How Much Car Insurance Do You Really Need?


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ByMark Fitzpatrick
Reviewed byMark Friedlander
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ByMark Fitzpatrick
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Reviewed byMark Friedlander
Edited byJonathan Ramos
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Updated: May 20, 2024

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When it comes to car insurance, there are two major types of coverage: minimum coverage (or liability-only if your limits are higher than the law mandates), which pays for vehicle and property damage or injuries to others in accidents caused by you, and full coverage, which also pays for injuries and damages you cause to others or property plus damage to your vehicle in collision and non-collision incidents.

How much coverage you need will depend on your state’s minimum liability requirements, budget and your personal needs.

Table of Contents

Why Trust MoneyGeek? MoneyGeek collected data from Quadrant Information Services and state insurance departments to determine mandatory insurance coverage requirements and the average cost of car insurance by coverage level and state.

Key Takeaways

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You should carry the highest amount of liability coverage you can afford, with 100/300/100 being the best coverage level for most drivers.

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You may need to carry additional coverages to protect your vehicle, including comprehensive, collision and gap coverage.

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Each state has minimum insurance requirements, but most states require far less insurance than you need to protect yourself and your assets.

How Much Car Insurance Is Required in Your State?

Nearly every state in the U.S. mandates drivers to have state minimum liability coverage. Among these, 13 states, including Delaware (a tort state), require personal injury protection (PIP) to cover medical expenses. Additionally, 22 states and Washington, D.C., require uninsured/underinsured motorist coverage, ensuring protection when another driver has no insurance or lacks sufficient insurance.

New Hampshire and Virginia are the only states that do not require insurance.

AlabamaAnnual Premium$359Monthly Premium$30
AlaskaAnnual Premium$393Monthly Premium$33
ArizonaAnnual Premium$506Monthly Premium$42
ArkansasAnnual Premium$384Monthly Premium$32
CaliforniaAnnual Premium$575Monthly Premium$48
ColoradoAnnual Premium$431Monthly Premium$36
ConnecticutAnnual Premium$661Monthly Premium$55
DelawareAnnual Premium$939Monthly Premium$78

What States Require Additional PIP and UM Coverage?

Twenty-two states and the District of Columbia have uninsured motorist (UM) or underinsured motorist (UIM) coverage requirements.

Although the state of New Hampshire does not require auto liability insurance, drivers in this state need to show financial responsibility to cover accident expenses by purchasing insurance, which may include UM coverage.

Standard car insurance policies will include your state's minimum liability requirements. This is the smallest amount of coverage you need to drive legally.

When you register your car, your state's motor vehicle department will make sure your insurance policy meets your state's liability requirements. In most states, you must have insurance to register your car. In most cases, the DMV will be alerted if you have a lapse in coverage or if your policy doesn't cover enough to meet state requirements.

States That Require Additional PIP and UM Coverage

How Much Liability Insurance Do You Need?

MoneyGeek recommends you secure as much liability coverage as you can reasonably afford. If you're at fault in an accident, you'll be responsible for the other party's expenses. Insufficient coverage means you could still be held liable, and the courts could seize your assets or garnish your wages.

The best way to protect yourself financially is to opt for the highest liability coverage.

The most common liability coverage is 100/300/100, which is $100,000 per person, $300,000 per accident in bodily injury liability and $100,000 per accident in property damage liability.

But what do 100/300/100 car insurance policy limits mean?

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    $100K in bodily injury liability

    • The first number in your liability coverage is the maximum amount your insurance company will cover for bodily injury claims for an individual person.
    • In this instance, the 100 represents $100,000 in coverage.
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    $300K in bodily injury liability per accident

    • The second number in your liability coverage is the maximum amount your insurance company will pay for bodily injury claims for a total accident.
    • This does not supersede your per-person maximum, however. So if you hit someone and they need $126,000 in medical care, you will be responsible for the extra $26,000 above your $100,000 per person limit, even though you have a per accident maximum of $300,000.
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    $100K in property damage liability

    • The third number in your liability coverage is the maximum amount your insurance company will pay for property damage claims in an at-fault accident.
    • In this instance, the 100 represents $100,000 in coverage.

Auto insurance policies can come with varying liability limits; they may be as small as 15/30/5, a bit more at 50/100/50 or as large as 250/500/250.

Some states have low liability minimums, with California and Pennsylvania requiring as little as $5,000 for property damage coverage.

If you're considering different coverage levels, aim for at least 100/300/100 in liability coverage if you can afford it. If that's too steep, go for the highest level you can manage, like 50/100/50, rather than settling for the state minimum.

Is Liability-Only Car Insurance Enough?

There are some scenarios in which it makes more financial sense to sign up for a liability-only policy and avoid overpaying for insurance. This applies if you drive a low-value car or can comfortably pay for car repairs or replacement out of pocket.

Scenario
Description

You drive an old car or low-value car

Liability-only coverage may suffice since the cost to replace or repair your car might not justify the higher premium of full coverage.

You can pay for a new car out-of-pocket

Liability-only insurance could be adequate if you can easily replace your car without financial strain.

You rarely drive

You're at a lower risk of getting into an accident if you're not on the road often. This would make a liability-only policy a reasonable choice.

You live in an area with low traffic and a low risk of accidents

Fewer cars on the road often means less risk, so liability-only insurance might be sufficient.

Young drivers might be inclined to choose minimum coverage to save on their premium, but it's important to remember that they are statistically more likely to be involved in accidents. Full coverage auto insurance can offer better financial protection.

Families with teen drivers face similar risks and should consider increasing their liability coverage limits, especially if the teen is included on the parents' policy.

Similarly, first-time motorists who are new to driving should also aim for more than just the state minimum coverage to ensure adequate protection from the get-go.

Data filtered by:Results filtered by:
Age Group:
Age Group:30-59
Coverage:
Coverage:State Minimum Liability Only
State FarmAnnual Premium$409Monthly Premium$34
GEICOAnnual Premium$424Monthly Premium$35
NationwideAnnual Premium$462Monthly Premium$38
TravelersAnnual Premium$504Monthly Premium$42
ProgressiveAnnual Premium$514Monthly Premium$43
FarmersAnnual Premium$572Monthly Premium$48
AllstateAnnual Premium$604Monthly Premium$50

Do You Need Full Coverage Car Insurance?

Full coverage car insurance offers robust protection, covering damages to your vehicle from accidents, theft and various unforeseen events. It goes beyond basic liability, protecting you from many potential costs and risks.

Full coverage usually has three parts:

  • Liability pays if you hurt someone or break something in a crash you cause.
  • Collision fixes your car after a crash.
  • Comprehensive pays for other issues like theft or weather damage.

Full coverage lowers your financial risk. You pay a deductible for collision and comprehensive claims, then the insurance company pays the rest, up to a certain limit. This is great if you have a new or expensive car or want to feel safer.

Full coverage costs more, so make sure it fits your budget.

If you're still paying off your car or leasing it, you'll likely need full coverage.

Commonly referred to as the 10% rule, you can consider dropping comprehensive and collision coverage if your annual cost for full coverage would be more than 10% of the vehicle's actual cash value.

Full Coverage Optional Add-Ons

Full coverage policies include collision and comprehensive insurance to fix or replace your car. But if you want more protection, you can add other types of coverage.

Besides the usual options, you can get special types of insurance to meet your vehicle's specific needs.

Add-on Coverage Type
What It Covers

Umbrella Policy

If you don’t think that the highest levels of bodily injury and property damage liability would be enough to protect your assets in a severe accident, you might want to purchase an umbrella policy. Umbrella policies provide a minimum of $1,000,000 in liability coverage above and beyond your standard auto insurance liability limits.

Gap Insurance

Gap insurance typically covers the difference between the value of your car and the balance of your car loan if your vehicle is totaled. This prevents you from having to make payments on a loan for a vehicle you can’t drive and is often a requirement by lenders if you take out a loan to purchase a car.

Accident Forgiveness

This coverage stops your premium from going up after your first at-fault accident.

Non-Owner Insurance

If you don’t own a car but still drive occasionally, you might need a non-owner insurance plan to provide liability coverage in case of an accident.

Usage-Based/Pay-As-You-Drive Insurance

Your car insurance company can record your driving information, such as speed and mileage, and offer you discounts on your coverage for being a better driver. However, this may have unintended consequences, so it’s smart to research before buying.

Classic Car Insurance

This specialized insurance is designed for vintage and classic cars, usually those at least 25 to 30 years old. It covers the car's agreed-upon value rather than its current market value, providing protection for vehicles that are often considered collectibles.

Comprehensive-Only Insurance

This type of insurance covers non-collision-related damages to your vehicle, such as theft, vandalism or natural disasters like floods and fires. It's often chosen for cars that are stored rather than driven, offering protection against risks other than accidents.

Nonstandard Auto Insurance

Designed for drivers who may not qualify for standard insurance due to a poor driving record, lack of experience or other risk factors, nonstandard auto insurance provides basic liability coverage. It's generally more expensive and may come with limited options.

What Deductible Should You Choose?

Full coverage offers thorough protection, but that doesn't mean it can't be affordable. In fact, it's entirely possible to find cheap full coverage car insurance.

The price of such a policy can differ for each driver, influenced by factors such as age, state of residence and driving record, among others.

Data filtered by:Results filtered by:
Age Group:
Age Group:30-59
Coverage:
Coverage:100/300/100 Full Cov. w/$1,000 Ded.
State FarmAnnual Premium$883Monthly Premium$74
NationwideAnnual Premium$930Monthly Premium$78
GEICOAnnual Premium$936Monthly Premium$78
TravelersAnnual Premium$1,037Monthly Premium$86
ProgressiveAnnual Premium$1,120Monthly Premium$93
AllstateAnnual Premium$1,124Monthly Premium$94
FarmersAnnual Premium$1,192Monthly Premium$99
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Frequently Asked Questions

Is basic car insurance enough?
Is car insurance per person or by car?
How many cars can you have on your insurance policy?
What’s the recommended car insurance coverage for new cars?

About Mark Fitzpatrick


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Mark Fitzpatrick has analyzed the property and casualty insurance market for over five years, conducting original research and creating personalized content for every kind of buyer. Currently, he leads P&C insurance content production at MoneyGeek. Fitzpatrick has been quoted in several insurance-related publications, including CNBC, NBC News and Mashable.

Fitzpatrick earned a master’s degree in economics and international relations from Johns Hopkins University and a bachelor’s degree from Boston College. He is passionate about using his knowledge of economics and insurance to bring transparency around financial topics and help others feel confident in their money moves.


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