How much auto insurance do you need?

Wondering how much auto insurance do you need? It depends on your state and personal needs. While most states require at least a minimum amount of the top liability insurance coverage, many drivers find full coverage better meets their needs.

Additionally, you may have to carry full coverage if you have an auto loan or lease. Insurance companies also offer add-on coverages, such as gap insurance and rental car reimbursement, to allow drivers to customize their policies as needed.

Keep reading to determine how much auto insurance you need and learn about your state’s coverage requirements. Then, you can use our free quote comparison tool to start shopping for the auto insurance you need.

How Much Auto Insurance You Need

There are many types of auto insurance coverage, which can make it challenging to pick out the right policy.  While most drivers need car insurance, the amount varies significantly based on the driver and state.

Why do you need car insurance? Auto insurance is typically not optional. Most states require at least a minimum amount of liability coverage. This coverage pays for the damages to other parties when you’ve caused an accident.

However, minimum coverage auto insurance offers little protection. Limits are generally very low, and it doesn’t cover your vehicle’s damage. Experts encourage drivers to increase limits and add coverage to be better protected.

Learn more:

• Top Liability Insurance Coverage: What You Need to Know
• Salvage: Auto Insurance Explained
• Salvage Title: Auto Insurance Explained

For example, let’s say you have minimum coverage and cause an accident where the other driver is injured, their car is totaled, and your vehicle has significant damage.

Unfortunately, your minimum coverage probably won’t cover all of the medical costs and property damage to the other driver. In addition, damage to your vehicle won’t be covered at all, leaving you with substantial out-of-pocket costs.

The right coverages and limits for you depend on where you live and your personal needs. While minimum coverage is the cheapest, you may decide full coverage is best for you, especially if you can’t afford to pay for damages yourself. In addition, other car insurance coverages, such as roadside assistance, can be added to your policy.

Let’s dive into various car insurance coverages to help you determine your needs.

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Minimum Auto Insurance You Need

Each state determines what, if any, auto insurance is required. These minimums vary by coverage and limit. However, mandatory coverage usually consists of four types.

State minimum car insurance may include the following:

• Bodily injury liability (BIL) and property damage liability (PDL): BIL pays for injuries caused to others in an accident, and PDL pays for property damage you cause, including damage to another vehicle or an object, like a fence.
• Uninsured/underinsured motorist (UM/UIM): The top uninsured motorist insurance coverage pays for medical costs and property damage if a driver hits you and they have little or no auto insurance.
• Medical Payments (MedPay): What is medical payments coverage in car insurance? MedPay covers medical costs for you and your passengers after an accident, no matter which driver is at fault.
• Personal injury protection (PIP): Like MedPay, the best personal injury protection (PIP) insurance coverage helps pay for medical costs. In addition, it covers related costs, such as childcare, funeral expenses, and lost wages.

Many states require UM/UIM coverage since there are many uninsured drivers on the road. However, only a handful of states require MedPay or PIP insurance.

Auto Insurance Requirements by State

As we discussed above, each state has different car insurance requirements, so the level of coverage you need will be different from that of your out-of-state friend or family member.

When looking at auto insurance requirements, you may see them written something like this: 25/50/25. This means that the state requires $25,000 in bodily injury liability per person, $50,000 in bodily injury liability total per accident, and $25,000 in property damage liability per accident.

Wondering how much auto insurance you should have in your state? Take a look at this table to see auto insurance requirements by state.

Auto Insurance Minimum Requirements Per State

What states don’t require car insurance? New Hampshire doesn’t require that drivers carry car insurance, but they have to show they can pay for damages if necessary. In addition, Virginia allows drivers to pay an annual uninsured motorist fee and forgo coverage. A few states also allow drivers to skip insurance and make a large cash deposit in case of an accident.

Remember, the state you live in affects the cost of car insurance. For example, states with higher minimum coverage requirements also have higher car insurance rates overall. In addition, states with a higher population or a higher number of uninsured drivers see higher rates. (For more information, read our “What are the costs of not having auto insurance?“).

Full Coverage Auto Insurance

Unlike minimum coverage, full coverage car insurance includes coverage for your vehicle with collision and comprehensive insurance.

Learn more: Top Full Coverage Auto Insurance: What You Need to Know

Collision auto insurance coverage pays for damages to your vehicle from an accident. Whether you hit another car, an object like a fence, or have a single-car rollover, collision coverage pays for damages to your vehicle. Your liability coverage pays for the damage to whatever you hit.

Comprehensive auto insurance coverage pays for your vehicle damages unrelated to an accident. This includes damages from theft, vandalism, fire, falling debris like tree limbs, and acts of nature, such as floods, hail, tornados, and hurricanes.

Learn more:

• Top Collision Auto Insurance Coverage: What You Need to Know
• Top Comprehensive Auto Insurance Coverage: What You Need to Know

Drivers who live in high-crime and high-traffic areas or places that experience extreme weather benefit from full coverage. However, that doesn’t mean full coverage is suitable for every driver.

Although full coverage offers the most protection for your vehicle, it is more expensive than minimum coverage. So, some drivers may not save money in the long run with the additional coverage. For example, if your car is worth $2,500 and your deductible is $1,000, minimum coverage would be a better option, since the higher rates and deductible mean you’re paying more than your car is worth.

However, forgoing full coverage means paying for repairs or a replacement vehicle yourself. Add full coverage to be protected if you drive an expensive car or can’t afford to pay out of pocket for a new one.

In addition, most lenders require full coverage car insurance. So, if you have a car loan or lease, you may not have the option to choose your level of coverage yourself. However, once the loan is paid off, the choice reverts back to you.

Optional Add-On Auto Insurance Coverages

In addition to state requirements and full coverage, most auto insurance companies provide numerous other coverages to meet drivers’ needs. While most drivers don’t need all of the add-on coverages, many take advantage of some extras.

Additional coverages may include:

• Gap insurance: Gap coverage pays the difference between what you owe on your car and its worth if it’s totaled in an accident. Most lenders require gap coverage until the vehicle is worth more than you owe.
• Roadside assistance: If you have car trouble on the side of the road, roadside assistance helps. Typical services include towing, fuel delivery, jump starts, tire changes, and locksmith services. (For more information, read our “Do you tip tow truck drivers?“).
• Rental car reimbursement. Rental car insurance coverage provides transportation if your car is being repaired under a covered claim. However, there are limits on how long the rental is covered and how much the insurance pays per day.
• New car replacement. Some insurers offer new car replacement coverage, which pays for a new vehicle if yours is totaled in a covered claim. However, restrictions vary by insurer, such as the age of the vehicle and replacement costs.

Not only do the specific coverages vary by insurer, but what those coverages include also varies. So, for example, while one insurer may have winching included in their roadside assistance coverage, another may not.

Read more: Top Roadside Assistance Provider 

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Factors That Affect The Rates for Coverage You Need

Many factors impact auto insurance rates, and each insurance company weighs those factors differently. So, the same driver can get different rates from different companies.

Factors that affect car insurance rates include:

• Age: Young drivers pay higher rates due to a lack of experience behind the wheel. As drivers age and gain experience, auto insurance rates decrease. Learn more about how age affects the cost of auto insurance.
• Driving record: Drivers with accidents, tickets, and DUIs pay much higher car insurance rates than drivers with clean records. Fortunately, accidents and tickets stop affecting rates after three to five years. Learn more about how long does an accident stay on your record.
• Vehicle: New or expensive cars have higher insurance rates since they are more costly to repair. While the latest technology helps keep drivers safe, it also comes with a higher price tag to fix.
• Coverage: Minimum coverage costs less than full coverage. In addition, adjusting limits and deductibles also affects rates.
• Credit score: Drivers with a higher credit score tend to pay for damages themselves, avoid filing claims, and get lower insurance rates. However, some states, like California, don’t allow insurers to use credit to calculate rates.
• ZIP code: Areas with high crime, traffic, and extreme weather have higher car insurance costs. Insurers know your vehicle is more likely to be stolen or damaged in those areas. (For more information, read our “What are the most stolen cars in America?“).

Since each insurer calculates rates differently, it’s essential to shop around. Compare coverages and rates from numerous companies to find affordable auto insurance that meets your needs.

Choosing an Auto Insurance Deductible

Auto insurance deductibles are the amount you pay before your car insurance kicks in. While liability coverage doesn’t have a deductible, both collision and comprehensive coverages do. Drivers pick their deductible amounts, and the most commonly chosen deductible is $500.

Choosing a higher deductible means lower auto insurance rates. However, it also means more out-of-pocket expenses if your vehicle is damaged. Choose a deductible amount that you can afford to pay in case of an accident.

Final Thoughts on How Much Auto Insurance You Need

Drivers in most states need car insurance. Although New Hampshire doesn’t require car insurance, other states determine the minimum amount of coverage you need. As a result, the required coverages and limits vary significantly from state to state.

While minimum coverage allows you to drive legally, it doesn’t protect your vehicle. Full coverage combines minimum required coverages with collision and comprehensive coverage, offering you the most protection.

However, full coverage auto insurance rates are higher. In addition, you may be required to carry full coverage if you have a car loan or lease. Drivers can also add coverages, such as gap, roadside assistance, and rental car reimbursement, to meet their needs.

Now that you know the answer to how much auto insurance do you need, the best way to find cheap auto insurance is to compare quotes from multiple companies. Each auto insurance company weighs your personal factors differently, so rates will vary. Use our free quote comparison tool to find the cheapest rates for auto insurance in your area.

Read more: Can you negotiate your Auto Insurance rates?

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