If you are shopping for insurance, an important question to ask yourself is: How much car insurance do I need? To find the best deal, it is helpful to first break down your personal requirements before you comparison shop.
Read on for details on how to evaluate liability insurance, collision insurance, comprehensive insurance, and more. If you find that, by the end, you’re ready to reach out for an auto insurance quote, we’ll recommend the best car insurance providers, too.
To start, we recommend that you get matched with the best quotes in your area by calling (844) 246-8209 or filling out the form below:
In this article:
- What Does Car Insurance Cover?
- Minimum State Requirements For Car Insurance
- How Much Car Insurance Do I Need?
- Other Types Of Car Insurance Coverage
- Our Top Recommendations For Car Insurance
What Does Car Insurance Cover?
The short answer is that car insurance helps you protect your assets, but what exactly that means can vary extensively from person to person. Keep reading to learn more about the standard types of car insurance.
Bodily Injury Liability Coverage
Bodily injury liability (BI or BIL) insurance coverage pays for injury caused to others, including legal, medical, and funeral costs. BIL covers the cost of expensive medical bills you may be liable for. This type of coverage is meant to protect you from paying out-of-pocket.
State requirements for mandatory minimum coverage are seldom adequate enough to cover the costs of a serious accident. All bodily injury liability policies have a limit, and in most states, a driver can be sued for any medical costs beyond a policy's maximum coverage. So even a generous buffer of $100,000 of BIL coverage per accident might not be enough.
Beyond your state’s minimum requirements, how much bodily injury coverage you choose is ultimately up to you. If you opt for a lower dollar amount, make sure you have the ability to cover costs that may exceed that amount.
Property Damage Liability Coverage
Property damage liability (PD or PDL) covers the cost of damages you cause to others' property, including vehicles. PDL pays to repair or replace wrecked cars, front yard fences, and more.
Property damage is unlikely to cost as much as a serious injury. Medical bills can climb higher than a brand new, fully optioned Rolls Royce Phantom in a particularly bad accident. Higher coverage amounts mean higher car insurance premiums, but there is likely a reasonable ceiling consumers can expect in terms of maximum property damage. We recommend careful consideration when balancing whether higher premiums are worth higher coverage amounts. Keep in mind that the average property damage liability claim in 2018 was less than $4,000, according to the Insurance Information Institute (III).
As with all coverage types, we recommend purchasing more than the minimum state requirement for peace of mind.
Personal Injury Protection And Medical Payments
Personal injury protection (PIP) covers medical costs for you and your passengers and compensates you for lost wages. Some PIP plans offer wage replacement due to hospitalization or injury for up to a year. Insurance policies vary in terms of the details, but PIP insurance also covers some day-to-day costs, such as compensation for childcare if a primary caregiver is hospitalized for more than 24 hours.
What insurance will cover varies from state to state and accident to accident. As a general rule, if you have health insurance and disability insurance through your employer, you can probably get away with a minimum PIP plan.
Medical payments coverage (MedPay) is similar to PIP but covers medical expenses alone – and typically only up to $5,000. It is a useful add-on for covering the cost of relatively minor injuries. MedPay is a smart auto insurance coverage option for consumers who have high-deductible personal health insurance.
However, not all health insurance plans cover injuries from car accidents, so it is a good idea to check with your employer's human resources office or directly with your health insurance provider before deciding how much PIP and MedPay coverage you need. It is also possible, depending on your health insurance provider, that medical insurance coverage will be denied until PIP and MedPay coverage limits have been reached.
Collision insurance pays for the repair or replacement of your own vehicle in the case of an accident with another vehicle or a fixed object.
The decision to repair or replace a wrecked vehicle depends on the insurance company's calculation of fair market value. This is important to keep in mind, because market value does not take into account how much you paid for your vehicle or how much you may still owe on a lease or lien. The average loan amount for car purchases in 2019 approached $33,000, according to USA Today. If you have a lease or lien on your vehicle, then you might want to consider gap insurance, which covers the difference between the fair market value of a new car and what you still owe for the car.
Older cars may or may not need collision insurance. On the other hand, if you don't have the money on hand to replace a totaled vehicle, then it might be a good idea to get collision insurance even if your car isn't worth tens of thousands of dollars.
Comprehensive car insurance is a type of insurance that covers the cost of damage to your car or truck outside of collisions with fixed objects or vehicles. That includes things like deer accidents, theft, floods, and vandalism.
Comprehensive insurance combined with collision insurance is what is typically referred to as full coverage and is required by many banks for leased and financed vehicles. Although comprehensive coverage is a relatively cheap insurance option, it is possible that if you have an older car, the fair market value of your car is less than the combined premiums and deductible of comprehensive insurance. Like collision insurance, comprehensive is optional unless required by a lender.
Uninsured And Underinsured Motorist Coverage
If you are involved in an accident with an uninsured or underinsured driver, this car insurance coverage takes care of your expenses. Uninsured motorist coverage (UM) covers both property damage and medical costs, and underinsured motorist coverage (UIM) pays for medical costs beyond an at-fault driver’s insurance limits.
While technically you could sue for medical costs, a person who drives uninsured or underinsured likely has limited assets and may be unable to pay even if court-ordered to do so. UM and UIM help you avoid lawsuits and protect your assets.
Umbrella insurance policies are generally available from your auto insurance provider once you’ve reached a minimum threshold of liability coverage – about $500,000 in bodily injury liability, for example. An umbrella policy will cover you for virtually all liability arising from an auto accident. These policies are generally very cost effective, as they are sold in $1 million increments. The first million dollars cost between $150 and $300 per year, according to the III, with every subsequent million costing half as much as the previous.
If you can’t get an umbrella policy through your current auto insurance company, you can ask an independent agent to find you a standalone umbrella policy.
Minimum State Requirements For Car Insurance
State requirements for auto insurance coverage are all different and depend on a number of factors. While something is better than nothing, the required bodily injury liability coverage in most states is less than you probably need.
State requirements for BIL range between $20,000 per accident in Florida to $100,000 in Alaska and Maine. Virginia and New Hampshire are the only states that do not require auto insurance, although drivers are liable for all property damage and medical bills in accidents they cause and sometimes have to pay a fee for not having insurance.
Do You Need More Than The Minimum Car Insurance?
We don’t recommend purchasing only the minimum amount of car insurance required state insurance. It would not take long to burn through most state minimum requirements in the case of a serious collision. For example, ankle fractures – a common injury in frontal collisions – can cost over $11,000 including a hospital stay, according to Sage Journals.
Once your maximum limits are met by your insurance company, you become liable for every dollar over. For example, if you are responsible for a collision that results in the total loss of a 2018 Lexus GS – a car with a market value of about $40,000 – and you are a Florida driver with minimum coverage of $10,000 property damage liability, then you would be personally responsible for paying the $30,000 difference between the value of the car and the amount your insurance company would cover.
If you are unable to pay $30,000 on the spot, you might be required to take out a loan or a second mortgage. In a worst-case scenario, you could be looking at a bankruptcy, having the DMV suspend your license until you are able to pay, or repossession of your assets to cover your financial liability. A life-changing hassle can be avoided by being adequately insured.
How Much Car Insurance Do I Need?
Let’s review the top things to think about when deciding on your desired level of car insurance coverage.
The first question to ask when considering how much insurance to purchase is: How robust is your private health insurance? Not all private health insurance plans cover car accidents, and if you have a high-deductible health insurance plan or a plan that exempts car accidents, then you should get a higher amount of PIP insurance.
Serious injuries that require surgery and rehabilitation can cost hundreds of thousands of dollars over the course of a few years. Above all, you should ensure that your medical costs will be covered, so you receive the best care without worrying about medical bankruptcy or other limitations.
Our recommendation is that your liability auto insurance should equal or exceed your net worth. Insurance is primarily an asset protection product. While collision and comprehensive coverage – or other perks like rental car reimbursement – are nice, insurance is for protection, not convenience. We recommend that if you spend money on roadside assistance or windshield replacement, you only add on these options after maximizing standard coverages.
Cash Flow Considerations
If you have minimal assets, car accidents can bring unexpected expenses. Do you have cash on hand to pay a high deductible? If not, then you should consider a low- or no-deductible auto insurance policy or windshield replacement add-on so you can avoid unexpected costs.
The same can be said about collision and comprehensive coverage. If your car is paid for, but you don't have the cash or budget flexibility to buy a replacement right away, opt for full coverage.
Finally, you should consider add-ons, such as breakdown insurance, roadside assistance, and rental car reimbursement. Particularly for single parents or others whose schedules are tightly packed, a small thing like paying extra up front to ensure you have transportation in the case of a damaged vehicle could more than pay for itself in convenience.
To see what quotes with these considerations in mind would look like, use the tool below or call (844) 246-8209.
Other Types Of Car Insurance Coverage
The auto industry is robust and serves nearly every need imaginable. Non-standard coverage is available for classic cars through providers like Hagerty Insurance. These companies negotiate the value of your vehicle with you, rather than relying on their own assessment of fair market value. The same principle applies with Progressive’s custom parts and equipment coverage, which adds additional value to your vehicle for custom electronics installation, custom paint, aftermarket wheels and tires, and more.
Roadside assistance is a standard add-on for most insurance providers. If you are a car fanatic and want to take care of your prized possession, some companies like Heacock Classic offer impressive attention to detail, as its roadside assistance guarantees flat-bed towing.
Our Top Recommendations For Car Insurance
Let’s consider the car insurance companies you might want to reach out to for a quote, now that we’ve answered the question, “How much car insurance do I need?”.
You can also get quotes from the companies we have looked into. We recently researched the best car insurance providers in the industry. Here are three of the companies that came out on top in our research, each earning 4.5 out of 5 stars.
State Farm Insurance
If you prefer a neighborhood office where you can know your insurance agent by name – a helpful thing for making policy changes or filing a claim – then you might want to check with State Farm for an affordable auto insurance quote.
Several years before car insurance was mandatory, State Farm was founded in Bloomfield, Illinois, for the sole purpose of affordable car insurance. Nearly 100 years later, the company is the largest auto insurance provider in the country. We found that State Farm is an excellent option for teenage drivers and students, in particular.
To learn more, read our full State Farm insurance review.
If you’re tech savvy, Geico auto insurance will blend seamlessly into your life. Not only does the provider have a secure mobile app, but you can request roadside assistance, check your balance, or even find the nearest, cheapest gas station through Amazon's Alexa. Not surprisingly, Geico is a top pick for members of our armed forces and a smart choice for students. The company also has an A++ financial strength rating from AM Best.
To learn more, read our full Geico review.
Progressive car insurance is more than just the friendly face of Flo. Its loyalty rewards program and online price comparison tool set it apart in a crowded insurance market. As the second largest insurance company in the United States by market share, Progressive wrote over $31 billion in premiums last year, according to the National Association of Insurance Commissioners. The provider has a great list of possible discounts, too.
To learn more, read our full Progressive insurance review.
Get Free Quotes
Whenever you shop for car insurance, we recommend getting quotes from multiple providers so you can compare coverage and car insurance rates. In addition to the insurance company you choose, factors such as your age, vehicle make and model, your driving record, and often your credit score can affect your annual premium, so what’s best for your neighbor might not be best for you.
In an effort to provide accurate and unbiased information to consumers, our expert review team collects data from dozens of auto insurance providers to formulate rankings of the best insurers. Companies receive a score in each of the following categories, as well as an overall weighted score out of 5.0 stars.
- Industry Standing: Insurers with strong financial ratings and customer-first business practices receive the highest scores in this category.
- Availability: We consider availability by state as well as exclusions for specific groups of drivers.
- Coverage: This rating is based on types of insurance available, maximum coverage limits, and add-on policies.
- Cost and Discounts: Our research team reviews sample quotes for a variety of drivers in every state. Companies with lower prices and many car insurance discount opportunities receive the best scores.
- Customer Service: We comb through customer reviews and consumer feedback studies from experts like J.D. Power.
- Technology: Auto insurers with mobile apps, advanced online services and telematics are more likely to meet consumer needs.
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