How Much Car Insurance You Need: An Expert Guide (2023)

You need to get car insurance to drive a vehicle legally in nearly every state and Washington, D.C. However, plenty of Americans buy more car insurance than they need. 

According to the Federal Reserve, the average American driver pays $190 per month for auto insurance — an increase of 4% from $182 in the previous year. 

Still, acquiring only the state minimums could leave you seriously unprepared to deal with an automobile accident and its consequences.

Read on to find out how much car insurance you need to protect yourself and your finances without overpaying.

How Much Car Insurance You Need

Liability, uninsured motorist protection, personal injury protection, comprehensive, and collision coverage are common forms of insurance that can cover anything from harming another driver in an accident to storm damage to your vehicle. 

How much car insurance do I need?

You likely need minimum liability insurance to legally drive where you live, and you’ll need to buy full coverage car insurance if you’re leasing or financing your vehicle. Other types of car insurance are optional, but we recommend researching all of your policy options to see what’s available. 

Minimum Car Insurance Requirements

Every state has some kind of financial responsibility law associated with auto insurance. In most cases, the majority of drivers fulfill state car insurance laws by purchasing liability insurance. Usually, state minimums are the simplest and come with the cheapest car insurance rates.

The minimum car insurance you need to drive typically includes:

• Bodily injury liability insurance: Covers medical costs for injuries you cause to a driver and their passengers in an at-fault accident.
• Property damage liability insurance: Covers damage you cause to another’s vehicle or property in an at-fault accident. 

Some states with no-fault insurance require additional coverages to pay for associated costs after an accident, including:

• Medical payments coverage (MedPay): Covers driver medical expenses after an accident, regardless of who is at fault.
• Personal injury protection (PIP): This covers the same as MedPay but will also pay for lost wages and funeral and burial costs.

Some of these types of coverage may not be available in your state, as state-by-state car insurance requirements vary by law. However, most require at least liability coverage to pay for the other driver and their passengers’ injuries and property damage.

Find your state in the table below to find out how much liability car insurance you need:

Liability insurance only covers damages you cause in an accident and does not protect your vehicle. If you opt for full coverage auto insurance, as many do, you are protected in the event of most accidents, regardless of whose fault it is.

Read More: What should I do if I’m in an accident and don’t have car insurance?

When you shop for insurance quotes online, our comparison tool will know how much car insurance you need based on your ZIP code. You can find the average cost of car insurance quotes from local companies for the amount of coverage you need.

Optional Types of Car Insurance

Minimum coverage is not enough for most drivers. Because of that, many opt to purchase additional coverage. 

Below are some of the most common and beneficial add-on coverages available from most car insurance companies:

• Collision car insurance: Collision coverage pays for damages you sustain in an accident or collision, regardless of who is at fault.
• Comprehensive car insurance: Comprehensive coverage pays for any damage not caused by a collision, including weather, fire, vandalism, and animal damage.
• Guaranteed asset protection (Gap) insurance: Loan/lease gap coverage will cover any remaining amount on your car loan or lease if your car is stolen or totaled in a covered event.
• Uninsured/underinsured motorist coverage (UM/UIM): UM/UIM coverage pays for damages if you’re involved in an accident with an uninsured, underinsured, or hit-and-run driver. 
• Roadside assistance: This add-on coverage pays for towing and locksmith services, gas delivery, tire changes, and more if you’re stranded with your vehicle.

Even if it isn’t required in your state, you should still consider buying these types of coverage. For example, UM/UIM coverage is an extremely helpful and reasonably-priced addition to your auto insurance policy, especially if you live in a state with high rates of uninsured drivers.

We also recommend carrying collision and comprehensive coverage. When you buy these coverages along with your minimum insurance requirements, it’s known as full coverage. You may be required to carry full coverage if you have an auto lease or loan because it insures your vehicle across multiple risks.

However, adding optional coverages will raise your monthly car insurance rates. Liability insurance is the cheapest type of car insurance you can have, but it offers the least protection.

State Minimum Insurance Isn’t Enough

You’ve undoubtedly seen the slash line from your insurance provider on your policy documents at some point. For example, the state minimum car insurance requirements are often written as 25/50/15 or $25,000/$50,000/$15,000. But what do those numbers mean?

They’re levels of liability coverage that depend on the circumstance and nature of the accident, which we get into in more detail below:

• $25,000 refers to the bodily injury liability limits per person
• $50,000 refers to the total bodily injury liability limit per accident
• $15,000 refers to the property damage liability limit

This kind of insurance pays for injuries and property damage you cause in an at-fault accident. It’s required in nearly every state to protect injured accident victims. Read our guide on the best bodily injury liability car insurance companies to find coverage at the lowest rates.

However, it’s difficult to imagine a world where $50,000 would cover medical costs in the event of a serious multi-car accident. Because of that risk, we recommend increasing your liability insurance coverage limits to match your personal net worth.

To protect yourself financially after a major accident, we recommend the following coverage limits for minimum car insurance policies:

• $100,000 per person
• $300,000 per accident in bodily injury liability
• $100,000 per accident in property damage liability

You’ll be better prepared with appropriate coverage limits by purchasing additional insurance. This is because the potential for something devastating, like selling your house or declaring bankruptcy to meet your financial obligations, will be reduced.

Additionally, drivers should consider getting, if not full coverage insurance, at least collision coverage. This insures your vehicle against damages no matter who causes the accident or if you collide with an animal or stationary object. 

States That Don’t Require Car Insurance

Although it’s recommended, is car insurance required? Almost all states require that drivers carry at least a minimum amount of coverage, but exact coverages and limits vary by state.

What states don’t require car insurance?

Only two states — Virginia and New Hampshire — do not mandate car insurance. Although New Hampshire residents are not required to have auto insurance, they are still liable for up to $50,000 in liability costs and $25,000 in property damage costs after a car accident. 

Virginians who pay a state fee of $600 per year can legally forgo purchasing auto insurance. However, the fee does not include any accident coverage, and the at-fault driver is still responsible for the accident. Drivers who are unable to pay for damages should prepare for the suspension of their licenses and registrations in these states.

Read more: Best West Virginia Car Insurance

The Cost of Car Insurance

The average cost of a full coverage car insurance policy is based on numerous factors, including driver age, driver gender (where permissible by law), accident claims history (known as a CLUE report), and make/model of the vehicle you want to insure.

For a 30-year-old driver with a clean record in the U.S., the average cost of full coverage insurance is around $134 per month. Liability insurance costs around $52.

The table below shows the average monthly car insurance rates by age, gender, and marital status. 

Full coverage insurance costs nearly double that of minimum liability, but you’ll be better protected behind the wheel. Further, adding optional coverages like gap insurance or roadside assistance will lead to higher quotes. 

To avoid paying too much for car insurance, ask your company if you qualify for car insurance discounts that can bring down the overall cost of your policy.

The Best Deductible for Car Insurance

If you buy collision or comprehensive car insurance, you will have what is called a “car insurance deductible.” The deductible is the amount you pay upfront before your auto policy applies. 

Deductibles range in price from $250 to $1,000, though lower deductibles usually mean higher car insurance rates. 

It’s a good idea to keep your car’s current market value in mind when choosing a deductible for your physical damage insurance policy. For example, if you drive an older vehicle worth around $3,000, setting a deductible amount of $1,000 might mean paying more out-of-pocket to restore the vehicle after an accident.

Read more: What is the difference between a deductible and a premium in car insurance?

Case Studies: Highlighting the Significance of Sufficient Car Insurance Coverage

Case Study 1: Underinsured Motorist

John, a resident of California, opted for the state minimum car insurance coverage of 15/30/5. One day, he was involved in a severe accident caused by an underinsured motorist. The medical expenses and property damage resulting from the accident exceeded his coverage limits, leaving John responsible for the remaining costs.

This case highlights the importance of considering higher coverage limits to protect against potential financial hardships.

Case Study 2: Comprehensive Coverage For Storm Damage

Emily, a driver in Florida, experienced significant damage to her car during a severe storm. Fortunately, she had opted for comprehensive coverage in her car insurance policy, which protected her against storm-related damages.

The insurance company covered the cost of repairs, allowing Emily to restore her vehicle without incurring substantial out-of-pocket expenses. This case emphasizes the benefits of comprehensive coverage for unexpected events like storms.

Case Study 3: Uninsured Motorist Accident

Sarah, a driver in Texas, was involved in an accident caused by an uninsured motorist. Despite having liability coverage, Sarah was left to bear the financial burden of medical bills and property damage repairs.

If she had chosen to include uninsured motorist coverage in her policy, the insurance company would have covered the costs incurred due to the uninsured driver’s negligence. This case underscores the importance of considering additional coverage options to protect against uninsured motorists.

Case Study 4: Full Coverage For Collision

Mark recently purchased a new car and opted for full coverage car insurance, including collision coverage. While driving, he collided with another vehicle, causing significant damage to both cars.

Mark’s insurance policy covered the repair costs for his car, regardless of who was at fault. This case demonstrates the benefits of full coverage, particularly collision coverage, in ensuring comprehensive protection for one’s vehicle.

Read More: What Happens if I don’t Agree with the Amount the Insurance Company is Offering me for the Repairs to my Vehicle?

Conclusion: How Much Car Insurance Drivers Need

Most state insurance laws require a minimum level of liability insurance, although you may be required to carry higher limits if you lease or finance your vehicle. Your lender may also require comprehensive and collision insurance, known together as full coverage car insurance.

The minimum coverage requirements for auto insurance in your state are just that  — minimal. 

We recommend that drivers always carry more insurance than required by law to avoid making up the difference out of pocket if they’re found at fault for an accident. 

We recommend shopping around for quotes from at least three different companies to find the best price on car insurance. Use our comparison tool below to find the best insurance companies with the cheapest rates and most up-to-date car insurance quotes.