How Much Car Insurance Do I Need?

There are two ways to look at how much car insurance you need. The first is to consider the state minimum requirements. The second is to consider how much protection you need to avoid lawyers targeting your personal assets. Let’s look at the considerations that go into figuring out how much car insurance you need.

Why You Need Car Insurance

You need to have car insurance because it is the law in most states. Also, you may be required to carry a certain amount of coverage for a lease contract. You also need car insurance to make sure that your car will be fixed after an accident. This is particularly important for at-fault accidents and uninsured motorist incidents.

What Is State Minimum Insurance Coverage?

State minimum insurance coverage is the legally required minimum amount of liability insurance that all cars must have. Every state (except New Hampshire and Virginia) has its own auto insurance requirements that your car must adhere to in order to be registered for the road.

What Happens If You Get Caught Driving Without Insurance?

Penalties vary from state to state. However, most states will give a driver fines and will suspend their driver’s license or the car registration for failing to meet the legal requirements. Fines range from $25 to $1,500 and up to five years in prison.

Minimum Coverage vs. Full Coverage

Don’t make the mistake of thinking that having the state minimum coverage is having full coverage. Remember that state liability laws don’t cover your own vehicle. Full coverage means that you have protection for others and yourself.

This includes additional coverages: collision insurance, comprehensive insurance, uninsured motorist coverage, and medical expenses coverage/personal injury protection for medical bills. It doesn’t include gap insurance, roadside assistance, or rental car reimbursements, or any other type of insurance like health insurance.

Note that collision coverage also covers the cost of any lost wages you incurred as a result of an at-fault accident, up to your limit. Beyond that, you’ll have to pay out of pocket.

Is State Minimum Coverage Enough?

While the state minimum coverage is enough to prevent you from getting a ticket for not having insurance, it may not cover all the liability you could incur in an accident, nor will it cover your car’s damages in a claim. Evaluate your needs by talking to an auto insurance agent.

If the state minimum coverage is 15/30/5, this means you are protected only from liabilities of $15,000 in injuries per person, $30,000 in total injuries per accident, and $5,000 in property damage. A fender bender can often cause more than $5,000 in damages, which you may be liable for.

Are there Different Requirements for Leased Vehicles?

Leasing companies have minimum requirements for liability insurance that are often higher than state minimum requirements. Most leasing companies require at least 100/300/50 for leased vehicles.

How to Choose Higher Limits

Choosing higher limits depends on your unique circumstances. You want to have enough coverage to protect your personal assets while staying within budget for the cost of insurance. Ask your insurance agent to give you a quote for higher liability limits. To avoid being sued, those with a high net worth should consider having high liability limits.

How Big of a Deductible Should You Have?

Choosing a deductible for your collision and comprehensive coverage is a balancing act between cost and personal resources. Remember that deductibles pertain to when you need to get your car fixed. You pay them as your portion of the claim.

The lower the deductible, the higher the premium. Agents recommend getting as high of a deductible as you can comfortably afford to pay in a claim. The average deductible is $500.¹

What Is the Cost of Car Insurance?

Car insurance costs will vary widely depending on the state that you live in and the type of coverage that you choose. According to the most recent federal data available, the average monthly cost of auto insurance in 2018 was $83.12, with a range of $119.12 at the high end and $60.14 at the low end.

How to Buy Car Insurance

To buy car insurance:

1. Decide how much coverage you want, whether it’s just the state minimum requirements or additional coverage like medical payments coverage, which not every state requires.
2. Get quotes from multiple carriers.
3. Review the coverage limits of each quote.
4. Choose the best policy for the price.
5. Contact an agent.
6. Pay for the policy to bind it.

Learn more about how to buy auto insurance in our car insurance FAQs.

Recap

While you absolutely need to meet state minimum insurance requirements, you’ll want to have enough insurance to protect yourself from liability and to protect your car should it get damaged. This means adding full coverage with comprehensive and collision coverage to the policy.