How Much Car Insurance Do You Really Need?

Buying only the minimum required by your state keeps your premium low, but it can leave you personally responsible for thousands of dollars after a serious accident. Here is how to decide how much car insurance you actually need.

Start with your state’s minimum

Almost every state requires liability insurance, and the required limits vary widely. Some states also require uninsured motorist coverage or personal injury protection. Your state department of insurance or DMV lists the exact requirements.

Why the minimum is often not enough

Minimum limits can be as low as $25,000 per person for injuries. A hospital stay, surgery or lost wages after a serious crash can quickly exceed that amount. If the damages go beyond your limits, the injured person can seek the difference from you personally, including your savings and future income.

A practical way to choose liability limits

• Few assets: choose more than the minimum if you can afford it, such as 50/100/50.
• Homeowners and people with savings: many experts suggest at least 100/300/100.
• High net worth: consider 250/500/100 or higher, plus an umbrella policy.

Do you need collision and comprehensive?

If you lease or finance your car, your lender will almost certainly require both. If you own your car outright, ask yourself whether you could afford to repair or replace it without insurance. For newer or valuable cars, the answer is usually no, so keep the coverage.

Uninsured and underinsured motorist coverage

A significant share of U.S. drivers are uninsured, and many more carry only low limits. UM/UIM coverage protects you and your passengers in that situation and is usually inexpensive compared with the protection it offers. Many advisors suggest matching it to your own liability limits.

Useful extras

• Gap insurance: covers the difference between your car’s value and what you still owe on a loan or lease.
• Rental reimbursement: pays for a rental car while yours is being repaired after a covered claim.
• Roadside assistance: towing, jump-starts and lockouts, unless you already have it through another service.

Summary

Buy liability limits that protect what you own, keep physical damage coverage while your car is valuable, and add UM/UIM coverage. Then lower your cost with discounts and the right deductible. See our auto insurance guide for the basics.

This article is for general information only and is not insurance, legal or financial advice. Rules and prices vary by state and insurer. Check your policy and talk to a licensed agent before making changes.