Auto Insurance: How Much Coverage Do You Need?

How much auto insurance you need depends on several factors, including your state's minimum liability requirements, your budget, and your personal needs. While most states require drivers to carry some form of liability insurance, the specific coverage amounts vary. For example, California requires a minimum of $15,000 in bodily injury liability coverage per person and $30,000 per accident, while New York requires $25,000 and $50,000, respectively. Experts generally recommend higher coverage limits, such as $100,000 per person and $300,000 per accident in bodily injury liability, to ensure adequate protection. In addition to liability insurance, other types of coverage to consider include uninsured/underinsured motorist coverage, personal injury protection, collision insurance, and comprehensive insurance. The cost of auto insurance can vary depending on factors such as your driving history, the age and model of your vehicle, and your chosen deductible. It's important to carefully review your options and consider your budget and specific needs to determine the right level of coverage for you.

Liability insurance

The minimum amount of liability insurance required varies by state. For example, California requires $15,000 in bodily injury liability coverage per person, $30,000 per accident, and $5,000 in property damage liability coverage. In Alaska, the requirements are $50,000 in bodily injury liability insurance per person, $100,000 per accident, and $25,000 in property damage liability coverage.

It is recommended that you purchase more liability insurance than the state minimum to ensure you are adequately covered in the event of an accident. The recommended minimum coverage is $100,000 in bodily injury liability insurance per person, $300,000 per accident, and $100,000 in property damage liability per accident.

When determining how much liability insurance to purchase, consider your net worth, which includes the value of your assets (such as your home, vehicles, savings, and investments) minus your debts. You should aim to have enough liability insurance to cover your net worth, as this will protect your assets in the event of a lawsuit.

If your insurance company does not offer liability limits high enough to cover your net worth, you can consider purchasing an umbrella policy, which expands your liability coverage beyond the normal limits. Umbrella policies are typically suited for those with a lot of assets or a higher risk of encountering risk.

In addition to liability insurance, there are other types of auto insurance that you may want to consider, such as personal injury protection, collision insurance, and uninsured/underinsured motorist coverage. These types of insurance can provide additional protection in the event of an accident, depending on your specific needs and circumstances.

Collision insurance

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

If your car is damaged but not totalled, collision insurance will pay to repair your car minus your deductible. If your car is totalled, collision insurance will pay the actual cash value of your vehicle minus your deductible. Without collision insurance, you could be stuck paying thousands of dollars for car repairs or a new vehicle.

If you are in a crash and the other driver is at fault, their liability car insurance will typically cover the damage to your car. However, liability insurance minimums vary by state and may not be sufficient to cover the cost of repairs or a new vehicle. In this case, your collision insurance would cover the remaining cost.

Whether or not you need collision insurance depends on the value of your vehicle, your ability to pay for repairs or a replacement out of pocket, and whether your vehicle is in storage. If your vehicle is brand new or worth a considerable amount, collision insurance can help cover expensive repairs or replacement. If you cannot afford to pay for repairs or a replacement vehicle, collision insurance can provide peace of mind. However, if your vehicle is in storage and will not be driven for a long period, such as a boat or RV, collision insurance may not be necessary.

Comprehensive insurance

The average annual comprehensive insurance premium for drivers in the U.S. in 2019 was $171.87. You can reduce the cost of your premium by choosing a higher deductible, but you must be able to pay that amount to fix your car if you do have a claim.

Personal injury protection

In some states, PIP is mandatory. These include:

• Delaware
• Florida
• Hawaii
• Kansas
• Massachusetts
• Michigan
• Minnesota
• New Jersey
• New York
• North Dakota
• Oregon
• Pennsylvania
• Utah

In other states, PIP is optional. These include:

• Connecticut
• District of Columbia
• Illinois
• Indiana
• Maine
• Maryland
• Missouri
• Nebraska
• New Hampshire
• South Carolina
• South Dakota
• Vermont
• Virginia
• West Virginia
• Wisconsin

In Texas, PIP insurance is not mandatory, but you have to sign a waiver if you want to decline the coverage.

If you're in an auto accident, your PIP insurance can help cover medical expenses for you and your injured passengers. It can also help cover your health insurance deductible. If you're self-employed and need to hire temporary workers to perform tasks, your PIP coverage can help with this, too.

Your PIP coverage can also help pay for funeral, burial, or cremation expenses after a car accident. If you pass away in an auto accident, your PIP insurance can help replace your lost income for your surviving dependents.

PIP generally has a deductible. It won't cover the other driver's injuries in a collision, nor will it cover any injuries from an accident while you were committing a crime, like fleeing the police, or any injuries in an accident while you received payment for driving.

Uninsured motorist coverage

When deciding on the amount of uninsured motorist coverage to purchase, consider choosing limits that match your liability coverage. For example, if your liability coverage is $50,000 per person and $100,000 per accident, you may want to select the same limits for your uninsured motorist coverage. This ensures that you have sufficient protection in the event of an accident.

In addition to uninsured motorist coverage, there are other types of optional insurance that you may want to consider, such as personal injury protection (PIP) and medical payments coverage (MedPay). These coverages can provide additional financial protection in the event of an accident, covering medical expenses and, in some cases, lost wages and funeral costs.

While the specific insurance requirements vary by state, it is generally recommended to carry a higher level of liability coverage than the state minimum to ensure adequate protection. This may include liability coverage of $100,000 per person and $300,000 per accident in bodily injury liability, and $100,000 per accident in property damage liability.

Frequently asked questions