The amount of car insurance you need depends on state requirements, your car, your loan or lease, your savings, and how much liability risk you can absorb.
State minimum coverage is the legal floor. It may not be enough for a serious accident.
Start With Required Coverage
Most states require liability coverage. Liability helps pay when you injure someone or damage someone else’s property and you’re at fault.
State minimum limits vary, some states require limits as low as 10/20/10 (meaning $10,000 per person for bodily injury, $20,000 total per accident, $10,000 for property damage). Your insurer or state insurance department can explain what’s required where you live. Knowing how liability coverage works is a useful starting point.
Think Beyond The Minimum
Minimum limits can be low compared with the cost of a serious crash.
Ask:
- What if multiple people are injured?
- What if the other car is expensive?
- What if medical bills are high?
- What assets or income could be at risk?
If you cause an accident and the damages exceed your coverage limits, the injured party can sue you for the difference. That puts your savings, future wages, and other assets on the line. Higher liability limits offer real protection, and the cost difference between minimum and higher limits is often smaller than people expect. Compare quotes.
Collision And Comprehensive
Collision helps with damage to your car from crashes. Comprehensive helps with non-collision events like theft, fire, hail, vandalism, or hitting an animal.
If you have a loan or lease, the lender will typically require both. They have a financial interest in the vehicle and want it insured against physical damage.
If your car is paid off, you choose whether to carry these coverages. Dropping them means you’re self-insuring, if something happens to your car, you pay the full repair or replacement cost yourself. Before dropping either, ask yourself honestly whether you could replace the vehicle out of pocket.
For a side-by-side look at what liability-only versus adding collision and comprehensive actually means, see Liability vs Full Coverage Car Insurance.
Pick Deductibles Carefully
A higher deductible can lower premiums, but only if you can actually afford to pay the deductible after a loss.
Don’t choose a $1,000 deductible if a $1,000 surprise would wreck your budget. Your deductible should be an amount you could comfortably pull from savings on short notice. As your emergency fund grows, it may make sense to raise your deductible and reduce your premium. For more detail, see How To Choose Car Insurance Deductibles.
Consider Uninsured And Underinsured Motorist Coverage
Uninsured or underinsured motorist coverage helps if another driver has no insurance, or not enough insurance, to cover your damages. Despite laws requiring coverage, a significant share of drivers are uninsured or underinsured. In a crash where the at-fault driver can’t pay, this coverage protects you.
Rules and availability vary by state. Some states require it, others make it optional. Ask your insurer how these coverages work in your state.
Consider Personal Injury Protection Or MedPay
In some states, personal injury protection (PIP) is required. PIP covers your medical expenses and sometimes lost wages after an accident, regardless of who’s at fault. Medical payments coverage (MedPay) is similar but more limited, and is available in most states as an add-on.
Both can be valuable if your health insurance has high deductibles or coverage gaps. They may also cover passengers in your vehicle.
Review After Life Changes
Review coverage when:
- You buy a car
- You pay off a loan
- You move to a new state or city
- A teen driver is added to the policy
- Your savings change significantly
- Your car’s value drops substantially
- Premiums rise and you want to reassess
- You add a new driver to the household
The right coverage isn’t permanent. It should change as your life changes. A policy that fit your situation three years ago may be too little or too much today.
Frequently Asked Questions
Q: Are state minimum limits enough?
For legal purposes, yes. For financial protection, often no. Minimum limits are set by state law to ensure some baseline coverage, not to protect you from worst-case scenarios. Medical bills and property damage from a serious crash can easily exceed low minimum limits, leaving you personally liable for the difference.
Q: Should I carry more liability than the minimum?
Most financial experts recommend it. The premium increase for significantly higher liability limits is often modest. Common recommendations for drivers with meaningful assets are 100/300/100 ($100,000 per person, $300,000 per accident, $100,000 property damage) or higher, but the right amount depends on your assets and risk tolerance.
Q: What is gap insurance and do I need it?
Gap insurance covers the difference between what your car is worth (actual cash value) and what you still owe on your loan if the car is totaled. New cars depreciate quickly, so it’s possible to owe more than the car is worth for the first year or two of a loan. If you financed a new or nearly-new car, gap coverage is worth considering. Some lenders require it.
Q: How do I know if I have enough coverage?
A rough check: could you absorb the financial impact if a serious accident exceeded your coverage limits? If your assets and income could be at risk, consider raising them. If budget is tight, at least make sure you’re not under-insured on liability, that is where the biggest exposure lives.
Learn More
- NAIC: Consumer auto insurance guide
- NAIC: Auto insurance