How Much Car Insurance Do I Need?

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  • How Much Car Insurance Do I Need?

In every state except New Hampshire and Virginia, car insurance is required in some form. Some states have more strict requirements and some have more lenient requirements.

Even though a minimum amount may be required by your state, that doesn’t necessarily mean the minimum required amount will be enough. Let’s dive deeper into how much car insurance you actually need.

How Much Car Insurance Do I Need?

How much car insurance you need to satisfy legal requirements is vastly different than how much you’ll need to cover an at-fault accident. But the amount you need varies greatly depending on where you live, how much your vehicle is worth, what the average cost of living is and much more.

If you leased or still owe money on the loan of your vehicle, your lender will require you to purchase full coverage car insurance anyway. They’ll also require you to keep that insurance until your loan is paid off or the lease ends.

Auto Insurance Coverage Recommendations

Unless you live in one of the two aforementioned states, you’ll be required to purchase property damage and bodily injury liability coverage. Many states now also require drivers to carry uninsured or underinsured motorist coverage due to the rising number of vehicles on the road without or with insufficient insurance.

Car insurance is commonly displayed as three numbers in a sequence like 50/150/50. That means drivers have $50,000 per person and $150,000 per accident of bodily injury liability and another $50,000 per accident in property damage liability. Let’s take a look at what exactly those coverages can protect against and whether or not that’s enough coverage.

Property Damage Liability Coverage

This coverage is designed to pay to repair damage to any property the at-fault driver causes. This could be used to repair damage to another vehicle, a building, fences, mailboxes or any other piece of property that could be accidentally driven into.

If you’re at fault in an accident and you cause damage to multiple vehicles or extensive damage to a building, the minimum coverage in your state may not be enough to pay for all the repairs entirely. It also won’t be enough if you live in an affluent area with more expensive cars on the road, such as Los Angeles or Miami.

If your coverage maximums aren’t enough to pay for the damages entirely, you’ll be legally and financially responsible to pay the remaining amount out of your own pocket.

While it will cost more to increase the property damage liability on your policy, you should strongly consider investing in at least $100,000 worth of coverage. This covers more bases than the state minimum.

  • Coverage Needed: At least $100,000 per accident

Bodily Injury Liability Coverage

This coverage is designed to pay for injuries to others if you’re involved in an at-fault accident. This includes injuries to pedestrians, people in other vehicles you run into or people in your vehicle that are injured. It can also help cover legal fees if you’re sued by any of the injured parties.

If you have the state minimum coverage and you’re involved in an at-fault accident that injures three or four people, you likely won’t have enough coverage to pay for everything. That’ll leave you paying for the remaining amount out of your own pocket.

We recommend having coverage maximums that are at least $100,000 per person and $300,000 per accident. But if you have a high net worth, you may want to think about increasing your coverage amounts. If an injured party sues you, they could come after your assets.

  • Coverage Needed: At least $100,000 per person and $300,000 per accident

Uninsured & Underinsured Motorist Coverage

This coverage can kick in if you’re involved in an accident with another vehicle, and the driver of that vehicle doesn’t have auto insurance. While it’s illegal to drive without insurance, and drivers who break that law will face serious ramifications, people still do it every day.

That’s why more and more states have implemented laws that require drivers to purchase uninsured or underinsured motorist coverage. This coverage can help pay for damage to your vehicle and injuries to those people in your vehicle, including yourself. You’ll likely have to choose one or the other instead of purchasing both, too.

While many states mandate drivers must carry at least $10,000 per person and $20,000 per accident of uninsured motorist coverage, we recommend erring on the cautious side and investing in at least $30,000 per person and $60,000 per accident.

  • Coverage Needed: At least $30,000 per person and $60,000 per accident

Collision Coverage

The first facet of full coverage auto insurance, this coverage is designed to pay to repair your vehicle if you’re involved in an at-fault accident. Collision coverage isn’t required by law, but lenders always require it if you’ve leased the vehicle or still owe money on the loan.

Figuring out how much collision coverage you’ll need is much simpler than deciding on the aforementioned coverages. Since you know how much your vehicle is worth, you already know how much coverage you need.

Collision coverage should match the amount of your vehicle (or the amount you still owe on the loan). If your vehicle is worth $20,000, you need $20,000 worth of coverage. If it’s worth $50,000, you need $50,000 worth of coverage. But if it’s worth $20,000 and you still owe $40,000 on the loan, you’ll need $40,000 worth of coverage.

The simple math is that you need enough coverage to fully replace your vehicle if it’s totaled or enough to pay off the entirety of the remaining balance on the loan — whichever amount is higher.

  • Coverage Needed: Your vehicle’s value or the remaining loan amount, whichever number is higher

Comprehensive Coverage

Also not required by law in any state, but will be mandated by your lender, comprehensive coverage is designed to pay for damage caused to your vehicle by things that are deemed to be out of your control.

Coverage can kick in if your vehicle is stolen, vandalized or damaged by a covered peril like a hurricane, flood, tornado or another natural disaster. This coverage should also match the value of your vehicle or the amount you still have remaining on the loan.

  • Coverage Needed: Your vehicle’s value or the remaining loan amount, whichever number is higher

Personal Injury Protection Coverage

Personal injury protection, commonly referred to as PIP coverage, is required by some states that have enacted a no-fault insurance system up to a certain limit. It can help pay for injuries to you and your passengers, as well as lost wages that arise from those injuries, no matter which driver was at fault.

States like Florida have a $10,000 per person minimum legal requirement of PIP coverage, but that may not be enough. Since it works similarly to bodily injury liability, we recommend having at least $50,000 per person if your state allows it.

  • Coverage Needed: At least $50,000 per person if available in your state

Medical Payments Coverage

Medical payments coverage works similarly to PIP coverage, but it doesn’t cover lost wages. It also only protects you instead of you and your passengers, but it kicks in no matter who’s at fault. It’s optional in many states because your health insurance should be sufficient to cover the expenses.

  • Coverage Needed: At least $50,000 if you don’t have health insurance

How Much Car Insurance Is Enough?

You’d rather be overinsured than underinsured, but the amount of car insurance you need will depend drastically on the situation of the accident. Every accident is different, and each costs a different amount. So, the minimum coverages in this article are simply guidelines instead of hard-and-fast rules of coverage amounts you need.

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The editorial content on Clovered’s website is meant to be informational material and should not be considered legal advice.