IN PLAIN ENGLISH

How much car insurance do you need? The simple answer: as much as you can afford.

Everyone's needs are different, but that doesn't mean that you can't protect yourself from unforeseen financial trouble resulting from car accidents. How much coverage do you need? Just like most everything else concerning car insurance, it varies. But we are here to guide you in the right direction. Below you'll find a breakdown of the different types of coverage and our suggestions for the amounts you should carry.

 

How much liability insurance do I need?

Probably more than you think. Generally, we recommend $50,000/$100,000/$50,000 and for people who own a home the recommended amount is $100,000/$300,000/$100,000. Below are some rates for an insurance policy with liability limits set at 100/300/100.

InsurerAverage Annual Premium
Allstate$2,021
Farmers$1,647
GEICO$1,289
Liberty Mutual$2,074
Progressive$1,799
State Farm$1,731
USAA$1,046

 

It's important to understand what liability coverage does for you in the event of an accident. Liability is third-party coverage and pays for injuries to another driver or their passengers as well as damage to the vehicle they are driving. Liability insurance is broken down into two sections: bodily injury liability and property damage liability. Bodily injury liability covers any physical harm that you may cause to another driver, up to your coverage limits. Property damage liability covers damage you cause to another person's car or other personal belongings.

The reason liability coverage is so important is because it protects you from financial burden if you are at fault in an auto accident. Even a very minor accident can result in thousands of dollars worth of damage. What liability does NOT do is provide an unlimited amount of coverage.

When purchasing an auto policy you are agreeing to the terms of coverage you select and you can choose varying amounts of insurance depending on your financial exposure. If you are someone who has a large asset such as a house, then your exposure to financial risk is much greater than someone who rents their current residence. The point of auto insurance is to protect yourself from a catastrophic financial burden, but if you don't purchase enough coverage then you could be leaving yourself open to civil litigation and potentially lose your home or other assets to pay what you owe.

Learn how to estimate your liability coverage needs.

 

How much uninsured motorist coverage (UIM) do I need?

It is generally recommended to keep your uninsured/underinsured motorist coverage high and as close to your liability limits as possible.

Currently, 20 states mandate that drivers carry uninsured motorist coverage as part of their minimum insurance requirement. This is great news for people insured in those 20 states because if they suffer an injury as a result from being hit by an at-fault and uninsured driver, they are covered with a state minimum policy. Even if your state does not require uninsured motorist coverage it is still a smart idea to carry it to protect yourself against the 13% or roughly 30 million uninsured drivers on the road. With liability insurance, you'll want to carry enough coverage to pay for the injuries that you cause to others. However, with uninsured motorist coverage, you and your passenger's injuries are what you should consider when determining how much you need.

In the majority of cases, your limit of uninsured motorist coverage cannot exceed the limit of liability on your policy. Often the minimum amount is not sufficient enough to pay for all injuries resulting from a car accident, so consider increasing the amount as needed. Uninsured motorist coverage protects your passengers too so you'll want to take that into consideration when determining how much coverage you need. Even if your state doesn't require that you carry uninsured motorist coverage on your policy it's still a good idea to add it. 

Underinsured motorist coverage is another great coverage to consider. Because basic liability coverage requirements are quite low in many states, underinsured coverage can be quite helpful if a motorist's liability limits are too low to cover the full extent of the damage. This coverage kicks in when the at-fault driver's liability limits have been exhausted and help to cover costs related to medical expenses or property damage.

 

How much medical payments coverage do I need?

Many consumers don't understand the difference between uninsured motorist coverage and medical coverage on their auto policies, but the main differentiating factor is fault in an accident. Uninsured motorist coverage pays for you and your passengers' injuries if you are hit by someone else who is at fault and doesn't have liability. Medical payments coverage is for you and your passengers' injuries when you are the at-fault driver in an accident. 

The other difference between these two sets of coverage is the way they are displayed on your policy. Uninsured motorist will be listed as a split limit just like liability. An example of this would be $25,000/$50,000 meaning a per person injury limit for the first number and a per accident amount of injury coverage for the second number. Medical payments coverage amounts will be listed as a single, per person limit without a per accident limit so it can cover all the people in your vehicle up to that amount individually. The most common options are $500, $1,000, $2,000, $5,000, and $10,000.  

As with liability and uninsured motorist you should carry as much medical payments coverage as you can afford to protect yourself from unforeseen injuries resulting from auto accidents. If you ever need it, the value of the coverage will significantly outweigh the cost on your policy.  

 

Do I need full coverage?

If you're leasing, financing, or have a valuable vehicle - yes. On average, you should expect "full" coverage to cost $720 for a standard 6-month policy for $1,440 annually.  

Car Insurance CompanyAverage Six-Month Premium
Allstate$786
Geico$709
Farmers$677
Liberty Mutual$736
Nationwide$644
Progressive$729
State Farm$748
USAA$734

 

Let's start with the simple fact that there is no such thing as full coverage. Comprehensive and collision is coverage that is specific to repairing the damage that was caused to your vehicle. If you are financing a vehicle (read: making payments) then you more than likely will be required to carry comprehensive and collision coverage in addition to the minimum coverage required by your state (you can read more about full coverage here). Since comprehensive and collision is described as a deductible and not a specific dollar amount of coverage on your policy, choosing this coverage is a bit different. 

Most insurance companies will offer deductible options of $100, $250, $500, and $1,000 for physical damage coverage (comp and collision). The deductible amount and cost of the coverage are inverse meaning that the higher your deductible the lower your rate and vice versa. Cost should not be the only factor in determining your deductible since the one you choose is what you have to pay if you ever file a claim. If it's relatively easy for you to come up with $1,000, then financially it makes the most sense to select a high deductible because that will be the lowest rate. If it would be extremely taxing or impossible to pay for a large deductible, then you should opt for a lower deductible like $250. The cost of your policy will be higher, but if you select a deductible that you knowingly wouldn't be able to pay in the event of a claim, your vehicle repair will not begin until you can afford it.

Keep in mind that collision and comprehensive coverage is based on an actual cash value (ACV) basis, which means you can't buy "more" coverage for your vehicle since the payout is determined by the value of it at the time of an accident minus depreciation. If your 5-year-old car is totaled you shouldn't expect to be paid what the car was worth when it was brand new. 

 

What about additional coverages like rental car reimbursement and roadside assistance?

 

Do you need roadside assistance?

One of the worst things a driver can experience is being stranded on the road after a breakdown, flat tire, or running out of gas. The best way to combat this potential issue is to carry roadside assistance from your insurance company. Most companies offer this beneficial coverage at a reasonable cost to your policy so it is definitely something you should consider adding. A few words of caution: make sure you are aware of the type of roadside coverage you are getting.

Not all roadside assistance options are created equal and there can be gaps or exclusions to certain types of events. If your company says you have "towing and labor" coverage you should make sure that this also includes lock-out service for your keys, battery jumps, tire change assistance, etc. The last thing you want is to be surprised by the things your roadside service does not cover when it matters most. The same can be said for rental car reimbursement.

See our guide here for a full comparison of different roadside assistance programs.

 

Do I need rental reimbursement coverage?

The majority of car owners use their vehicles to commute to work so suddenly being without a means of transportation can be devastating to your income. In the event that your vehicle is hit by another driver and they are deemed to be at fault, a rental car is normally covered by the at-fault driver's insurance while your vehicle is being repaired. If you were to be at fault in an accident or had damage caused to your vehicle by a weather event then you would be responsible for your own temporary transportation while your vehicle is being repaired. This is where rental car reimbursement can be extremely valuable since, much like roadside assistance, it can provide a great deal of value for a fairly low cost. Coverage is normally offered in daily limits over a 30 day period ($30/day with a max of $900) or one full month ($900 over 30 days). The important thing to consider with this type of coverage is that it's REIMBURSEMENT meaning that you will have to pay for the rental upfront and submit your receipt to your insurance company to be paid back for your expenses. 

As with any part of your coverage, if you aren't sure what something means; ask. You should be aware of what you are getting and not getting on your policy to avoid potential issues down the road. A good agent will discuss your policy in detail, but if you need a better explanation you should ask for clarification until you are firm in your understanding. Being prepared is always the best defense against the unknown.

 

Car insurance considerations

While the level of car insurance coverage that you choose will ultimately depend on your specific needs, having more than you think you might actually need is probably a good idea. If you are worried about the cost of adding to your auto insurance coverage, know that it doesn't have to be outrageous. Shopping around for a new car insurance policy can be a great way to find better coverage at a lower rate. Car insurance quotes are free and easy to find. The Zebra can help you find dozens of quotes that can lead to you the insurance policy that is right for you.

 


 

Ava Lynch LinkedIn

Based in Austin, TX, Ava has been in the insurance industry as a licensed agent for 4-plus years. Ava is currently one of The Zebra’s resident property insurance experts and has been featured in publications such as US News Report, GasBuddy, and Yahoo! Finance.

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Recent Questions:

I signed up for a new insurance policy, but why doesn't the quote doesn't match the policy I signed up for?

The first thing you'll want to do is to check your policy's declaration page to see the exact coverage that you currently have. This may be a physical document or, if your insurer has an app, could be electronic. If you find that your coverage is insufficient, you should start shopping for a new policy or look to add coverage from your current insurer.

Can I insure an RV bought from a friend if the loan is in her name?

This situation could cause a few issues. You cannot insure property that you do not own.

I own my car but it's still insured under my dad. Will his insurance cover my accident?

I would reach out to your dad's insurance provider to see if you can be covered. They may be willing to cover the accident since the policy is still active. If you have any questions, feel free to ask.

How much car insurance coverage do I need and should I get umbrella insurance?

We generally recommend basing your liability needs on your assets. From the information you've given, I would say that maxing out your liability limits and getting an umbrella policy is probably a wise decision since you own your home and vehicles and have a high net worth.

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