Choosing the right amount of car insurance is essential for your peace of mind on the road. It’s not just about meeting legal requirements; it’s about protecting yourself financially in case of a car accident. Factors like state laws, your vehicle’s value, and personal assets all play a role in determining the optimal coverage. Understanding how much car insurance you need empowers you to make informed decisions for your safety and financial well-being.
Ready to see if you may qualify? Click here to get a FREE, no-obligation consultation before starting your claim.
Recommended Auto Insurance Coverage: Key Takeaways
- State Minimums May Not Be Enough: Minimum coverage often falls short in covering all expenses after an accident.
- Assess Your Assets: Your net worth should guide how much liability coverage you purchase.
- Consider Optional Coverages: Uninsured motorist, PIP, collision, and comprehensive insurance offer additional protection.
- Understand Coverage Limits: Liability limits like 25/50/15 may be insufficient; higher limits provide better security.
- Evaluate Deductibles Carefully: Choosing the right deductible balances premium costs with out-of-pocket expenses.
How Much Car Insurance Do I Need?
Determining the right amount of car insurance involves more than just adhering to state laws. While states require minimum liability coverage to legally drive, these amounts often aren’t sufficient to cover the costs of a serious accident. For instance, if your state’s minimum bodily injury liability is $15,000 per person, but the average injury claim is over $26,000, you could be personally responsible for the difference.
Assess your financial situation, including your assets and savings. If you’re involved in an at-fault accident, inadequate coverage could lead to lawsuits that jeopardize your financial stability. Choosing higher liability limits, such as $100,000 per person and $300,000 per accident, offers greater protection and peace of mind.
What Car Insurance Coverage Do I Need?
Selecting the appropriate car insurance coverage depends on your individual needs and circumstances. Beyond the mandatory liability insurance, consider coverages that protect your vehicle and personal well-being:
- Collision Coverage: Pays for damage to your car from collisions, regardless of fault.
- Comprehensive Coverage: Covers non-collision incidents like theft, fire, or natural disasters.
- Uninsured/Underinsured Motorist Coverage: Protects you if you’re hit by a driver without adequate insurance.
- Personal Injury Protection (PIP): Covers medical expenses and lost wages for you and your passengers, regardless of fault.
- Medical Payments Coverage (MedPay): Pays for medical bills after an accident, supplementing health insurance.
Evaluate each option based on factors like your car’s value, your health insurance, and your risk tolerance.
Car Insurance Requirements By State
Car insurance laws vary significantly across states, dictating the minimum coverage drivers must carry. Here’s a snapshot of different state requirements:
| State | Bodily Injury Liability (per person/per accident) | Property Damage Liability (per accident) | Other Requirements |
| Alabama | $25,000 / $50,000 | $25,000 | None |
| Alaska | $50,000 / $100,000 | $25,000 | None |
| Arizona | $25,000 / $50,000 | $15,000 | None |
| Arkansas | $25,000 / $50,000 | $25,000 | None |
| California | $15,000 / $30,000 | $5,000 | None |
| Colorado | $25,000 / $50,000 | $15,000 | None |
| Connecticut | $25,000 / $50,000 | $10,000 | Uninsured Motorist (UM) required |
| Delaware | $25,000 / $50,000 | $10,000 | Personal Injury Protection (PIP) required |
| Florida | $10,000 / $20,000 | $10,000 | Personal Injury Protection (PIP) required |
| Georgia | $25,000 / $50,000 | $25,000 | None |
| Hawaii | $20,000 / $40,000 | $10,000 | None |
| Idaho | $25,000 / $50,000 | $15,000 | None |
| Illinois | $25,000 / $50,000 | $20,000 | Uninsured Motorist (UM) required |
| Indiana | $25,000 / $50,000 | $25,000 | None |
| Iowa | $20,000 / $40,000 | $15,000 | None |
| Kansas | $25,000 / $50,000 | $25,000 | None |
| Kentucky | $25,000 / $50,000 | $25,000 | None |
| Louisiana | $15,000 / $30,000 | $25,000 | None |
| Maine | $25,000 / $50,000 | $10,000 | Optional Personal Injury Protection (PIP) |
| Maryland | $30,000 / $60,000 | $15,000 | Uninsured Motorist (UM) required |
| Massachusetts | $20,000 / $40,000 | $5,000 | Personal Injury Protection (PIP) required |
| Michigan | $250,000 / $500,000 | $50,000 | Personal Injury Protection (PIP) required |
| Minnesota | $30,000 / $60,000 | $10,000 | Uninsured/Underinsured Motorist (UM/UIM) required |
| Mississippi | $25,000 / $50,000 | $25,000 | None |
| Missouri | $25,000 / $50,000 | $25,000 | None |
| Montana | $50,000 / $100,000 | $20,000 | None |
| Nebraska | $25,000 / $50,000 | $25,000 | None |
| Nevada | $25,000 / $50,000 | $20,000 | None |
| New Hampshire | No mandatory insurance, must prove financial responsibility | N/A | Optional Personal Injury Protection (PIP) |
| New Jersey | $15,000 / $30,000 | $5,000 | Personal Injury Protection (PIP) required |
| New Mexico | $25,000 / $50,000 | $10,000 | None |
| New York | $25,000 / $50,000 | $10,000 | Personal Injury Protection (PIP) required |
| North Carolina | $30,000 / $60,000 | $25,000 | None |
| North Dakota | $25,000 / $50,000 | $10,000 | None |
| Ohio | $25,000 / $50,000 | $25,000 | None |
| Oklahoma | $25,000 / $50,000 | $25,000 | None |
| Oregon | $25,000 / $50,000 | $20,000 | None |
| Pennsylvania | $15,000 / $30,000 | $5,000 | Personal Injury Protection (PIP) required |
| Rhode Island | $25,000 / $50,000 | $25,000 | Uninsured Motorist (UM) required |
| South Carolina | $25,000 / $50,000 | $25,000 | None |
| South Dakota | $25,000 / $50,000 | $10,000 | None |
| Tennessee | $25,000 / $50,000 | $15,000 | None |
| Texas | $30,000 / $60,000 | $25,000 | None |
| Utah | $25,000 / $50,000 | $15,000 | None |
| Vermont | $25,000 / $50,000 | $10,000 | None |
| Virginia | $25,000 / $50,000 | $20,000 | None |
| Washington | $25,000 / $50,000 | $10,000 | None |
| West Virginia | $25,000 / $50,000 | $10,000 | None |
| Wisconsin | $25,000 / $50,000 | $10,000 | None |
| Wyoming | $25,000 / $50,000 | $20,000 | None |
It’s crucial to know your state’s specific requirements, but remember that minimums are often insufficient for full protection.
Types of Auto Insurance Coverage
Understanding the different types of auto insurance coverage is crucial to building a policy that fits your needs. Each coverage type offers protection in specific situations, ensuring you’re not left paying out-of-pocket after an accident. By selecting the right mix of coverages, you can safeguard your finances and provide peace of mind while driving.
Liability Insurance
Liability insurance is the cornerstone of any auto insurance policy. It covers the costs if you’re responsible for an accident that injures someone else or damages their property. Without adequate liability coverage, you could face significant financial burdens, including medical bills and legal fees.
- Bodily Injury Liability: This covers medical expenses, rehabilitation, and sometimes legal fees if you’re sued due to an accident you caused. For example, if you rear-end another vehicle and the other driver sustains injuries, your bodily injury liability coverage will pay for their medical bills up to your policy limits.
- Property Damage Liability: This covers the cost of repairing or replacing another person’s property, such as their car, fence, or mailbox, if you’re at fault in an accident. For instance, if you accidentally hit a parked car, property damage liability will cover the repair costs of the other vehicle.
Example: If you rear-end another vehicle, your liability insurance would pay for the other driver’s medical bills and car repairs up to your policy limits. Without sufficient coverage, you might have to pay out-of-pocket for these expenses, which can be financially draining.
Uninsured Motorist Insurance
Uninsured Motorist (UM) insurance protects you if you’re hit by a driver who doesn’t have insurance. With a significant number of drivers operating without insurance, UM coverage is essential to ensure you’re not left covering costs that should be the other driver’s responsibility.
Coverage Includes:
- Medical Expenses: Pays for your medical bills and those of your passengers if you’re injured in an accident caused by an uninsured driver.
- Lost Wages: Compensates for lost income if you’re unable to work due to injuries from the accident.
- Pain and Suffering: Provides compensation for the physical pain and emotional distress resulting from the accident.
Why It’s Important: With about one in seven drivers uninsured, UM coverage ensures you’re not left covering costs that someone else should have paid. This coverage is particularly vital in areas with high rates of uninsured drivers.
Example: If you’re rear-ended by an uninsured driver, UM insurance would cover your medical expenses and car repairs, preventing you from facing substantial out-of-pocket costs.
Collision and Comprehensive Insurance
These coverages protect your vehicle from various types of damage, providing a safety net for repairs or replacement in different scenarios.
Collision Coverage:
- What It Covers: Pays for repairs to your car if you collide with another vehicle or object, regardless of who is at fault. This includes accidents like hitting another car, a tree, or a guardrail.
- When It’s Needed: Essential if you have a newer or more valuable car that you’d prefer to repair rather than replace out-of-pocket.
Comprehensive Coverage:
- What It Covers: Protects against non-collision incidents such as theft, vandalism, fire, falling objects, or natural disasters like hurricanes and floods. It also covers damage from hitting an animal, like a deer.
- When It’s Needed: Valuable for protecting your car against unpredictable events that can cause significant damage.
Deductibles: Both coverages require you to choose a deductible—the amount you pay out-of-pocket before insurance kicks in. Higher deductibles lower your premium but increase your costs after a claim.
Example: If a tree falls on your car during a storm, comprehensive coverage would pay for repairs after you pay your deductible. Similarly, if you hit a pothole and damage your car’s suspension, collision coverage would handle the repair costs.
Personal Injury Protection
Personal Injury Protection (PIP) covers medical expenses for you and your passengers, regardless of who caused the accident. It goes beyond standard medical payment coverage by also addressing other related expenses.
What It Covers:
- Medical Bills: Covers hospital stays, surgeries, and rehabilitation costs for you and your passengers.
- Lost Wages: Compensates for income lost due to injuries sustained in the accident.
- Funeral Costs: Pays for funeral expenses if a passenger dies in the accident.
- Essential Services: Covers costs for services like childcare or housekeeping if you’re unable to perform these tasks due to injuries.
States Requiring PIP: PIP is mandatory in no-fault insurance states, such as Florida and New York, ensuring that medical expenses are covered promptly without the need for lengthy legal processes.
Benefit: Even if you have health insurance, PIP can cover deductibles and co-pays, providing immediate financial relief and ensuring comprehensive coverage for a wide range of expenses.
Example: If you’re injured in a collision while driving, PIP would cover your medical bills, compensate for lost wages, and help pay for any necessary services you can’t perform due to your injuries.
Medical Expenses Coverage
Medical Payments Coverage (MedPay) helps pay for medical expenses after an accident, no matter who is at fault. While similar to PIP, MedPay typically offers lower coverage limits and fewer benefits.
Coverage Details:
- Medical Bills: Pays for doctor visits, hospital stays, and surgeries for you and your passengers.
- Funeral Expenses: Covers costs if a passenger dies in the accident.
- Coverage Limits: Typically range from $1,000 to $5,000 per person, making it a valuable supplement to your health insurance.
Ideal For: MedPay is especially useful if you have health insurance with high deductibles or limited coverage, as it can help cover out-of-pocket medical expenses not fully paid by your health plan.
Example: If you’re involved in a minor accident and incur $2,000 in medical bills, MedPay can help cover these expenses, reducing the financial burden on you and your family.
Optional Types of Insurance Coverage
While the standard auto insurance coverages provide essential protection, adding optional types of insurance can further safeguard your financial well-being and enhance your overall coverage. These optional coverages cater to specific needs and scenarios that may not be fully addressed by basic policies. By carefully selecting additional coverages, you can ensure comprehensive protection tailored to your lifestyle and circumstances.
Gap Insurance
Gap insurance is particularly beneficial if you have a car loan or lease and owe more on your vehicle than its current market value. In the event that your car is totaled or stolen, gap insurance covers the “gap” between what your standard auto insurance policy pays out based on the car’s actual cash value and the remaining balance on your loan or lease. Without gap insurance, you would be responsible for paying the difference out of pocket, which can be a significant financial burden. This coverage is essential for new cars that depreciate quickly, ensuring that you are not left with outstanding debt for a vehicle you no longer possess.
Rental Reimbursement
Rental reimbursement insurance provides coverage for a rental car while your vehicle is being repaired due to a covered claim, such as an accident. This optional coverage ensures that you remain mobile and can continue with your daily activities without incurring additional transportation costs. Typically, rental reimbursement policies come with daily limits and maximum payout amounts, so it’s important to choose a policy that aligns with your needs. For individuals who rely heavily on their vehicle for commuting or family transportation, rental reimbursement offers peace of mind by covering the inconvenience and expense of being without a car during repairs.
Roadside Assistance
Roadside assistance is an invaluable add-on for drivers who want extra support in case of unexpected vehicle issues. This coverage provides a range of emergency services, including towing, battery jump-starts, flat tire changes, fuel delivery, and lockout assistance. Having roadside assistance ensures that you are not stranded in inconvenient or potentially unsafe situations if your car breaks down or you encounter minor mishaps on the road. This coverage is especially useful for those who frequently drive long distances, travel in remote areas, or simply want the reassurance that help is just a phone call away.
Rideshare Insurance
For individuals who drive for ridesharing services like Uber or Lyft, standard personal auto insurance policies may not offer adequate coverage during work hours. Rideshare insurance is designed to bridge the gap between personal auto policies and the limited coverage provided by rideshare companies. This specialized insurance ensures that you are protected whether you are actively driving a passenger, waiting for a ride request, or have just dropped someone off. Rideshare insurance covers incidents that occur during these times, providing comprehensive protection and reducing the risk of financial loss due to accidents or damages that occur while you are engaged in ridesharing activities.
Is Minimum Car Insurance Enough?
Relying solely on the minimum car insurance required by your state might seem like a cost-effective approach, but it often leaves you vulnerable to significant financial risks. Minimum coverage typically includes only the basic liability insurance needed to comply with legal requirements, which may not be sufficient to cover all expenses in the event of a serious accident. For instance, if you cause an accident that results in substantial property damage or severe injuries to others, the costs can quickly exceed the limits of your minimum coverage, forcing you to pay the difference out of pocket.
In addition to financial strain, insufficient insurance can lead to legal complications. If the damages exceed your coverage limits, you might be sued for the remaining amount, which can impact your credit score and lead to wage garnishment or asset seizure. Furthermore, minimum insurance does not protect your own vehicle or cover your medical expenses, leaving you to bear the full burden of repair costs and healthcare bills.
Investing in higher coverage limits and additional protections, such as uninsured motorist coverage or comprehensive and collision insurance, provides a more robust safety net. This comprehensive approach not only safeguards your financial assets but also ensures that you have the necessary support to recover and rebuild after an accident. Ultimately, while minimum car insurance meets legal obligations, it falls short in offering the comprehensive protection needed to fully secure your financial well-being and peace of mind on the road.
What Types of Car Insurance Are Mandatory?
Understanding the mandatory types of car insurance is essential to ensure you comply with state laws and protect yourself financially on the road. Here are the most types of mandatory car insurance coverages, though it varies from state to state which insurance types are mandatory:
- Liability Insurance: Covers the costs if you cause an accident that injures someone else or damages their property. It is required in almost every state to legally operate a vehicle.
- Uninsured/Underinsured Motorist (UM/UIM) Coverage: Protects you if you’re hit by a driver who doesn’t have insurance or doesn’t have enough insurance to cover the damages. This coverage is required in several states to ensure you aren’t left financially responsible.
- Personal Injury Protection (PIP): Covers medical expenses, lost wages, and other related costs for you and your passengers, regardless of who caused the accident. PIP is mandatory in no-fault states like Florida and New York.
Failing to carry these mandatory types of car insurance can result in serious penalties, including fines, license suspension, and even jail time in some cases. Additionally, driving without the required insurance can leave you financially exposed in the event of an accident, making it crucial to understand and comply with your state’s specific insurance requirements.
What States Require PIP and UM Coverage?
Several states mandate specific types of car insurance to ensure drivers are adequately protected. Personal Injury Protection (PIP) is required in no-fault states such as Florida, Michigan, New Jersey, New York, and Pennsylvania. In these states, PIP covers medical expenses, lost wages, and other related costs for you and your passengers, regardless of who is at fault in an accident.
Uninsured/Underinsured Motorist (UM/UIM) Coverage is mandatory in states like Connecticut, Illinois, Maryland, Massachusetts, and Minnesota. This coverage protects you if you’re involved in an accident with a driver who either has no insurance or insufficient coverage to pay for the damages and injuries they cause.
Understanding your state’s specific requirements for PIP and UM/UIM coverage ensures you remain compliant with the law and are financially protected in the event of an accident.
What Deductible Should I Choose?
Choosing the right deductible is important because it affects both your insurance premiums and how much you’ll pay out-of-pocket if you have a claim. A deductible is the amount you agree to pay before your insurance covers the rest of the costs.
If you choose a higher deductible, your monthly premiums will be lower. This option is good if you have enough savings to cover the deductible in case of an accident. For example, a $1,000 deductible can reduce your premium, saving you money each month.
On the other hand, a lower deductible means you’ll pay more each month, but you’ll have to spend less if you need to file a claim. This is a better choice if you prefer predictable expenses and want to minimize your out-of-pocket costs after an accident.
Consider your financial situation and how much you can afford to pay in case of an accident when selecting a deductible. Balancing your premium costs with potential expenses ensures you choose a deductible that fits your budget and provides adequate protection.
Finding the Right Balance in Auto Insurance Coverage
Securing the appropriate amount of auto insurance is not just about meeting legal requirements; it’s about safeguarding your financial future and peace of mind. By assessing your individual needs and considering factors like your car’s value and personal assets, you can avoid the pitfalls of being underinsured or overpaying for unnecessary coverage. Making informed decisions on your car insurance ensures that you’re adequately protected on the road, providing confidence and security every time you drive.
Ready to see if you may qualify? Click here to get a FREE, no-obligation consultation before starting your claim.
Car Accident Insurance & Injury Claim FAQs
Note: This article was last updated in October 2022 with the latest statistical data. Most people go their whole lives without getting hurt in a car accident — and thank goodness for that! But for those who are injured, deciding what to do next can be difficult. You may have already filed an insurance claim, and now you’re wondering if you made the right decision. If you’ve ever wondered whether getting a lawyer is better than filing an insurance claim for car accident injuries, we think you’ll find the information below quite helpful.
Q: Can I cancel my car accident insurance claim after talking to a lawyer about my options?
A: Yes, so long as you didn’t cause the accident. Three good reasons to do this are: 1) if your car damage costs about the same amount as your deductible; 2) you can’t afford to pay your deductible; or 3) you want to recoup 100% of your car accident injury and property damage costs.
Canceling an auto insurance claim will probably prevent your insurer from raising your premium rate. However, any insurance claim that you file stays on your driving record — even if you cancel it. The good news is, canceling a claim before your insurer pays it can sometimes lower your insurance costs.
Q: If insurance will cover my car repair cost and medical bills, why do I need a lawyer?
A: One word: damages. “Damages” is a legal term for all money an injured person lost due to an auto accident. Examples include:
- medical bills
- prescriptions
- unpaid time off from work
- time and costs involved with a lengthy recovery from your injuries
- pain and suffering
Insurance policies only cover about 54% of car accident costs, according to National Highway and Traffic Safety Administration (NHTSA) data. What does that mean, exactly? Well, most insurance policies do cover hospital bills for anyone injured. However, most insurers will not pay for a physical therapist afterwards.
If a lawyer files your injury claim, you’re far more likely to recover 100% of costs associated with your car accident. That’s because personal injury lawyers work to recover the maximum amount in damages from all responsible parties. In 2020, the average car insurance bodily injury claim paid $20,235. In most cases, a lawyer secures a significantly larger payout than what insurance companies offer to claimants without representation.
Q: How does a lawyer estimate the total amount of damages owed for my car accident injuries?
A. Lawyers follow a careful process for estimating the full damages owed after an auto accident. They add up all medical bills — including hospital stays, lab fees, prescription drugs, and visits to a rehabilitation specialist. Then, they include compensation for any lost wages, pain and suffering or emotional distress that you experienced. Finally, if the liable driver can’t pay the full amount owed at once, your lawyer can calculate an appropriate structured settlement plan. That means receiving a set dollar amount in regular installments over time.
Q: Won’t filing an auto accident injury claim take longer to settle than dealing with the insurance company directly?
A: If you’re seriously hurt in a car wreck and the driver at fault has full coverage, the insurer’s job is to settle for the lowest acceptable amount. Their goal is to save money by paying out less than they earn in monthly insurance premiums. To get you to accept their lowest offer, they may say you were either fully or partially at fault. They may suggest this to avoid paying you the full amount that you feel your injuries deserve.
Insurers may assert your estimated damages aren’t justified, or that you submitted unclear or inaccurate documentation. If the insurance company’s first settlement offer seems low, you’ll have to keep negotiating until you can both agree on an amount that seems fair to you. But if you’re recovering from a serious injury, you’re probably better off letting an experienced lawyer negotiate a settlement for you.
Q: Once I pay legal fees, won’t I actually get more money by filing an insurance claim?
A: It depends. Did your car accident injure anyone else? Could that person counter-sue you or your insurance provider? Will your premiums go up more than you can afford? Can the insurance company cancel your policy for filing a bodily injury claim? Many car insurance policyholders think they decide whether to renew their policies or not. However, insurers can decide to stop covering you at your next renewal date.
How old are you, and is your driving record otherwise perfect? Every car accident that results in an injury is unique. It costs nothing to have a lawyer review your case before accepting an insurance company’s settlement offer — so why wouldn’t you? Studies show that people with lawyers handling their claims receive up to 3.5x more money, on average, than those who settle directly with insurers.
Ready to see if you may qualify? Click here to get a FREE, no-obligation consultation before starting your claim.
Shay Fleming is the SEO Content Manager at LeadingResponse. A proud graduate of Texas State University, she has been based in Austin since 2016, where she lives with her dog. Shay has contributed extensively to various domains, writing and publishing articles about real estate, investing, disability, and urban living.