 2021 study by the Insurance Research Council.
Do I need medical payments or personal injury protection coverage?
Your state, especially if it is a no-fault state, may require that you buy personal injury protection so that your injuries in a car accident are always covered up to your limits, no matter whose fault the accident was. It usually includes coverage for lost wages as well. If you don’t have health insurance, these coverages are recommended.
Medical payments coverage is required by a few states but is optional in most, paying medical expenses up to your limits. You should consider this coverage if you don’t have health insurance coverage. If you have a high-deductible health plan, medical payments may help pay the deductible.
What are other types of car insurance?
Auto insurance companies also offer a variety of optional coverages. Some may be more useful than others, so review your policy and determine which applies to you.
- Gap insurance: If your car is a total loss due to an accident, this coverage option will cover the difference between what you owe on your loan or lease and the vehicle’s actual cash value.
- Roadside assistance coverage: This coverage may be a good choice for people who drive frequently. It covers any service calls and towing expenses if your car breaks down, but it does not pay for vehicle repairs.
- Rental car reimbursement coverage: Pays for a rental car after a covered claim. Adding this endorsement could be handy if your car is not drivable due to a covered incident.
- Non-owner car insurance: Non-owner car insurance is liability coverage that protects people who don’t own a vehicle but still need to drive someone else’s on occasion. It pays out if you cause injury or property damage in a mishap with another person.
- Mechanical breakdown insurance: If your car runs into trouble for reasons unrelated to an accident, mechanical breakdown insurance (MBI) is there to cover the costs of fixing it.
- Rideshare insurance: Personal coverage typically doesn’t apply if you drive for a ridesharing company like Uber or Lyft.
How can I save money on car insurance?
There are several ways to save on car insurance. One of the best is to shop around — the insurance industry is highly competitive and many companies want to acquire new customers from their rivals, Pangarkar says.
“Individuals with a poor credit score are regarded as risky investments, which can increase your premium,” Pangarkar says. “Other factors impact your insurance premium, such as the ZIP code where you live; the year, make and model of your car; how many miles you drive annually … your age, etc.”
He recommends calling your insurance company and asking for discounts. He says that low-mileage auto insurance companies are a good fit and highly beneficial for those consumers who drive less (typically lower than 7,500 miles in a given year).
“Car insurance companies offer two kinds of discounts for low-mileage consumers. The first is where consumers that drive below a certain threshold qualify (typically 7,500 miles as mentioned earlier,)” Pangarkar says. “In this first case, companies like Geico and State Farm offer highly competitive rates that can help drivers get substantial discounts. For the second type of discount, which is calculated based on a pay-per-mile rate, many insurance companies like Nationwide, Allstate and Liberty Mutual offer discounts. Many companies use apps to track driving history. Nationwide is a company that is reputed to offer good discounts in the pay-per-mile category.”
Resources & Methodology
Insurance Information Institute. “Facts + Statistics: Uninsured motorists.” Accessed July 2022.
CarInsurance.com commissioned Quadrant Information Services to report average auto insurance rates for nearly every ZIP code in the United States. The rate includes uninsured motorist coverage.
Note: Liberty Mutual, one of the biggest auto insurers in the U.S., is not included in the list of insurers offering cheap car insurance because of a lack of public rate information from the company.
– Michelle Megna contributed to this story.