Are the state minimums enough, or do you need more?
Buying car insurance can be as simple as buying the minimum required amount determined by law in your state. If you’re a risk taker and not a law breaker, that could be enough. But if you want to be covered for all potential damages from a car accident, you need to buy more than the minimum.
Read on to find out:
The first step to figuring out how much car insurance you need to buy is to understand the types of insurance that make up “car insurance” — there isn’t just one!
If you’re new to the car insurance game, you may want to read more about how car insurance works, but in short, a car insurance policy is made up a few different types of insurance types, some which are optional, and some which are not:
Bodily injury insurance: Covers you if you cause bodily injury to someone else with your car.
Property damage liability insurance: Covers you if damage someone else’s property with your car.
Personal injury protection: Covers health care bills that you or your passengers incur, whether your fault or someone else’s fault.
Uninsured/underinsured motorist insurance: Covers you if you get hit by an uninsured or underinsured driver.
Collision insurance: Covers damages to your car if you get in an accident, no matter who was at fault.
Comprehensive insurance: Covers damages to your car that wasn’t caused by another car, like theft, vandalism, and weather damage.
All but two states require you have to have a certain amount of car insurance across a number of different categories. It’s the law!
The exceptions: New Hampshire requires you to pay up to certain limits out of pocket if you go uninsured or else face penalties; Virginia requires an annual payment to the state if you forego insurance.
All other states require at least two types of bodily injury and property damage. Some states also require personal injury protection and some require uninsured/underinsured motorist coverage.
Find out your state’s required minimum car insurance coverage.
Now that you know you how much car insurance you need to retain your status as a law-abiding citizen, let’s talk about how much car insurance you need to retain your status as a fully-protected, not-gonna-lose-everything-in-a-fender-bender citizen.
That’s right: you probably need more insurance than your state requires.
Why do you need more? Because the state minimums don’t provide enough coverage for most people to ensure they are protected in case of an accident.
Let’s look at New York as an example. In New York, you need to carry a "25/50/10 liability" policy, meaning $25,000 bodily injury limit per individual, $50,000 total bodily injury limit per accident, and $10,000 property damage limit. If you get into a truly terrible accident and the driver in the other car requires more than $25,000 worth of medical care you’ll be on the hook for the difference. And if you can’t pay for it in cash? Your assets can and will be seized to pay the costs. If you truly have no assets, the minimus may be enough. But if you own a home or have savings, both could be taken to pay your debt.
Generally, it’s a good idea to make sure you have liability insurance that covers the full value of your assets (your house, your car, savings, investments, etc.). When it comes to personal injury protection, however, you probably don’t need to buy more than the legally required minimum. Why? As long as you have health insurance and some form of disability insurance, you’ll probably be able to cover any medical costs or costs from being unable to work.
Different car insurance companies will recommend different amounts of coverage based on your car, your driving history, and your assets. Find the right car insurance company for you..
Some states require uninsured and underinsured motorist insurance, but even if yours doesn’t, you should consider it mandatory. If you get involved in an accident where the other person is either underinsured (likely if they just bought the minimum required amount) or uninsured (it happens), this insurance will cover your costs. It’s a relatively cheap addition to your car insurance policy that can be incredibly useful.
Lots of people skip collision and comprehensive insurance, and you may be able to, too. But the general rule is that if you have a car that is less than 10 years old or if you don’t have enough cash on hand to repair or replace your car in case of an accident, you should get collision and comprehensive. People who live in areas prone to wildfires and floods may also want to opt in to comprehensive, as this kind of insurance would pay out if your car was destroyed.
Another reason to choose collision and comprehensive insurance: if you plan on using your car insurance to insure you when you when driving rental cars, you’ll need both — in addition to liability insurance — to be fully covered.
Read more about rental car insurance.
If you’re financing your car, you may also want to look into gap insurance. Gap insurance will help cover the cost of paying off an auto loan in the event that the car is totaled in an accident (some lenders will require you purchase this insurance).
Read more about gap insurance.
Disclaimer: Policygenius’ editorial content is not written by an insurance agent. It’s intended for informational purposes and should not be considered legal or financial advice. Consult a professional to learn what financial products are right for you.