How Much Car Insurance Do You Really Need? (2024)

When it comes to car insurance, there are two major types of coverage: minimum coverage (or liability-only if your limits are higher than the law mandates), which pays for vehicle and property damage or injuries to others in accidents caused by you, and full coverage, which also pays for injuries and damages you cause to others or property plus damage to your vehicle in collision and non-collision incidents.

How much coverage you need will depend on your state’s minimum liability requirements, budget and your personal needs.

• How Much Car Insurance Is Required in Your State?
• How Much Liability Insurance Do You Need?
• Do You Need Full Coverage Car Insurance?
• Frequently Asked Questions

How Much Car Insurance Is Required in Your State?

Nearly every state in the U.S. mandates drivers to have state minimum liability coverage. Among these, 13 states, including Delaware (a tort state), require personal injury protection (PIP) to cover medical expenses. Additionally, 22 states and Washington, D.C., require uninsured/underinsured motorist coverage, ensuring protection when another driver has no insurance or lacks sufficient insurance.

New Hampshire and Virginia are the only states that do not require insurance.

Twenty-two states and the District of Columbia have uninsured motorist (UM) or underinsured motorist (UIM) coverage requirements.

Although the state of New Hampshire does not require auto liability insurance, drivers in this state need to show financial responsibility to cover accident expenses by purchasing insurance, which may include UM coverage.

Standard car insurance policies will include your state's minimum liability requirements. This is the smallest amount of coverage you need to drive legally.

When you register your car, your state's motor vehicle department will make sure your insurance policy meets your state's liability requirements. In most states, you must have insurance to register your car. In most cases, the DMV will be alerted if you have a lapse in coverage or if your policy doesn't cover enough to meet state requirements.

How Much Liability Insurance Do You Need?

MoneyGeek recommends you secure as much liability coverage as you can reasonably afford. If you're at fault in an accident, you'll be responsible for the other party's expenses. Insufficient coverage means you could still be held liable, and the courts could seize your assets or garnish your wages.

The best way to protect yourself financially is to opt for the highest liability coverage.

The most common liability coverage is 100/300/100, which is $100,000 per person, $300,000 per accident in bodily injury liability and $100,000 per accident in property damage liability.

But what do 100/300/100 car insurance policy limits mean?

Auto insurance policies can come with varying liability limits; they may be as small as 15/30/5, a bit more at 50/100/50 or as large as 250/500/250.

Some states have low liability minimums, with California and Pennsylvania requiring as little as $5,000 for property damage coverage.

If you're considering different coverage levels, aim for at least 100/300/100 in liability coverage if you can afford it. If that's too steep, go for the highest level you can manage, like 50/100/50, rather than settling for the state minimum.

Young drivers might be inclined to choose minimum coverage to save on their premium, but it's important to remember that they are statistically more likely to be involved in accidents. Full coverage auto insurance can offer better financial protection.

Families with teen drivers face similar risks and should consider increasing their liability coverage limits, especially if the teen is included on the parents' policy.

Similarly, first-time motorists who are new to driving should also aim for more than just the state minimum coverage to ensure adequate protection from the get-go.

Do You Need Full Coverage Car Insurance?

Full coverage car insurance offers robust protection, covering damages to your vehicle from accidents, theft and various unforeseen events. It goes beyond basic liability, protecting you from many potential costs and risks.

Full coverage usually has three parts:

• Liability pays if you hurt someone or break something in a crash you cause.
• Collision fixes your car after a crash.
• Comprehensive pays for other issues like theft or weather damage.

Full coverage lowers your financial risk. You pay a deductible for collision and comprehensive claims, then the insurance company pays the rest, up to a certain limit. This is great if you have a new or expensive car or want to feel safer.

Full coverage costs more, so make sure it fits your budget.

If you're still paying off your car or leasing it, you'll likely need full coverage.

Commonly referred to as the 10% rule, you can consider dropping comprehensive and collision coverage if your annual cost for full coverage would be more than 10% of the vehicle's actual cash value.

Full coverage policies include collision and comprehensive insurance to fix or replace your car. But if you want more protection, you can add other types of coverage.

Besides the usual options, you can get special types of insurance to meet your vehicle's specific needs.

Full coverage offers thorough protection, but that doesn't mean it can't be affordable. In fact, it's entirely possible to find cheap full coverage car insurance.

The price of such a policy can differ for each driver, influenced by factors such as age, state of residence and driving record, among others.

Frequently Asked Questions