How Much Car Insurance Do I Need?

John Egan
Written by
John Egan
John Egan
Written by
John Egan
John Egan is a freelance writer and content marketing strategist in Austin, Texas. His specialties include personal finance, real estate, and health and wellness. John’s work has been published by outlets such as CreditCard.com, Bankrate, Forbes Advisor, Experian, Capital One, The Balance and U.S. News & World Report. He is the author of The Stripped-Down Guide to Content Marketing.
Danny Smith
Edited by
Danny Smith
Photo of an Insurify author
Edited by
Danny Smith
Insurance Writer
Danny is an insurance writer at Insurify. Specializing in auto insurance, he works to help drivers navigate the complicated world of insurance to find the best possible policy. He received a bachelor's degree from the University of Massachusetts Amherst. You can connect with Danny on LinkedIn.

Updated December 12, 2022

Why you can trust Insurify

As an independent agent and insurance comparison website, Insurify makes money through commissions from insurance companies. However, our expert insurance writers and editors operate independently of our insurance partners. Learn more.

Figuring out how much car insurance you need depends a lot on where you live. Nearly every state requires motorists to carry a minimum amount of liability coverage. In addition, many states require drivers to purchase personal injury protection (PIP) coverage, uninsured motorist coverage, or both.

On top of that, if you financed your car through a loan or lease, your lessor will likely require you to carry comprehensive and collision coverage.[1]

How to calculate how much coverage you need

To calculate how much coverage you need, you’ll need to do a little research.

Check your state’s minimum car insurance requirements

In most states, you’ll need to purchase two types of liability coverage: bodily injury liability and property damage liability. Bodily injury liability covers costs related to injuries or death caused to someone else by whoever is driving your car, while property damage liability covers damage to someone else’s property, such as a car, garage door, or utility pole.

Some states may also require personal injury protection (PIP) and uninsured motorist coverage. PIP reimburses payment of medical expenses for injuries to you or your passengers. Uninsured motorist coverage covers your expenses if you’re in an accident caused by an uninsured or underinsured motorist or a hit-and-run driver.[1]

Texas, for example, requires a minimum of $30,000 in liability coverage for each injured person, up to $60,000 per accident, and $25,000 in liability coverage for property damage per accident. You’ll see this shown as 30/60/25 coverage. All car insurance policies in Texas include PIP coverage by default even though it’s an at-fault state.[2]

Determine the value of your vehicle

It’s important to understand how much your car is worth because that’s how much it’ll cost to replace if it gets damaged or stolen. You can find your car’s value by using a site like Kelley Blue Book. Once you know this number, you’ll have a better understanding of what coverages make sense for you.

For example, if you have a new vehicle, you may want to purchase coverage with higher liability limits. You might do this if you think the minimum liability coverage wouldn’t adequately pay for repairing or replacing your car or wouldn’t be enough to reimburse medical expenses.[2]

Consider comprehensive and collision coverage

If you’ve taken out a loan or lease for your car, your lender may require you to purchase comprehensive and collision coverage. Together, comprehensive and collision coverage make up what is known as full coverage, which can be useful even if your lender doesn’t require it.

Comprehensive coverage reimburses you if your car gets damage from something other than a collision, such as a fire, flood, or hailstorm. Collision coverage pays for damage to your car from an accident with another vehicle or a collision with an object.[1]

Choose a deductible you’re comfortable paying

Your deductible is the amount you pay out of pocket in the event of a claim before your insurance coverage kicks in. For example, if you have a $500 deductible and submit a claim for $1,000 in damages, you’ll have to pay $500. The higher your deductible is, the cheaper your average monthly rate will typically be.

Explore optional coverage

Certain types of car insurance aren’t required but can be useful. Some examples include coverage for towing your car and coverage for a rental car if your vehicle was stolen or is in the body shop.

What to look for in a car insurance policy

When shopping for a car insurance policy, you’ll have various factors to consider. First, understand what type of coverage you’re looking for, as some insurers specialize in certain types of policies, such as pay-per-mile insurance. Once you know what you’re looking for, you should spend time researching different providers and comparing quotes.

Look for an insurer that provides adequate coverage at a reasonable rate, and make sure that the company you choose has a good reputation. A cheap policy may not be worth the savings if it doesn’t offer enough protection or the company doesn’t have reliable customer service. Finally, be sure to take advantage of any discounts available to you; most insurers offer plenty.

Minimum car insurance requirements

Location plays a big part in how much car insurance you’re required to purchase. For example, some states may require coverage such as PIP, medical payments, or uninsured motorist coverage, while other states may consider these coverages optional.

Every state except New Hampshire mandates a minimum amount of auto liability insurance. Ohio, for example, requires $25,000 to cover injury or death of one person in an accident, $50,000 for injury or death of at least two people, and $25,000 for property damage.[3]

Learn more: Minimum Car Insurance Requirements by State (2022)

Types of car insurance coverage

As you’re researching how much car insurance you need, you’ll also want to consider the different types of coverage available.

Liability coverage

Nearly every state requires two kinds of auto liability coverage — bodily injury liability and property damage liability. Simply put, liability coverage helps shield your finances if you cause an accident that results in injuries, death, or property damage.

Without liability insurance, you could be left open to expensive lawsuits. The Insurance Information Institute recommends that policyholders buy more than the state-required minimum liability insurance.[1]

Full coverage

Generally, “full-coverage car insurance” refers to a combination of state-mandated liability insurance as well as the optional comprehensive and collision coverages. As you might expect, full coverage costs more than liability insurance by itself since it offers more financial protection.

  • Liability coverage pays for costs related to injuries or death that you or another driver under your policy causes to other people. It also pays for damage to someone else’s property. In other words, it doesn’t cover people in your car or your own property, which is where comprehensive and collision coverage come into play.

  • Comprehensive coverage pays for losses due to theft or damage caused by something aside from a collision with another car or an object. Incidents covered by comprehensive coverage include fires, falling objects, explosions, earthquakes, windstorms, hailstorms, floods, vandalism, and run-ins with animals.

    Comprehensive insurance typically charges its own deductible (generally $250 to $1,000) and costs an average of about $290 a year, according to the Insurance Information Institute.

  • Collision coverage reimburses you for damage to your car from a collision with another car, a run-in with an object such as a tree, a rollover accident, or pothole damage. Like comprehensive coverage, collision coverage comes with a separate deductible (usually $100 to $300) and costs an average of about $134 a year, according to the Insurance Information Institute.

If you’re financing your car with a lease or loan, the lender will often require you to purchase comprehensive and collision coverage. The Insurance Information Institute emphasizes that comprehensive and collision coverage apply only to the current value of your car, and not to the purchase price.[1]

Even if your lender doesn’t require comprehensive and collision coverage, it still might be worth the cost, unless you’re driving an older, low-value car. For example, if the value of your vehicle is less than your deductible, full coverage may not be worth it.

Uninsured motorist coverage

Uninsured motorist coverage provides coverage if you’re injured or your vehicle is damaged by an uninsured or underinsured motorist. It also applies in the event of a hit-and-run.

PIP coverage

Some states require PIP coverage or medical payments coverage. These coverages pay for the treatment of injuries to the driver and passengers of the policyholder’s car. If you have this coverage, it may provide money for medical bills, lost wages, funeral costs, and other expenses, depending on your policy.[1]

How much does car insurance cost?

Numerous factors affect how much you’ll pay for car insurance. The coverage types, limits, and deductibles you choose all have an effect on the rate you’ll pay, as will the discounts you qualify for. Insurers also weigh your driving record heavily, increasing rates for drivers with infractions such as speeding tickets, DUIs, at-fault accidents, and other serious traffic violations.

Insurance companies also consider your age and driving experience when determining rates. Younger drivers with less experience almost always pay higher monthly rates than drivers with multiple years of experience. Location plays a role as well, as insurers consider how many accidents occur in your area when calculating your rate.[4]

Many states allow insurance companies to consider your credit score when determining your rate. Insurers input your credit score into what’s known as a credit-based insurance score. This score takes a driver’s credit history into consideration to predict how likely the driver is to file an insurance claim. The lower your score, the higher your premium will be.[5]

How to find cheap car insurance

Finding cheap car insurance isn’t as hard as you might think. Try these five tips to cut your car insurance costs.

1. Compare quotes

Comparing car insurance quotes is one of the best ways to find an affordable policy. This allows you to get a grasp on what providers and prices are available in your area. The Insurance Information Institute suggests obtaining at least three quotes from different insurance providers.

2. Raise your deductible

Increasing your deductible will reduce your monthly premium. But be aware of the added out-of-pocket cost you’ll face in the event of a claim. Don’t raise your deductible to an amount that you’re not comfortable paying.

3. Search for discounts

Most insurers have a wide array of discounts that you can take advantage of. These include discounts for bundling your car and home insurance with the same company, completing a defensive driving course, going without an accident or moving violation for three years, and being a longtime customer of the insurance company.

4. Drop optional coverage

Get rid of any coverage that you don’t think you’ll need. For example, you might want to get rid of comprehensive and collision coverage if you’re driving an older car since the cost of repairs might be greater than the car’s value.

5. Ask about group insurance

If you’re connected to an organization like an employer, business group, or alumni association, you might qualify for lower rates.

How much car insurance do I need FAQs

Here are answers to some commonly asked questions about how much car insurance coverage you might need.

  • Every state except New Hampshire requires a minimum amount of liability coverage. But full-coverage car insurance is not mandated by any state, although it may be required by your lender.

  • Generally, the minimum liability coverage required by your state is considered enough car insurance. But if you’ve leased your car or have a loan, your lender may require you to carry full coverage. And if you have a DUI, your state may require you to carry an SR-22 certificate. It also depends on how much financial protection you’re looking for from your policy.

  • A deductible is the sum of money deducted from an insurance claim payout. For instance, if your insurer approves a $5,000 car insurance claim and your deductible is $500, you’ll pay $500 out of pocket, and your insurer will pay the remaining $4,500.

  • The average U.S. driver pays $121 a month for car insurance, but your monthly premium may be higher or lower depending on any number of factors, including your driving record, where you live, and which insurance company you choose.

  • The best way to compare car insurance is to compare quotes online from at least three different insurers. Quote comparison is a great way to compare insurers side by side and understand the benefits and drawbacks of each. Drivers should always compare quotes before renewing their policy, as insurers may have new offerings.

Compare Car Insurance Quotes Instantly

Secure. Free. Easy-to-use.

Sources

  1. Insurance Information Institute . "Auto insurance basics—understanding your coverage." Accessed December 12, 2022
  2. Texas Department of Insurance. "Automobile insurance guide." Accessed December 12, 2022
  3. Ohio BMV. "Mandatory Insurance." Accessed December 12, 2022
  4. Insurance Information Institute. "What determines the price of an auto insurance policy?." Accessed December 12, 2022
  5. NAIC. "CREDIT-BASED INSURANCE SCORES." Accessed December 12, 2022
John Egan
Written by
John Egan
Linkedin

John Egan is a freelance writer and content marketing strategist in Austin, Texas. His specialties include personal finance, real estate, and health and wellness. John’s work has been published by outlets such as CreditCard.com, Bankrate, Forbes Advisor, Experian, Capital One, The Balance and U.S. News & World Report. He is the author of The Stripped-Down Guide to Content Marketing.

Learn More
Danny Smith
Edited by
Danny Smith
Linkedin

Insurance Writer

Photo of an Insurify author
Edited by
Danny Smith
Insurance Writer
Danny is an insurance writer at Insurify. Specializing in auto insurance, he works to help drivers navigate the complicated world of insurance to find the best possible policy. He received a bachelor's degree from the University of Massachusetts Amherst. You can connect with Danny on LinkedIn.