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How Much Car Insurance Do You Need and How Much Is Required?

A key question you'll face every time you buy car insurance: "How high should I set my coverage limits?" There are likely to be legal coverage minimums you have to meet, but these only scratch the surface when it comes to protecting you and your property. That's why mandatory state minimum car insurance limits should be just the starting point in figuring out how much car insurance you need.

The type of car you drive, where you live and work, your income and wealth, plus how much you depend on your car should all factor into your decision. This article will tell you how much car insurance coverage you need to meet the legal requirements in your state, plus everything else you need to take into consideration when deciding on your insurance limits.

Liability Coverage vs. Car Value and Assets

Think about the four types of damage you can do if you cause an accident:

  1. Harm to people outside of those in your vehicle requiring medical attention

  2. Damage to other people's property

  3. Harm to you or others in your car requiring medical attention

  4. Damage to your car and property

Liability coverage is insurance that goes towards damage you've done to others - basically, the first two types of damage on the list above. Liability coverage does not apply to your property (including your car) or to the medical bills of people in your car.

Just about every state requires you to carry liability coverage. This gives others some protection from damage that you cause in an accident.

However, liability insurance requirements often fall short in two important ways:

  1. The dollar limits may be less than the liability you incur for medical bills or property damage if you cause a motor vehicle accident

  2. Liability insurance does nothing to cover your own costs if you're at fault in an accident

Therefore, in thinking about how much car insurance you need, you should consider two things beyond mandatory insurance minimums:

  1. What is the value of your car - specifically, how much would it cost to fix or replace if damaged in an accident that was your fault?

  2. How much of your net worth do you stand to lose if your liability to others exceeds the coverage limits of your insurance?

Once you think about how much you have to lose as a result of an auto accident, you'll realize why legal insurance requirements are just the starting point when it comes to the types of coverage you buy and the coverage limits you should set on those coverages.

Liability coverage is insurance that goes towards damage you’ve done to others.

Is Car Insurance Required?

Nearly every state requires you to have auto insurance to operate a vehicle on public roads. The exceptions are:

  • In New Hampshire, you can operate a vehicle without insurance if you first provide proof that you have the financial means to meet the state's financial responsibility requirements should you be at fault in an accident.

  • In Virginia, you can get an exception to the state's insurance requirement if you pay an annual uninsured motorist fee of $500. That fee does not provide you with any form of insurance coverage. You would be personally liable for costs resulting from an accident that you caused.

How Much Car Insurance Coverage Do I Need?

So, in the vast majority of states, the first question you should ask yourself is "how much liability car insurance do I need to meet the legal requirement?"

Liability coverage is required in most states and is generally described as three numbers separated by slashes, such as 25/50/25.

These numbers stand for the amount (in thousands) for the following:

  1. medical payments coverage per person

  2. total medical payments coverage for all people injured in a single accident and

  3. property damage liability coverage.

Some states have additional coverage requirements, like personal injury protection (PIP) or uninsured motorist protection (UM).

Required car insurance coverage level by state

Broken down by individual liability/total liability/property damage liability minimums, here are the minimum coverage requirements of each state:

State

Minimum Liability Requirements

Alabama

25/50/25

Alaska

50/100/25

Arizona

25/50/15

Arkansas

25/50/25

California

15/30/5

Colorado

25/50/15

Connecticut

25/50/25

District of Columbia

25/50/10

Delaware

25/50/10

Florida

10/10/10

Georgia

25/50/25

Hawaii

20/40/10

Idaho

25/50/15

Illinois

25/50/20

Indiana

25/50/25

Iowa

20/40/15

Kansas

25/50/25

Kentucky

25/50/25

Louisiana

15/30/25

Maine

50/100/25

Maryland

30/60/15

Massachusetts

20/40/5

Michigan

20/40/10

Minnesota

30/60/10

Mississippi

25/50/25

Missouri

25/50/25

Montana

25/50/20

Nebraska

25/50/25

Nevada

25/50/20

New Hampshire

25/50/25

New Jersey

15/30/5

New Mexico

25/50/10

New York

25/50/10

North Carolina

30/60/25

North Dakota

25/50/25

Ohio

25/50/25

Oklahoma

25/50/25

Oregon

25/50/20

Pennsylvania

15/30/5

Rhode Island

25/50/25

South Carolina

25/50/25

South Dakota

25/50/25

Tennessee

25/50/15

Texas

30/60/25

Utah

25/65/15

Vermont

25/50/10

Virginia

25/50/20

Washington

25/50/10

West Virginia

25/50/25

Wisconsin

25/50/10

Wyoming

25/50/20

Sources: Insurance Information Institute and individual states' motor vehicle departments

Some states have additional coverage requirements, like personal injury protection (PIP) or uninsured motorist protection (UM).

Coverage level costs by state

How much will it cost you to maintain the minimum required amount of insurance?

The answer varies a great deal. Not only do states have different liability coverage limits, but different driving and economic conditions in each state affect the price of coverage.

The chart below shows typical insurance price levels for each state for both the minimum required amount of coverage in that state and full coverage including collision and comprehensive coverage as well.

State

Liability Only

Full Coverage

Alabama

$59.05

$77.73

Alaska

$69.89

$135.63

Arizona

$65.96

$91.27

Arkansas

$55.99

$122.44

California

$83.09

$158.06

Colorado

$65.76

$107.34

Connecticut

$93.57

$150.10

District of Columbia

$101.20

$182.47

Delaware

$79.54

$139.30

Florida

$134.26

$206.29

Georgia

$91.07

$127.46

Hawaii

$56.07

$117.75

Idaho

$39.58

$51.38

Illinois

$60.81

$107.37

Indiana

$43.81

$92.52

Iowa

$39.51

$59.74

Kansas

$49.32

$88.20

Kentucky

$65.67

$128.88

Louisiana

$133.98

$182.03

Maine

$38.81

$74.08

Maryland

$102.86

$131.35

Massachusetts

$60.33

$119.51

Michigan

$93.51

$183.76

Minnesota

$56.62

$89.46

Mississippi

$67.63

$69.58

Missouri

$56.67

$87.67

Montana

$47.22

$83.12

Nebraska

$38.52

$70.61

Nevada

$93.69

$110.10

New Hampshire

$52.90

$100.97

New Jersey

$120.84

$176.24

New Mexico

$67.65

$84.28

New York

$126.15

$218.94

North Carolina

$46.25

$59.22

North Dakota

$41.67

$71.64

Ohio

$46.67

$89.56

Oklahoma

$72.45

$116.79

Oregon

$67.89

$75.33

Pennsylvania

$55.12

$157.08

Rhode Island

$108.75

$119.46

South Carolina

$64.80

$104.71

South Dakota

$41.33

$83.94

Tennessee

$62.96

$59.23

Texas

$80.61

$128.55

Utah

$66.05

$79.02

Vermont

$42.62

$90.25

Virginia

$54.87

$90.50

Washington

$64.35

$73.73

West Virginia

$67.31

$96.04

Wisconsin

$43.38

$67.85

Wyoming

$41.07

$102.49

Source: Internal SmartFinancial quote data

How Much is Car Insurance? - Compare Top Companies Rates

Typical Car Insurance Coverage Types

Remember, all liability coverages apply only to other people and their property - not to your car or the people in it. Collision and comprehensive together (full coverage) would cover your damages and injuries.

With all forms of coverage, the question isn't just what type of coverage you have, but what the dollar limit on that coverage is. Many car owners choose to go well beyond the legal minimum limits to better protect themselves from paying for losses out-of-pocket.

What Coverage Amount Is Best?

The state minimums discussed above tell you how much liability insurance you'd need to legally operate a car, but is that enough?

State liability coverage limits fall well short of what your actual liability in an accident could be. Take a closer look at what liability insurance actually covers, and it's easy to see why you might need more than the minimum.

What does 100/300/100 mean?

Alaska and Maine have the highest minimum liability coverage limits at 50/100/25. Yet insurance experts commonly recommend coverage at the 100/300/100 level.

The following breaks down what each of those individual coverage limits means, and why it may provide you with more complete coverage than your state's minimum.

Injury liability per person coverage limit

State-mandated individual injury liability coverage limits are as low as $10,000. In the case of a serious accident requiring extensive treatment, medical bills might be several times that amount.

A $100,000 coverage limit on medical bills per person would give you much more protection against having to make up any shortfall out of your own pocket.

Total injury liability coverage limit

Not only might the medical expenses for any one person run much higher than mandatory coverage limits, but most states set the total limit for all injuries at just twice the individual limit. This essentially assumes that no more than two people would be injured in a car crash.

Considering that there are more than two people in the average household according to US Census data, that assumption may be a little unrealistic. When you think about the size of today's minivans and SUVs, plus the possibility of more than one other vehicle being involved if you cause an accident, the potential for injuries clearly goes beyond just two people.

By setting the total injury limit at three times the per-person maximum, a 100/300/100 coverage recommendation does a somewhat more realistic job than state minimums of covering your potential liability.

Property damage coverage limit

State minimums for property damage liability range between $5,000 and $25,000. Considering that Kelly Blue Book recently estimated the average new car price at a little over $47,000, this could easily leave you well short in the case of a serious accident - especially if several cars are involved.

A 100/300/100 recommendation would cover you against $100,000 in damage to other people's property. That would leave you with a much lower chance of having to pay a substantial amount of money out of pocket.

Insurance experts commonly recommend coverage at the 100/300/100 level.

Which States Require Additional PIP and UM Coverage?

Beyond requiring insurance coverage for liability to others, some states also require you to carry some insurance that protects you, your passengers and your property. Common additional coverage requirements are known as PIP and UM insurance.

Where is PIP coverage required?

Personal injury protection (PIP) coverage pays medical bills for you and passengers in your car regardless of who's at fault in an accident.

The following 17 states require some level of PIP coverage, according to the Insurance Information Institute:

States Requiring PIP Coverage:

  • Arizona
  • Delaware
  • Florida
  • Hawaii
  • Kansas
  • Kentucky
  • Maryland
  • Massachusetts
  • Michigan
  • Minnesota
  • New Jersey
  • New York
  • North Dakota
  • Oregon
  • Pennsylvania
  • Texas
  • Utah

Where Is UM/UIM coverage required?

Uninsured motorist coverage (UM) applies to your damages and medical expenses if you are in an accident where the person at fault was uninsured. The Insurance Research Council estimated that 12.9% of US motorists are uninsured.

A related form of insurance is underinsured motorist coverage (UIM). This applies to your damages and medical expenses if the driver who was at fault did not have enough insurance to cover those expenses.

The following is a table of states which required UM and/or UIM coverage, according to the Insurance Information Institute:

State

Uninsured Motorist (UM) Coverage Required?

Underinsured Motorist (UIM) coverage required?

Connecticut

Yes

Yes

District of Columbia

Yes

Illinois

Yes

Yes

Kentucky

Yes

Yes

Maine

Yes

Yes

Maryland

Yes

Yes

Minnesota

Yes

Yes

Missouri

Yes

Nebraska

Yes

Yes

New Jersey

Yes

Yes

New York

Yes

Yes

North Carolina

Yes

Yes

North Dakota

Yes

Yes

Oregon

Yes

Yes

South Carolina

Yes

Yes

South Dakota

Yes

Yes

Vermont

Yes

Yes

Virginia

Yes

Yes

West Virginia

Yes

Yes

Wisconsin

Yes

Is Gap Insurance Needed?

Guaranteed asset protection insurance, commonly known as gap insurance, can keep you out of a financial hole if you're in an accident driving a leased vehicle or a new car which you've financed.

Gap insurance can save you from having to continue to pay off a loan or a lease on a car after an accident or theft.

Cars that are leased or have loans on them are required to have comprehensive and collision insurance coverage. This covers the financial risk to the lender using the car as collateral or the company that leased you the vehicle.

However, that insurance can fall short if the market value of the car is less than what you still owe on the loan. This can happen because new cars tend to depreciate very quickly.

If your car's value is less than what you owe on a loan or your remaining lease obligation, insurance won't be able to fully pay off those amounts if the car is totaled or stolen. This situation creates a gap which gap insurance addresses.

Gap insurance is only available for new cars, which are financed by loans, and leased vehicles Gap insurance covers any remaining amount that is not covered by comprehensive or collision insurance if the car is totaled or stolen.

Gap insurance can save you from having to continue to pay off a loan or a lease on a car which you can no longer use because of an accident or theft.

What Other Coverages Are Offered?

While liability coverage is required by most states, there are other forms of insurance coverage that can protect you from damage to your vehicle or injury to the people in it.

PIP and UM are required in a few states, but are optional in others. Gap coverage is also optional and may serve new car owners who are leasing or financing their new ride.

Here are some other types of insurance you may consider:

  • Collision coverage pays for damage to your vehicle due to a collision with another vehicle or object.

  • Comprehensive coverage pays for losses from things like theft, vandalism or hitting an animal.

  • Rental reimbursement coverage pays for renting a car while your car is being repaired or replaced due to damage in an accident.

  • Medical payments coverage helps pay for medical bills or funeral services regardless of who's at fault in an accident.

With each of these types of insurance, the coverage limits on your auto insurance policy will determine whether that policy will pay the full cost in these situations or just contribute towards it.

When Does It Make Sense To Have Liability-Only Coverage?

Having just liability coverage rather than more extensive insurance is cheaper, but it puts you at greater risk of having to pay for damages if there is an accident.

It may make sense to take that risk in the following three scenarios:

  1. Car owners on low budgets may have no choice but to opt for liability-only coverage.

  2. People with vehicles with low market values may find that the added cost of collision or comprehensive insurance is not worth the extra coverage it provides.

  3. Drivers who drive very little and store their cars in a secure place might feel that the risk of damage or theft is low relative to the added cost of going beyond liability coverage.

To get an indication of whether you have enough coverage, try the SmartFinancial "how much car insurance do I need" calculator. This will show you how much insurance people in similar situations usually get.

How Much Car Insurance Do I Need? FAQs

Why would I want more than the legal minimum coverage?

Think of more coverage as an investment in protecting your financial security. Your liability in an accident can easily exceed the minimum required amounts of liability coverage. Also, liability insurance would not cover the costs you would incur in an accident if you're at fault.

Why should I be insured for more than my car is worth?

First, your liability in an accident is related to the worth of the other vehicle you hit. Second, if you've financed a new car or leased a vehicle, you may owe more on the car than it's worth.

How can I get more coverage without raising my premiums?

Insurance is a competitive business with lots of providers to choose from. Quotes for the exact same level of insurance can vary by hundreds of dollars. Do some shopping around to see if you could get more coverage without raising your premiums. At the very least, you should be able to minimize how much more you'd have to pay for additional coverage.

Finding the Right Amount of Coverage

Look at minimum liability coverage requirements, but also coverages that may protect you if you are ever involved in an accident. When able, raise your liability limits higher than the state minimum requirement and see which coverages may serve to protect your car and passengers as well.

More coverage doesn't necessarily mean paying more than you're paying now. Shopping around for the most competitive rates may help you find fuller coverage for the same or less money than your current policy costs. For free car insurance quotes, just enter your zip code below and answer a few questions to get started.

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