How Much Car Insurance Do I Need?

Car accident

Nobody wants to lay out more money for car insurance than they actually need, especially when budgets are tight and every dollar counts. So how do you determine what amount is absolutely necessary and still gives you peace of mind that you’re adequately covered? Here are some considerations.

Abide by state liability minimums for car insurance. There’s no getting around this requirement, as every state has a certain minimum amount of liability coverage that’s required. Liability insurance covers medical bills and others’ property if you are found to be at fault in an accident.

How much does this amount to? It varies by state, so check your own state’s requirements. California law requires minimum liability coverage of $15,000 for the injury/death of one person, $30,000 or injury/death of more than one person, and $5,000 for damage to property.  This is usually abbreviated at 15/30/5. In Texas, the liability minimums are 30/60/25, while Maine carries 50/100/25 liability minimums. See the chart on for the liability minimums in all states.

Keep in mind that the bare minimum is often not sufficient to take care of the bills that could come due following an at-fault accident, particularly if there are multiple injuries and multiple vehicles involved. Anything over and above your liability insurance coverage will come out of your pocket – or could potential wipe out your assets.

Many car insurance companies have liability coverage up to $5 million, either as part of the car liability policy or in a separate umbrella liability policy. The cost to add an umbrella liability policy may be more reasonable than you think, approximately $100 for a $1 million umbrella policy, when paired with $500,000 liability coverage in the auto policy. Insuring multiple cars and/or carrying other insurance, such as homeowners, with the same company can also lower costs of insurance across the board.

Buy coverage that’s equal to your assets. Insurance experts advise buying sufficient auto insurance coverage so that you protect your available assets in case of a serious accident or injury where you’re found to be at-fault.

Outside of mandatory state liability insurance coverage, there are other areas of car insurance coverage to consider.

Collision insurance. With collision insurance, repairs to your vehicle are covered, minus your deductible. Be sure to ask if collision insurance applies if you are at-fault. If your vehicle is new, you’ll want to insure it for collision. If it’s an older vehicle, you may wish to consider dropping this coverage.

Comprehensive coverage. This coverage takes care of vandalism, theft, fire, glass breakage, animal damage, objects falling on your car and other events. In the same way that you may consider eliminating collision insurance on an older vehicle, you may also want to drop comprehensive coverage for it, thus saving some money in premiums.

Uninsured/underinsured motorist coverage. When you’re hit by an uninsured or underinsured motorist, this coverage helps pay for the cost to treat your bodily injuries and those of your passengers. It may also cover property damage.

Personal injury protection (PIP). This coverage provides payment for costs of injuries to you and your passengers in the event of an accident.

MORE: See Car Insurance Rates: What To Cover, What To Save


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