Insurance

How much car insurance do you need?

hero image

You know you need insurance. But how much insurance coverage do you really need? In the insurance world, there's an arcronym CYA which stands for “cover your assets.” That little bit of wisdom is at the heart of determining how much insurance is necessary.

So when you encounter various types of coverage, it’s worth thinking about what exactly you must protect. With a basic understanding of each coverage and what your state or lender requires, you’ll be well on your way to picking the right amount of coverage.

An overview of car insurance coverages

Here’s a breakdown of the most common car insurance coverages:

Coverage What does it cover? Is it required?
Liability insurance Injuries and property damages you cause In every state but New Hampshire and Virginia
Collision coverage Damage to your car caused by a collision with another vehicle or object Only if you lease or finance your vehicle 
Comprehensive coverage Damage to your car by things other than a collision, such as fire, vandalism or weather. Only if you lease or finance your vehicle
Medical payments (MedPay) coverage Medical bills for you and your passengers Only in Maine and New Hampshire 
Personal injury protection (PIP) Medical bills, lost wages, funeral expenses, and more for you and your passengers Only in some states
Uninsured/underinsured motorist (UM/UIM) Medical bills when you’re hit by a driver with no or too little insurance Only in some states

How much liability insurance do you need?

What it covers: Liability insurance covers bodily injuries and property damage you cause to others after an accident. 

Required?: Yes, in every state but New Hampshire. However, state requirements are often set so low that they may not be adequate for your needs. For example, the most common state minimum liability limits are $25,000/$50,000/$25,000, meaning:

  • $25,000 bodily injury coverage per person
  • $50,000 bodily injury coverage per accident
  • $25,000 property damage coverage per accident

Recommendation: Purchase sufficient liability coverage to safeguard your home, savings and other assets if you are at fault for an accident. Generally, we recommend $50,000/$100,000/$50,000. And if you own a home, a good place to start is $100,000/$300,000/$100,000.

Zebra tip

Penalties for driving without insurance can be steep, so think twice before considering it. Fines vary by state, and range from $100 all the way up to $5000. You'll also likely pay more for insurance when you do get it. 

Do you need collision and comprehensive coverage?

When people say “full coverage,” they’re referring to liability insurance with collision and comprehensive coverage. Below you’ll find more info on each coverage.

Collision Coverage

What it covers: Collision insurance covers the cost to repair or replace your vehicle if it’s damaged by an accident with another car or object like a tree, light pole or guardrail. Before the insurance company picks up the tab, you must pay your deductible, typically $500 or $1,000.

Required? States don’t require this coverage, but your lender may if you have leased or financed your vehicle.

Recommendation: If your car is leased, financed or worth more than $4,000, get collision insurance.

Zebra tip: Choosing a higher deductible will save you money on car insurance. But you should select a deductible you can easily handle out of pocket, so you’re not without a vehicle while trying to come up with the required amount.

Comprehensive Coverage

What it covers: You’ll need comprehensive coverage to file a claim if your car sustains damage from a cause other than a collision, like theft, vandalism, weather and wildlife. Like collision insurance, you’ll pick a deductible.

Required? Your lender may require comprehensive coverage if you lease or finance your car.

Recommendation: Similar to collision insurance, grab it if your car is leased, financed or worth more than $4,000.

Zebra tip

Choosing a higher deductible will save you money on car insurance. But you should select a deductible you can easily handle out of pocket, so you’re not without a vehicle while trying to come up with the required amount.

How much medical payments coverage and personal injury protection do you need?

Medical Payments Coverage

What does it cover? Medical payments coverage (MedPay) pays for your and your passengers’ medical expenses, regardless of fault.

Required? MedPay is only required in Maine and New Hampshire (and in New Hampshire only if you elect to buy car insurance). 

Recommendation: Coverage limits usually range from $1,000 to $10,000 per person. People with health insurance may want to match their health plan’s yearly deductible. If you don’t have insurance, it might also be wise to opt for as much as you can afford.

Personal Injury Protection

What it covers: Like MedPay, personal injury protection covers medical bills. And depending on where you live, the coverage may include lost wages, funeral expenses, childcare services and even housecleaning if your injuries interrupt your regular activities.

Required? Some states require PIP.

Recommendation: PIP coverage limits vary by state, with maximums as high as $25,000 per person. The minimum coverage requirements set by your state may be sufficient if you currently have health insurance that covers the same expenses as PIP. That said, you might increase your PIP coverage if:

  • Your health insurance plan has coverage gaps, low limits or high co-pays and deductibles.
  • You want more coverage for lost wages, child care, funeral expenses or other PIP benefits.

Zebra tip

If your state allows you to choose between personal injury protection (PIP) and MedPay, PIP is a better pick because it covers medical expenses alongside expanded coverage for lost wages and funeral expenses.

How much uninsured and underinsured motorist coverage do you need?

What it covers: Uninsured motorist (UM) coverage pays for your medical bills if a driver with no insurance or a hit-and-run driver causes an accident. Underinsured motorist (UIM) coverage protects you if a driver hits you who doesn’t have enough insurance to cover your medical bills. 

Required? Some states require UM/UIM coverage

Recommendation: Even if you don’t live in a state that requires it, it’s wise to match your UM/UIM coverage with your bodily injury liability limits. 

Zebra tip

Roughly 13% of drivers (or one out of eight) are uninsured, so anyone who drives can benefit for this coverage. 

What optional car insurance coverage should you consider?

Guaranteed Asset Protection (GAP)

What it covers: Gap insurance pays the difference between what’s owed on your loan and your vehicle’s actual cash value in the event of a total loss. 

Required? The coverage may be required if you don’t make a significant down payment when you purchase your vehicle.

Recommendation: Think about adding this coverage if you put down less than 20% or financed your vehicle for 60 months or longer. 

Rental Reimbursement

What it covers: Rental reimbursement pays for a rental car after an accident, usually with a set dollar amount and time frame, such as $50 per day for 30 days.

Required? It’s optional coverage.

Recommendation: Rental reimbursement makes sense if being without a vehicle would significantly interrupt your regular activities, such as going to work, school or doctor visits. Those with multiple cars or transportation alternatives can skip the coverage.

Rideshare Insurance

What it covers: Rideshare insurance fills the coverage gaps left by personal car insurance when working for ridesharing platforms like Uber or Lyft.

Required? Yes, your insurer may deny any rideshare claims without the coverage.

Recommended: If you plan to do any rideshare activity, tack on this coverage at the highest limits you can afford.

Roadside Assistance

What it covers: Roadside assistance is coverage to help you when you’re stranded. It provides gas refills, jumpstarts, tire changes, tows and other services.

Required? It’s optional coverage.

Recommendation: Roadside assistance is a relatively inexpensive policy option and is well worth the investment. However, you can skip the coverage if you already have the service through triple AAA or a credit card.

Zebra tip

Gap insurance is usually cheaper through your insurance company than the dealership’s finance department. And remove it once your car is worth more than you owe on your loan.

Compare insurance rates quickly and easily.

or
Location pin icon
No junk mail. No spam calls. Free quotes.
Don't forget to share!