Auto Insurance: Setting The Right Coverage Limit

The amount of auto insurance you need depends on your state's minimum liability requirements, your budget, and your personal needs. Every state in the US, except New Hampshire and Virginia, mandates drivers to have a minimum amount of car insurance. The minimum amount of car insurance you'll typically need is state-required liability coverage, which covers some, if not all, injuries and damages you're liable for in an accident. The most commonly required liability limits are $25,000 per person, $50,000 per accident for bodily injury, and $25,000 for property damage per accident. However, individual state requirements vary widely, and your state may mandate higher or lower limits.

State-specific minimum insurance requirements

The minimum auto insurance requirements vary from state to state in the US. While New Hampshire and Virginia are the only two states that don't require car insurance, all other states mandate drivers to purchase a minimum amount of car insurance to drive legally.

• California: $15,000 bodily injury liability per person, $30,000 bodily injury liability per accident, and $5,000 property damage liability per accident.
• Florida: $25,000 bodily injury liability per person, $50,000 bodily injury liability per accident, and $10,000 property damage liability per accident.
• New York: $25,000 bodily injury liability per person, $50,000 bodily injury liability per accident, $10,000 property damage liability per accident, and $50,000 wrongful death coverage per person.
• Texas: $30,000 bodily injury liability per person, $60,000 bodily injury liability per accident, $25,000 property damage liability per accident, $25,000 uninsured/underinsured motorist coverage per person, and $50,000 uninsured/underinsured motorist coverage per accident.
• Washington: $25,000 bodily injury liability per person, $50,000 bodily injury liability per accident, and $10,000 property damage liability per accident.

Full coverage insurance

While there is no policy called "full coverage auto insurance", it is generally understood to be a combination of comprehensive, collision, and liability insurance. Comprehensive coverage pays for damage to your vehicle from non-collision incidents like theft, fire, or natural disasters. Collision coverage pays for the cost of repairing or replacing your car after an accident with another vehicle or object, regardless of who is at fault. Liability insurance covers damage to another person's vehicle or property, as well as medical expenses for others, in the event that you cause an accident.

In addition to these three main components, full coverage insurance can also include other types of coverage, such as uninsured/underinsured motorist coverage, personal injury protection, and medical payments coverage. These additional coverages can provide further protection in the event of an accident, regardless of who is at fault.

The cost of full coverage insurance can vary depending on factors such as age, location, and driving history. It is generally recommended to have a deductible of at least $1,000 to save on premiums. While full coverage insurance may cost more, it provides more comprehensive protection and is often required by lenders if you are leasing or financing a vehicle.

Liability insurance

When considering how much liability insurance to purchase, it is important to check your state's liability limit requirements. Additionally, you should take into account the value of your personal assets and your ability to meet financial responsibilities that may arise after a collision. While your state's minimum liability limits may be sufficient for minor accidents, they may not be enough to cover more serious crashes. It is generally recommended to purchase enough liability insurance to protect your personal assets, including your home and bank accounts.

To determine the right amount of liability insurance for your needs, consider the following coverage limits:

• $100,000 per person for bodily injury liability
• $300,000 per accident for bodily injury liability
• $100,000 for property damage liability

These limits can be structured as split coverage limits, with separate amounts for each category, or as a combined single limit (CSL) policy, where a single amount covers all liability costs.

Collision insurance

If you own your vehicle outright and choose not to carry collision coverage, you will have to pay to repair or replace your vehicle out of pocket if you're involved in a single-vehicle accident or are found at fault in an accident. If the other driver is found at fault, their liability coverage will typically pay for the damage.

If you decide to purchase collision insurance, you can typically expect it to cover the following:

• Single-vehicle accidents, like hitting a guardrail or a telephone pole
• Collisions with other vehicles
• Collisions while your vehicle is parked (including hit-and-runs)

However, collision insurance does not cover collisions with animals, injuries or damage to another driver and their vehicle, or damage to your vehicle caused by events outside of your control (e.g. a tree falling on it).

Comprehensive insurance

The cost of comprehensive insurance varies depending on factors such as age, state of residence, driving record, and the value of your vehicle, among others. The average annual comprehensive insurance premium for drivers in the U.S. in 2019 was $171.87, with California having the least expensive average of $96.53 and South Dakota the most expensive at $347.61.

When choosing a comprehensive insurance policy, you will need to select a deductible, which is the amount you pay before your insurance company covers the rest of the repair or replacement costs. A higher deductible will result in lower insurance costs, but you will have higher out-of-pocket expenses if you file a claim.

Frequently asked questions