When choosing how much car insurance coverage you need, weigh the value of your assets, the value and age of your vehicle, your ability to pay unexpected expenses, and the cost of additional coverage. That’ll help you decide which coverage types and limits provide enough protection—without paying for insurance you’re unlikely to need.

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How much car insurance do I need?

Nearly every state has a minimum amount of liability insurance you’ll be required to maintain to legally drive on public roads. Without meeting these minimums, you could face penalties like costly fines, license suspension, vehicle impoundment, and points on your license.

The amount of insurance needed by each state can vary, so ensure you review your local laws to verify you’ve met or exceeded the minimum coverage requirements. Common minimum liability limits are 25/50/25, which means:

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

Additionally, some states may require you to carry minimum amounts of additional types of car insurance, such as personal injury protection (PIP) or uninsured motorist coverage.

Why state minimum car insurance requirements may not be enough

Purchasing only the minimum required coverage may not be enough to preserve your financial wellbeing in the event of an accident. Many state minimums haven’t been updated to reflect rising property damage and medical costs for injuries after accidents, meaning you could be left paying substantially out of pocket even if you have minimum coverage. For example, a disabling injury after a crash costs $174,000 on average, while a fatal crash could result in over $2 million in costs. That’s far higher than many minimum liability car insurance requirements.

Understanding the different types of car insurance coverage

The types of car insurance you need depend on state requirements, your vehicle, whether you finance or lease it, and the financial risks you want your policy to cover. Here’s how some of the most common types of car insurance work.

Liability insurance

Liability coverage pays for injuries or property damage you cause to others in an accident, as well as certain legal expenses if you’re sued. Liability insurance includes two main types of coverage:

• Bodily injury liability, which covers injuries or death you cause to others in an accident
• Property damage liability, which covers damage you cause to another person’s vehicle or other property

Liability limits are commonly expressed as three numbers representing bodily injury coverage per person, bodily injury coverage per accident, and property damage coverage per accident. For example, Texas has minimum liability limits of 30/60/25, or $30,000 per injured person, $60,000 in total bodily injury coverage per accident, and $25,000 in property damage coverage per accident.

Collision coverage

Collision coverage pays for repairs to your own car after it’s damaged in an auto accident, strikes a stationary object, or rolls over. Collision insurance is normally optional and isn’t required by any state laws, but you may be forced to carry it if you’re leasing your vehicle as part of your agreement with your lender.

Comprehensive coverage

Comprehensive car insurance covers your car against losses from specific events, such as fire, hail, theft, and vandalism. While comprehensive coverage isn’t required by law, you may be required to purchase this insurance if it’s part of your lender’s lease or financial agreement on the vehicle.

Uninsured and underinsured motorist coverage

Uninsured and underinsured motorist coverage protects against drivers who either don’t have insurance or don’t have enough to cover the costs of injuries or vehicle repairs. In some states, uninsured coverage may also cover costs after a hit-and-run. Depending on where you live, uninsured and underinsured motorist coverage may be optional or required coverage.

Personal injury protection

Personal injury protection (PIP), or “no-fault insurance”, covers medical bills, rehabilitation, lost income, and other related costs if you or one of your passengers is injured after an accident–regardless of who was at fault for causing it. PIP coverage limits typically range from $2,500 to $10,000.

While PIP isn’t available in every state, it may be an additional required coverage if you live in a “no-fault” state where each individual is responsible for covering their own medical expenses after an accident.

Medical payments

Medical payments (MedPay) coverage functions similarly to PIP in that it covers medical expenses for you and your passengers after an accident, regardless of fault. MedPay coverage is optional in most states, required only in Maine and New Hampshire. Coverage limits typically range from $1,000–$10,000 per person and can help cover health insurance payments or your deductible.

MedPay coverage is more limited than PIP, as it won’t cover a broad range of medical expenses, including lost wages or long-term care. If you have the option to choose between them, compare how either MedPay or PIP coverage benefits you most in combination with your existing health insurance.

Gap coverage

Gap coverage can help cover the difference between the remaining balance on an auto loan for a leased car and its actual cash value after it’s totaled in an accident. For example, if your car was totaled in an accident when you still had $12,000 to pay off on your loan, but it was only worth $10,000, then gap insurance could help cover the $2,000 difference.

Gap coverage may be worth considering if you owe more on your vehicle than it’s worth, such as after making a small down payment, taking out a long-term auto loan, or financing a vehicle that depreciates quickly. However, once your loan or lease balance falls below the vehicle’s value, you generally no longer need gap coverage.

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How much liability insurance is usually recommended?

A commonly recommended starting point for liability insurance is 100/300/100, which provides:

• $100,000 in bodily injury liability coverage per person
• $300,000 in bodily injury liability coverage per accident
• $100,000 in property damage liability coverage per accident

However, the amount of liability insurance you need depends on your finances and the assets you want to protect. If you cause a serious accident and the resulting medical bills, property damage, and other covered expenses exceed your policy limits, you could be responsible for paying the remaining costs out of pocket.

Consider your savings, income, and other assets when choosing liability limits. Drivers with substantial assets may also want to consider an umbrella insurance policy, which can provide additional liability protection after the underlying limits of an eligible auto insurance policy are exhausted.

Should you carry full coverage?

Full coverage generally refers to an auto insurance policy that combines liability insurance with collision and comprehensive coverage. It isn’t a specific type of insurance or standardized policy, and the coverage included can vary.

If you finance or lease your vehicle, your lender or lessor will typically require collision and comprehensive coverage. In many cases, full coverage isn’t necessary, but If you own your vehicle outright, consider carrying full coverage if you:

• Drive a high-value car that would be more expensive to repair after an accident
• Regularly commute in heavy traffic, which increases the risk of an accident
• Live in an area with weather conditions that could affect your driving, such as regular rain and fog
• Live somewhere with a high rate of car theft or vandalism
• Drive through areas with a high risk for animal collisions
• Aren’t able to cover the cost of repairs to your vehicle after an accident or to replace it in the event it’s stolen

Full coverage may not be worth it on older vehicles, since physical damage coverage will only cover repair or replacement up to the value of the car at the time of your claim and will still feature a deductible you’ll have to pay. If your deductible alone is higher than the price of your older car, it’s probably worth dropping full coverage.

How to choose the right deductible

Your car insurance deductible is the amount you’ll be responsible for covering before your coverage kicks in, and it’s typically between $250–$2,000, although amounts can vary between insurance companies. Choosing a low deductible often results in higher monthly premiums, but you can help lower your costs by choosing a higher deductible. For example, raising your deductible from $500 to $1,000 could help lower your premium by 20%–25%.

When choosing a deductible, consider how much you could comfortably pay out of pocket after an unexpected loss. Compare that amount with the premium savings you would receive from a higher deductible to decide whether taking on the additional financial risk makes sense.

When to consider additional coverage

Meeting your state’s minimum car insurance requirements may keep you legal, but changes to your finances, vehicle, or coverage needs can make higher limits or additional coverage worth considering. You may want more protection in the following situations:

• Your assets increase: Higher liability limits can provide more financial protection if you cause an accident that results in a costly liability claim. Drivers with substantial assets may also want to consider umbrella insurance for additional liability protection.
• You finance or lease a vehicle: Lenders and lessors typically require collision and comprehensive coverage. Gap insurance may also be worth considering if you owe more on your financed or leased vehicle than it’s worth.
• Your vehicle faces additional risks: Comprehensive coverage can protect against covered losses such as theft, vandalism, and certain weather-related damage. Uninsured or underinsured motorist coverage can provide additional protection if you’re involved in an accident with a driver who has little or no liability insurance, subject to state and policy rules.
• You can’t comfortably cover a loss yourself: Collision and comprehensive coverage may be valuable if repairing or replacing your vehicle would strain your finances. Depending on where you live and the coverage available, PIP or MedPay can also help cover eligible expenses resulting from injuries after an accident.

When you may need less coverage

You’ll obviously need to always meet your state’s minimum insurance requirements and any requirements imposed by a lender or lessor—but some optional coverage may become less valuable as your circumstances change. Reevaluate your coverage if:

• Your vehicle has depreciated enough that the potential payout from collision or comprehensive coverage is small compared with the premiums and deductible
• You’ve paid off your auto loan and are no longer subject to your lender’s insurance requirements
• You could comfortably pay to repair or replace your vehicle after a loss
• Your coverage needs have changed and you’re paying for optional protection that no longer provides enough value to justify its cost

How much car insurance you need at a glance

Here’s what to know about how much car insurance you need:

• Most states require drivers to carry minimum amounts of liability insurance or otherwise meet financial responsibility requirements.
• Some states also require other types of car insurance, such as personal injury protection (PIP) or uninsured or underinsured motorist coverage.
• If you finance or lease your vehicle, your lender or lessor will typically require collision and comprehensive coverage.
• A commonly recommended starting point for liability coverage is 100/300/100, although the appropriate limits depend on your finances and the assets you want to protect.
• Choosing a higher collision or comprehensive deductible can lower your premium, but it also increases how much you’ll pay toward a covered claim.
• If you own your vehicle outright, you may want to drop collision or comprehensive coverage when the potential insurance payout is small compared with the cost of the coverage and deductible.

How to get the right amount of car insurance coverage

To determine how much car insurance coverage you need:

• Start with state requirements: Find out which types of car insurance and minimum coverage limits your state requires.
• Check lender or lessor requirements: If you finance or lease your vehicle, determine which types and amounts of coverage your agreement requires.
• Evaluate your financial exposure: Choose liability limits based on the assets you want to protect and how much you could afford to pay if a claim exceeds your policy limits.
• Evaluate your vehicle: Consider its value and how difficult it would be for you to pay for repairs or a replacement when deciding whether you need collision and comprehensive coverage.
• Choose a deductible you can afford: Consider how much you could comfortably pay out of pocket after a covered collision or comprehensive claim.
• Review optional coverage: Consider whether coverage such as PIP, MedPay, uninsured or underinsured motorist coverage, or gap insurance addresses a financial risk you want to protect against.
• Ask for professional guidance if needed: A licensed insurance agent can help you compare coverage options and limits based on your circumstances.

The takeaway

The amount of car insurance you need depends on factors like your state’s minimum requirements, as well as how much financial damage a catastrophic accident could do to you. After all, once your liability limits run out, drivers can come after your savings, your wages, even your home.

It’s worth carrying enough liability coverage to protect what you own—and then add collision, comprehensive, and other coverages based on your car’s value.

Frequently asked questions

Is the minimum required car insurance enough?

The minimum required car insurance for each state may not be enough to cover all costs in the event of an accident—and won’t cover you for physical damage to your vehicle. Think about raising your liability coverage limits to at least $100,000 per person and $300,000 per accident, along with optional insurance add-ons such as collision and comprehensive coverage.

Do I need collision and comprehensive on an older car?

Regardless of your car’s age, you’ll likely need to purchase collision and comprehensive coverage if you’re leasing your vehicle or have an auto loan on it. If you own it outright, older cars with a value less than 10 times the annual premium for these coverages are often not worth insuring that heavily.

How often should I review my car insurance policy?

You should review your car insurance policy at least once per year to ensure your coverage aligns with your desired coverage limits, deductible amounts and that you’re taking advantage of available discounts.

Does my vehicle’s value affect how much car insurance I need?

Your vehicle’s value generally doesn’t determine how much liability coverage you need. That’s because liability insurance covers injuries and property damage you cause to others. Still, your vehicle’s value can help determine whether collision and comprehensive coverage are worth the cost because the potential payout is limited by the value of your vehicle.

Do I need more car insurance if I own a home?

Owning a home doesn’t automatically require you to carry more car insurance, but it can give you another valuable asset to protect from liability claims. Consider whether higher auto liability limits—or an umbrella policy for additional liability protection—make sense based on your overall assets and financial exposure.