How Much Car Insurance Do I Need? Your Questions Answered

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How much car insurance do I need: man using his phone while sitting inside a car

How much car insurance do I need?” is a tricky question because the right answer is different for everyone. There’s the amount the law tells you that you need – your state minimum coverage requirements – and then there’s the amount that’s right for your lifestyle, your budget, and the type of car you drive.

It’s easy to get pressured into coverage options that you may not actually need. Still, it’s just as easy to choose a cheap car insurance policy with insufficient coverage in the event of a natural disaster or at-fault car accident.

So we’re here to give you the facts so you can answer the question, “How much car insurance do I need?” once and for all.


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How Much Car Insurance Do I Need to Drive Legally?

Let’s start by answering the easy part of the question: how much car insurance do you need to abide by the driving laws of your state? Only two states – New Hampshire and Virginia – allow you to drive without insurance. In Virginia, you’ll have to pay a $500 uninsured motorist fee if you don’t have car insurance coverage.

In the rest of the country, you’ll need to meet the minimum auto insurance requirements, which tell you how much your insurance policy needs to cover (not how much you’ll pay).

To take one example, Florida state law has the following coverage requirements:

  • $10,000 property damage liability coverage per accident
  • $10,000 personal injury protection (PIP) coverage

That’s pretty straightforward, right? Now, let’s consider Delaware, which has a longer list of coverage requirements and higher coverage limits:

  • $25,000 bodily injury liability coverage per person
  • $50,000 bodily injury liability coverage per accident
  • $10,000 property damage liability insurance per accident
  • $25,000 bodily injury underinsured/uninsured motorist coverage per person
  • $50,000 bodily injury underinsured/uninsured motorist coverage per accident
  • $10,000 property damage underinsured/uninsured motorist coverage per accident
  • $15,000 personal injury protection per person
  • $30,000 personal injury protection per accident

What Type of Coverage Do I Need?

Before comparing insurance quotes, it’s important to understand each type of car insurance coverage, so you know which policy limits apply.

For example, liability car insurance will cover the other vehicle and passengers in an at-fault accident, while uninsured motorist insurance (UIM) kicks in if the other driver doesn’t have insurance.

There aren’t any states that require you to have collision coverage or comprehensive coverage, but depending on your budget and lifestyle, it’s often a good idea to have additional coverage beyond the state minimum.

Suppose you have a serious violation on your driving record, such as a DUI or DWI, or have been caught driving without insurance. In that case, you may need to maintain “proof of financial responsibility” with an SR-22 form.

And finally, don’t overlook the importance of personal injury protection (PIP) and medical payments coverage (MedPay). These coverages can cover things like ambulance costs, hospitalization, and even funeral expenses.

If you already have health insurance, then you may not need additional coverage for medical expenses. But for drivers without health insurance or in states where PIP is mandatory, this is important to include in your car insurance policy.

How Much Car Insurance Do I Need for a New or Used Car?

Car salesperson showing different cars to potential customers

Now that you know what type of auto insurance coverage you need in your state, it’s time to take the make and model of your vehicle into account. Do you want to pay for car insurance coverage above and beyond the minimum requirements? Usually, that means adding collision or comprehensive coverage to your policy.

Collision insurance pays for repairs to your own vehicle if you get into an accident. If you have comprehensive insurance, your car insurance company will cover loss or damage due to vandalism, theft, or natural disaster.

You may still have to pay some out-of-pocket costs until you reach your deductible amount, but it spares you from being on the hook for all of it.

So, should you add this type of coverage to your policy, or should you stick with the minimum amount of coverage required by your state?

Let’s say you’ve just bought a brand-new car and live in a neighborhood where car theft is common. Sure, taking out a full coverage auto insurance policy will result in a higher premium, but would you really want to do without it?

On the other hand, if you’ve just bought a used car, then the amount of insurance you need to sleep easy at night will be lower than if you bought a brand new vehicle. You may not need additional coverage beyond your state’s minimum coverage requirements if you’re comfortable paying any repairs (or even buying a replacement vehicle) out of pocket.

Most cars will fall somewhere on the spectrum: As your vehicle gets older, you can choose to remove collision and comprehensive coverage from your policy.

Once the actual cash value of your car is lower than your annual insurance premium, it’s time to reconsider the amount of car insurance coverage you need.

How Much Car Insurance Do I Need for My Lifestyle?

A few other things determine how much car insurance you need, such as your budget and your lifestyle. Ultimately, car insurance protects you from liability for damages in an at-fault accident, so the more assets you have to lose, the more coverage you should have.

If you’re involved in a serious accident, then the cost of medical bills could exceed your liability limits. The injured party could come after your home or savings. That’s why high net worth individuals may want to consider an umbrella policy.

If you’re leasing a vehicle, your lender may require you to have collision coverage, even if your state doesn’t. You may also want to take out gap insurance, which protects you if the cost of your loan exceeds the value of your vehicle.

Another thing to consider is how often you drive. Pay-per-mile car insurance can be a great option for low-mileage drivers who don’t use their car frequently, while roadside assistance is a good idea if you take long-distance road trips.

Other optional add-ons include rental reimbursement coverage, which pays for the cost of a rental car while your car is being repaired.

How Can I Lower My Car Insurance Costs?

We’ve mostly been looking at factors within your control, such as the type of car you drive and how much coverage you want to carry.

But most factors that affect your insurance rates are outside your control, like your age, location, and marital status.

If you want to lower your car insurance premiums without sacrificing coverage, consider choosing a higher deductible. This will increase your out-of-pocket costs if you get into an accident but can keep your monthly premiums within your budget.

Drivers who rent or own a home, or have multiple drivers on the same policy, may want to consider a car insurance bundle or look for other car insurance discounts.

Find the Best Car Insurance Policy for You

How much car insurance do I need: person handing a car key to a couple

The amount of car insurance you need comes down to your budget and your threshold for risk. If you want to play it safe and don’t mind paying higher auto insurance rates, consider choosing a policy that exceeds your state’s minimum requirements.

On the other hand, if your car’s value is lower than your annual premiums, consider removing collision and comprehensive coverage to lower your insurance costs.

Compare.com makes it easy to find the best car insurance coverage for you by showing you quotes from multiple car insurance companies side-by-side.

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