Essential Auto Insurance Coverage: The Bare Minimum You Need

The minimum amount of car insurance required by law varies from state to state. The most common minimum requirements are $25,000 per person and $50,000 per accident for bodily injury, and $25,000 for property damage. However, these limits may be higher or lower in certain states. For example, in California, the minimum requirements are $15,000 for bodily injury to one person, $30,000 for bodily injury to multiple people, and $5,000 for property damage.

While these are the minimum requirements, it is recommended that drivers purchase more than the minimum amount of insurance to ensure they are adequately covered in the event of an accident.

Liability insurance

Bodily injury liability covers medical treatment and other expenses for people injured in an accident for which you are found to be at fault. This includes others' medical expenses, pain and suffering, and legal costs for related lawsuits filed against you.

Property damage liability covers the costs of repairing property damaged by an accident you are found at fault for. This includes damage to other cars, as well as property like a mailbox, house, business, street sign, or guardrail. It also covers legal costs for related lawsuits filed against you.

The minimum liability insurance requirements vary by state. The most common minimum limits are $25,000 per person and $50,000 per accident for bodily injury, and $25,000 for property damage. However, experts recommend carrying more than the minimum coverage. In the event of a major accident, you could be responsible for more than $30,000 in medical bills alone, not to mention potential damages in a lawsuit. A "full coverage" policy with liability coverage of 100/300/50 is recommended by insurance agents.

When choosing liability coverage, it is important to consider your net worth and choose coverage that matches or exceeds it. This will ensure that your assets are well-protected in the event of a costly accident. You can also consider purchasing an umbrella insurance policy, which can increase your liability coverage to $1 million or more.

In addition to liability insurance, there are other types of optional car insurance coverages you may want to consider, such as collision and comprehensive insurance, personal injury protection, and medical payments coverage. These coverages can provide additional protection in the event of an accident, depending on your specific needs and situation.

Personal injury protection

PIP covers medical expenses for the insured and their passengers in the event of an accident, regardless of who is at fault. This includes medical expenses, lost wages, funeral expenses, and, in some cases, disability or loss of income, in-home services, and rehabilitation costs. PIP can also cover health insurance deductibles.

PIP Requirements by State

The requirements for PIP coverage vary from state to state. In states with no-fault insurance laws, all drivers must purchase PIP as part of their auto insurance policies. These states include Florida, Hawaii, Kansas, Kentucky, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Dakota, Pennsylvania, and Utah.

In other states, PIP coverage is optional, including in Arkansas, Delaware, Maryland, Oregon, South Dakota, Texas, and Virginia.

In at-fault states, the insurance company of the driver who caused the accident is responsible for paying for injuries and damages up to the policy limits. However, even in these states, some require PIP coverage, such as in New Hampshire and Texas.

The amount of PIP coverage you need depends on your state's requirements and your personal situation. If you already have comprehensive health insurance, you may not need as much PIP coverage. However, PIP offers additional benefits that health insurance may not, such as reimbursement for lost wages, funeral expenses, and certain services. If you frequently drive with passengers, you may want additional PIP coverage to ensure their medical expenses are covered in the event of an accident.

PIP vs. MedPay

In some states, medical payments coverage (MedPay) is required or offered as an alternative to PIP. Both cover medical expenses resulting from a car accident, regardless of fault. However, PIP also covers additional expenses such as lost wages and certain services that MedPay does not. PIP is generally a better option if it is available to you, as it provides more comprehensive coverage.

Medical payments coverage

MedPay limits typically range from $1,000 to $10,000 per person per accident, depending on the state and insurer. It is generally recommended to carry coverage equal to your health insurance deductible so that you can use MedPay to cover any out-of-pocket medical expenses. If you do not have health insurance, consider carrying a higher MedPay limit to help pay for medical bills after an accident.

It is important to note that MedPay does not cover lost wages if you are forced to miss work due to a car accident, nor does it cover injuries you cause to other drivers. Additionally, MedPay is not offered in every state, but states that do not offer it typically have personal injury protection (PIP) coverage available instead.

Uninsured/underinsured motorist coverage

Uninsured motorist coverage protects you if you are hit by a driver who does not have any auto insurance. Underinsured motorist coverage, which is usually offered alongside uninsured motorist coverage, protects you if the other driver doesn't have enough coverage to pay for the damages or injuries they caused. According to the Insurance Information Institute, nearly 13% of drivers countrywide don't have auto insurance, and this number rises above 20% in some states. Without uninsured/underinsured motorist coverage, you could be left paying for medical bills or vehicle repairs out of your own pocket.

In states where this coverage is not mandatory, insurance companies are still required to offer it to you. If you choose not to purchase it, you will need to sign a waiver form indicating that you were offered the coverage and declined it.

The minimum limits for uninsured/underinsured motorist coverage vary by state but are often similar to your state's liability insurance limits. For example, if your state's liability insurance limits are $25,000 per person and $50,000 per accident for bodily injury, your uninsured/underinsured motorist coverage limits might match these amounts. You can also choose to purchase higher limits for added protection.

When deciding how much uninsured/underinsured motorist coverage to purchase, consider your state's minimum requirements, your personal financial situation, and the value of your assets. It is generally recommended to have enough coverage to protect your assets in the event of an accident. You may also want to consider the percentage of uninsured drivers in your state, as this can impact your risk of being involved in an accident with an uninsured driver.

In addition to the financial protection it provides, uninsured/underinsured motorist coverage can also give you peace of mind and help ensure that you are not left struggling to cover the costs of an accident that was not your fault. While no one likes to think about being involved in an accident, it is important to be prepared and protected financially.

Collision and comprehensive insurance

Collision insurance covers damage to your vehicle caused by accidents involving other vehicles or objects, such as if you rear-ended someone and needed to replace your bumper. It also covers accidents involving single-car rollovers and accidents with stationary objects like road signs and guardrails.

Comprehensive insurance, on the other hand, covers non-collision damage to your vehicle, such as fire, hail, vandalism, theft, or damage from falling trees or weather events.

The cost of collision and comprehensive insurance can vary based on the insurer, your location, the value of your vehicle, and other factors. You can usually choose your deductible, which is the amount you pay out of pocket before the insurance coverage kicks in. A higher deductible will result in lower premiums, while a lower deductible will result in higher premiums.

It's important to note that collision and comprehensive insurance only cover damage to your own vehicle. If you want coverage for damage to other vehicles or property, you'll need liability insurance.

When deciding whether to get collision and comprehensive insurance, consider the value of your car, the likelihood of getting into an accident, your current savings, and the risk of vehicle damage in your area. If you lease or finance your vehicle, your lender will likely require you to carry both types of insurance.

Frequently asked questions