How Much Car Insurance Coverage Do You Really Need?

Purchasing car insurance before you get behind the wheel is not only smart -- it’s required in most states. While each state has its own standards on how much car insurance coverage you need to buy, there are other factors to consider.

Collisions, whether with another vehicle or stationary object, can be expensive. If you don’t have adequate coverage, you could be on the hook for gigantic expenses. How much you need, however, depends on your specific situation, including where you live, how much you drive and your particular personal and financial needs. 

“Having adequate auto insurance coverage is both smart and prudent to ensure you and your family are financially protected from a catastrophic loss,” says Mark Friedlander, director of corporate communications at the Insurance Information Institute. “To have adequate financial protection for you and your family, buy as much as you can afford. Comparison shopping when seeking insurance coverage is time well spent, as premiums could vary by hundreds of dollars between carriers depending on numerous factors.”

Here’s what to consider when purchasing car insurance coverage.

Types of car insurance coverage

First, let’s go over the major coverage types you’ll see when purchasing a policy.

Coverage types may roughly be split into three categories: 

1. Mandatory
2. Often required
3. Optional

Note that this list does not include all types of coverage offered by carriers -- these are just the most common.

1. Mandatory coverage

Just about all states require the two types of coverage below, which do not cover damage to your own car or property.

Bodily injury liability protection: This coverage pays for injuries to others caused by the policyholder and other drivers listed on the policy.

Property damage liability protection: This coverage pays for damage that policyholders cause to another’s property. Most prominently, this includes other vehicles but can also include personal property like fences or mailboxes. 

2. Often required

Many states also require these types of coverage.

Personal injury protection: This coverage pays for the medical costs and lost wages of the driver and passengers of the policyholder’s car if injury occurs, up to the policy’s limits, regardless of fault. PIP may also include coverage for funeral expenses and essential services, like child care or dog-walking, that you may be unable to perform due to physical injuries. 

PIP is mandatory in 14 states: Delaware, Florida, Hawaii, Kansas, Kentucky, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Dakota, Oregon, Pennsylvania and Utah.

Uninsured or underinsured motorist coverage: This coverage pays for the medical expenses of you and your passengers, up to the policy’s limits when an underinsured or uninsured motorist causes an accident. Uninsured motorist property damage insurance is available in some states to help cover repairs to your vehicle if damaged by an uninsured driver.

Medical payments: Similar to PIP, this coverage type helps pay for medical costs of the policyholder and their passengers up to the policy limit, regardless of fault. Unlike PIP, medical payments do not cover lost wages or essential services. Med Pay is an optional coverage in most states, but it is required in a few states. 

3. Optional coverage

State-mandated insurance coverage is the minimum for driving, and typically doesn’t include damage to your car. If your car is financed or leased, your lender may require you to carry full coverage, meaning both comprehensive and collision.

Collision coverage: This coverage pays for damage to your vehicle in an accident resulting from a collision between your car and another car or an object.

Comprehensive coverage: This coverage pays for damage to your car caused by an event other than collision. This includes theft, fire, flood, hail, vandalism and more.

Learn your state’s car insurance requirements

All but two states (New Hampshire and Virginia) require residents to purchase a car insurance policy. However, even if your state doesn’t require you to purchase insurance, it’s a good idea to do so anyway, according to Friedlander. Accidents can be costly, and collisions and injuries can happen just about anywhere while you’re on the road.  That said, required coverages and limits vary from state to state.

For example, while Massachusetts requires at least $20,000 bodily injury liability per person and $40,000 per accident, New York requires bodily injury liability limits of $25,000 per person and $50,000 per accident. Geico has a helpful tool that lets you check your state’s minimum coverage requirements as well as a breakdown of each state’s laws.

That said, most insurance experts caution that purchasing only your state’s minimum insurance requirement will leave you with grievously inadequate coverage. 

“Whenever possible, we strongly recommend that you get insurance well above the state minimums,” Friedlander said. “Only purchasing the state minimums leaves you and your family financially vulnerable.”

Thus, being aware of your state’s requirements is only the first step. You’ll want to start with what is required and add to your policy from there.

How much coverage do I need?

Triple-I recommends this amount of coverage for the two required coverage types, according to Friedlander: 

• A minimum of $100,000 in bodily injury liability protection per person.
• A minimum of $300,000 in bodily injury liability protection per accident.
• A minimum of $100,000 in property damage liability protection coverage.

From there, you can start considering other coverage types. Policies cover a variety of risks and damages. Thus, the first step in determining what and how much coverage to buy is to determine your risks, and how you can compensate for them. 

For example, insurance experts agree that you should consider purchasing uninsured or underinsured motorist coverage. Even though it is illegal in most states, there’s often a large percentage of folks driving without a policy. You can check the percentage of uninsured motorists in your state here. 

Friedlander recommends purchasing this coverage if your state is in the top 10 of this list, or if there are 10% or more uninsured motorists driving in your state. This coverage will help pay for the medical expenses of you and your passengers if you are involved in an accident that is caused by an uninsured driver. Without this type of coverage, you may have to pay out of pocket entirely if you’re hit by an uninsured driver. That noted, some states enable PIP to cover these types of losses while others don’t, according to Friedlander. 

You may also want to consider purchasing full coverage insurance (both comprehensive and collision). Collision will cover your vehicles for damages resulting from a collision with another car or object, and comprehensive will cover you from many other types of non-accident damages: flood, fire or even a tree falling on your car. 

Especially if you live near an area that gets major flooding or experiences hurricanes during the season, adding comprehensive coverage may be a good idea. And even if you don’t live near a flood area on the coast, Friedlander still suggests purchasing comprehensive coverage, as 90% of natural disasters involve flooding, meaning you can experience a flood just about anywhere in the country.