How Much Car Insurance Coverage Do I Need?
It seems simple enough that if you’re going to drive a car, you need to have
car insurance. But you’re probably wondering, “How much car insurance do I need?” Well, you need enough car insurance so that you’re covered in case something bad happens. You also need to be sure you have the amount required in your state, because every state has different minimum coverage limits.
There are several other factors that help you decide how much insurance you need, from the kind of car you drive to your personal financial situation. It’s important to find an insurance company that offers the best coverage to protect your finances if you’re in an accident or your car is damaged.
Five Factors Impacting How Much Car Insurance I Need
There are many things to consider when asking yourself “How much car insurance coverage do I need?” Think about:
- Where you live. Most states require that you have a minimum amount of auto insurance, and that amount will vary by state. You must purchase your state’s minimum required amount, but it is usually a good idea to have more.
- What vehicle you drive. The value of your car will help you decide how much coverage you need. You’ll want to have enough coverage for car repairs or to replace your car.
- Your driving habits. The number of miles you drive and if you use your car for business can impact how much auto insurance coverage you need.
- Your financial situation. You may want to save money, but cheaper or less car insurance isn’t always better. You’ll need to have enough coverage to protect assets like your home, savings and investments. Your liability coverage amount should exceed your net worth.
- Your car loan or lease. If you lease your vehicle, or have a car loan, your lender may require you have additional car insurance while leasing, like gap insurance.
What Types of Car Insurance Do I Need?
Basic Coverages
There are three types of
basic auto insurance coverage: liability, collision and comprehensive insurance. Not all states require you to have all three types of insurance coverage. However, each one protects you in a unique way, so you’ll want to have enough of each to be fully covered if you’re in an accident.
Liability Insurance
Most states have a minimum amount of basic liability coverage required by law. Even if your state doesn’t require liability coverage, it’s still a good idea to have it. Liability insurance protects your assets in case you’re in an accident that is your fault.
If you don’t have liability insurance, you could have to pay out of pocket to fix another driver’s car or for their medical bills. You could also have to pay out of pocket if the other person’s expenses are high and you only have the minimum coverage required by your state.
There are two types of liability insurance:
- Bodily injury liability: If you’re responsible for an accident, this coverage helps pay medical expenses for anyone in the other car. It can also help pay for their lost income, funeral costs, or pain and suffering. If the other driver files a claim against you, bodily injury liability coverage can help pay for your legal defense fees.
- Property damage liability: This coverage helps pay for damage you cause to other people’s property, including their house, vehicle, fence and more. However, it doesn’t pay for damage to your car, which is why you also need to have collision coverage.
Collision Insurance
Liability insurance protects you from having to pay out of pocket for other people’s expenses, but to make sure you’re fully covered, you should also have
collision insurance. Collision coverage helps you pay for damages from:
- A single car accident, like if your car rolls over
- Someone hitting your parked car
- An accident in a rental car you’re driving
- A collision with an object, like if you back into a pole
Since collision insurance covers damage to your car, the cost will depend on your car’s value and your deductible amount. Even if collision insurance is optional in your state, your lender may require it if you’re leasing or financing your car.
Comprehensive Insurance
Car accidents aren’t the only risk to your car. A lot can happen, even when you’re not on the road. This is why you also need
comprehensive insurance.
Comprehensive coverage is for non-accident related claims. For example, if hail dents your hood, or if your car is vandalized, comprehensive insurance covers damage to your car. The
car insurance even covers theft. This coverage is usually optional, but if you lease or finance your car, your lender will likely require you have it.
Additional Coverages
Personal Injury Protection (PIP)
Also known as no-fault insurance,
personal injury protection (PIP) helps pay for your medical expenses no matter who causes the accident. Many states with
no-fault insurance laws require you to buy personal injury protection (PIP) coverage. Some at-fault states also require this coverage, but in other states it’s optional.
Whether you’re required to purchase PIP coverage or not, you’ll want to seriously consider its benefits. It can cover things for you and your passengers like:
- Medical bills, including health insurance deductibles
- Lost wages, even if you’re self-employed
- Funeral costs
- Essential services, like childcare and housecleaning
Medical Expenses
This optional insurance covers you and any passengers in your car during an accident. It can even help protect you as a pedestrian, or if you’re injured as a passenger in another car.
Medical payments coverage can help pay for many types of medical bills including:
- Fees from an ambulance ride
- Medical procedures, surgeries or treatments
- Deductibles and co-pays from your medical insurance
- Visits to the doctor
Uninsured/Underinsured Motorist
Hopefully, if you’re in a car accident that’s not your fault, the other person’s insurance will pay to fix or replace your car. But what if that person doesn’t have car insurance? Consider adding uninsured/underinsured motorist coverage to your policy, so you’re covered if this happens.
Gap Insurance
You’ve probably heard the saying “a new car starts losing value as soon as you drive it off the lot.” Your regular
car insurance coverage helps you pay to replace or repair your car based on the actual cash value. But what if you owe more on your loan than your car is worth?
Gap insurance will help you pay that difference if your car is stolen or totaled, and your regular insurance isn’t enough to pay off your car loan.
State Requirements for How Much Car Insurance I Need
When deciding how much car insurance you need, first you’ll have to find out what is required where you live.
All states’ car insurance minimum requirements are different. Liability, collision and comprehensive insurance may each be required in your state at certain minimum amounts.
Some states have additional coverage requirements for personal injury protection (PIP), uninsured/underinsured motorist, medical payments and gap insurance. These also vary by state. While you need to purchase at least the minimum, it is wise to buy additional coverage based on your assets and needs.
Understanding How Much Car Insurance I Need
The amount of coverage each driver needs is unique. Your decision is based on your personal financial situation, how much your car is worth and what your state requires. You can use a
car insurance calculator to help you choose the right coverages. If you’re comparing
car insurance quotes, make sure the car insurance companies are providing you with the same types and amounts of coverage.
To learn more,
get a quote from The Hartford today. You can also call The Hartford’s representatives at
888-413-8970. They can help you be sure you have the amount of coverage you need to protect your assets.
Last Updated: September 21, 2023
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