How Much Insurance Do I Need for My Car?

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Rachel Bodine

Insurance Feature Writer

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...

Insurance Feature Writer

Eric Stauffer

Licensed Insurance Agent

Eric Stauffer is an insurance agent and banker-turned-consumer advocate. His priority is educating individuals and families about the different types of insurance coverage. He is passionate about helping consumers find the best coverage for their budgets and personal needs. Eric is the CEO of C Street Media, a full-service marketing firm and the co-founder of, a financial educat...

Licensed Insurance Agent

UPDATED: Mar 25, 2024

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While there’s no ideal amount of car insurance that’s perfect for every driver, you can still use some common sense methods to determine how much car insurance you actually need to fit your budget and the type of car you own. What makes auto insurance so tricky for most people is that it is one product made of several different types of coverage. The most basic coverages available for vehicles include: liability, personal injury protection (PIP), and underinsured/uninsured motorists coverage, and many drivers also maintain collision and comprehensive coverage. Beyond this, you can also purchase optional coverages like roadside assistance, GAP coverage, full glass replacement, or rental car use. Take a look at our comprehensive car insurance guide to understand how you can determine your needs for each area of auto insurance coverage, and keep in mind, that auto insurance rates vary by company. Make sure to look at quotes from a variety of insurance providers.

What are state liability car insurance minimums?

What are your state’s liability limits? Before you even think about other areas of coverage, make sure you are first meeting your state’s minimum requirements for auto insurance. If you drive without having the minimum liability coverage limits requirements in place, you could be ticketed and assessed a steep fine; for subsequent offenses, you could even have your license suspended or your vehicle impounded.

Liability insurance is a fundamental part of nearly every auto policy because drivers in every state are required to purchase it by law. This important coverage pays for medical bills if you cause an auto accident that injures or kills another person or their passengers, or if the accident damages their property. Liability insurance also pays out for any legal costs or damages if you are sued by someone that you injured, up to your policy limit.

The minimum requirement for liability insurance varies significantly by state, with Wisconsin, Alaska, and Maine requiring some of the highest state minimums in the nation, and Florida, New Jersey, and Ohio requiring some of the lowest. One of the more common state minimums is 25/50/25, which is shorthand for $25,000 worth of coverage for bodily injury caused to one person, $50,000 for bodily injury for an entire accident, and $25,000 for property damage.

Read more: Maine Car Insurance Guide (Cheap Rates + Best Companies)

Some states’ requirements stretch beyond the basic liability coverage. For example, in Minnesota, drivers are not only required to carry auto liability insurance, but they are also required to purchase Personal Injury Protection (PIP) coverage, and uninsured and underinsured vehicle coverage. PIP coverage pays out if you or anyone else covered on your policy or riding as a passenger in your vehicle is injured in an accident, while uninsured or underinsured vehicle coverages kick in if an uninsured or underinsured driver crashes into you and causes you injury or property damage.

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What are minimum car insurance lender requirements for car insurance?

Even after meeting state requirements, drivers who are paying a car loan are subject to the minimum standards set by the bank that issued the loan. Lenders often require drivers to carry a full coverage auto insurance policy, including not just bodily injury liabilty and property damage liability, but will also include collision coverage and comprehensive coverage, to protect their interest in the vehicle since they still technically “own” the vehicle.

Drivers who lease vehicles also must typically hold this type of coverage, which covers damage to your car. Once your car is paid off and you hold the title, you are within your rights to drop collision and comprehensive coverage since they’re not required by law.

If you do drop this coverage, you must be willing to pay out of pocket for any damage to your car if you wreck it or if your car has a surprise meeting with a deer that cuts across your path on your way home from work.

Should you go with the bare minimum coverage car insurance?

If you want to pay the rock bottom price for car insurance, you can simply choose to go with the minimum car insurance requirement in your state and with your lender. And once your car is paid off, you may even opt to drop collision, comprehensive, uninsured motorist, and other coverages entirely and go solely with the state minimum. While this choice will surely save you money, it can also expose you to a great deal of financial loss should you cause a serious accident. That’s why it’s not the best decision for most drivers.

Read more: Is it bad to just carry minimum coverage car insurance?

For example, if your state has a particularly low liability car insurance limit, and you buy only enough insurance to meet that limit, you will be on the hook for whatever expenses go above or beyond this low policy limit.

Example: Your insurance policy covers $25,000 worth of bodily injury liability coverage, and you cause an accident that puts someone in the hospital and causes $75,000 worth of injuries you will be responsible for paying the additional $50,000.

An expense like this can easily cause financial ruin. To make matters worse, you can be sued by the injured party and your assets can be seized or wages garnished to pay the judgment for whatever your insurance didn’t cover. For this reason, it is recommended that you purchase as much liability insurance as you can afford. Going with the state minimum level of coverage is really only a good option for extremely cash-strapped drivers with no family and few assets.

Tip: Drivers with a high net worth may be particularly vulnerable to lawsuits. For this reason, it is recommend that you tally up the total value of your assets and purchase liability insurance in an amount that equals that total. If the maximum amount of liability coverage does not cover all of your assets, consider purchasing umbrella insurance, which will protect you if you are sued for an amount that exceeds your auto liability limit.

It’s also important to keep underinsured motorist coverage and uninsured motorist coverage, as approximately 13 percent of U.S. drivers are uninsured, and even more are underinsured.

Do you need uninsured/ underinsured motorist insurance for your vehicle?

Uninsured and underinsured vehicle coverage is not required in every state, but that doesn’t mean it’s not important. If you get in a wreck with another car where the other driver is at fault, and that driver either has no insurance at all or doesn’t have enough insurance to cover property damage claims and bodily injury coverage claims to your car and/or injuries you or your passengers, you’ll truly regret not having purchased coverage in these areas. In most states, another scenario where uninsured vehicle coverage comes into play is if you are the victim of a hit-and-run accident.
Having another driver total your car only to flee the scene is a nightmare scenario, but having no coverage for it is even worse. A third scenario may not involve you as a driver. You could be walking across the street at a crosswalk, or cycling in the bicycle lane, and be struck by an uninsured driver or a hit-and-run driver, and this coverage would kick in. For this reason, it is recommended to purchase these coverages and in the same amount as your liability policy for as much as you can afford.

You should strongly consider high limits of uninsured/underinsured vehicle coverage if:

  • You have a family and are the primary breadwinner in the home. If you are hospitalized as a result of a wreck caused by an uninsured or underinsured driver, your insurance may cover lost wages, which could help your family stay afloat while you’re out of commission.
  • You live in a state with a higher rate of uninsured drivers than the national average. In 2009, the five states with the highest rates of uninsured motorists included Mississippi, New Mexico, Tennessee, Oklahoma, or Florida, according to the Insurance Research Council.
  • You live in a tort state rather than an at-fault state. No-fault states allow your own insurance company to cover you for property damage or bodily injury regardless of who caused the accident, while car insurance companies in tort states pay out based on who’s at fault. This makes you more vulnerable to financial loss by uninsured drivers in tort states. (For more information, read our “What’s the Difference: No-Fault vs. Tort Car Insurance“).

Tip: Many states allow you to purchase uninsured motorist property damage (UMPD) insurance, which will cover the cost of property damage only, not bodily injuries caused by uninsured drivers. If you have a good health insurance policy that will cover you in case you’re injured by an uninsured driver, choosing to only protect yourself against property damage could save you money. Just remember that health insurance will only cover your medical expenses, not any lost wages.

Read more: Tennessee Car Insurance

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Do you need personal injury protection (PIP)?

PIP pays for medical costs or funeral expenses for you or members of your household if you or they are injured in a wreck, whether you caused the wreck or not. If you already have health, disability, and life insurance policies through your work or through policies that you purchased individually, you may not need PIP. You would essentially be doubling up your coverage. If you don’t have health, disability, and life insurance policies in place, though, you leave yourself exposed to serious loss if you forgo PIP.

If you live in a state where PIP is required by law, you can opt for the minimum insurance requirements if you already have health, disability, and life insurance coverage.
Some states may offer Medical Payments coverage (MedPay) instead, which also helps with medical expenses.

Do you need “full” coverage for my vehicle?

Collision and comprehensive insurance, which cover damage to your vehicle, are some of the most expensive components of your insurance policy, which is why many people drop them entirely once their car is paid off and there’s no lender requiring them. However, if you forgo collision insurance, you’re on the hook for damage your own vehicle sustains in an at-fault accident even if you have more than enough in liability coverage to cover damage done to the other vehicle. Similarly, if you forgo comprehensive insurance, you’re on the hook for damages caused by vandalism, animals, falling objects, fire, and severe weather.

A good rule of thumb when evaluating your need for full coverage is knowing how much your car is worth. If you’re not sure, you can consult Kelley Blue Book. Since vehicles lose value over time, you may want to start considering dropping collision and comprehensive coverages when you vehicle’s value sinks below $3,000 or if your vehicle is more than 10 years old. At this point, it starts to be more likely that the cost of repairs would actually exceed the amount your car is actually worth, and these coverages wouldn’t make much sense. If your car has depreciated to the point where you could feasibly replace it out of pocket, this might be a good time to drop these coverages as well. Finally, consider how often your car is actually used, and where it is used. If you work from home or have a vehicle that is only used occasionally, the chances of you wrecking that vehicle are much less, and you might consider dropping these coverages.

Tip: To save money on comprehensive coverage, the policyholder can often get a discount coverage by having an anti-theft device installed in your vehicle.

How much should my deductible be?

If you are determined to keep collision and comprehensive coverages on your car while keeping your premiums low, you should choose the highest deductible that you can afford to pay out should you get in a wreck. This will require a little financial forethought on your part, as you will need to have enough cash in an emergency fund to pay this deductible should you damage your vehicle in a wreck. One caveat: You don’t want to pick a deductible that’s so high that it’s unlikely you’ll ever reach it, but you should at least get a quote from your insurer that shows how much you will save by bumping up to the next highest deductible.

You also need to take your driving history, and the driving history of others insured on your policy, into consideration when choosing a deductible. If you haven’t had a claim in five or more years, you might want to gamble that you’ll continue to stay claims-free and go for that $1,000 deductible, but if your spouse is a bit of a speed demon with a wreck to show for it, you might gamble on a lower deductible. If you’re insuring a teenager who’s just learning to drive, it’s probably smart to select a lower deductible, such as $500 or $250.

TIP: Before you raise your deductible, make sure it is actually financially worth your while. In some cases, raising your deductible from $500 to $1,000 might only save you $60 a year, which probably isn’t worth it considering the extra risk you’re taking on. However, if doing so saves you $100 or more, it might be something to think about, particularly if you have a good driving history.

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What add-ons can you get?

Perhaps the easiest thing to remove from your policy are add-ons and perks like roadside assistance, replacement car coverage, and glass replacement. If you have an emergency fund in place for instances like this, you can easily remove them and save yourself the premium dollars. However, add-ons like this are typically cheap to tack on to a policy, and you may decide you’d rather pay a little extra for the convenience. (For more information, read our “The Perks and Pitfalls of Car Insurance Add-ons“).

Tip: One auto insurance “extra” that might be worth it is Guaranteed Auto Protection, or GAP insurance. This coverage will pay the difference between how much your car is actually worth and how much you still owe to your auto lender if you total your car. This will rescue you from getting stuck making payments on a car that you can’t drive and is good for nothing but a junkyard. Most banks and lenders offer this insurance, but some auto insurers provide this type of coverage, as well.

While deciding how much auto insurance you need is not a one-size-fits-all process, there are some common-sense ways to decide how much insurance you need for your unique situation. While every driver needs to at least maintain the auto insurance requirements mandated by their state, other coverages may or may not make good sense financially.

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