How much auto insurance do I need? It’s a common question that every car owner faces, but there’s no straightforward answer for every driver.
The amount of auto insurance you need depends on a variety of factors, including where you live and whether you financed your vehicle. In this article, we’ll talk about the types of auto insurance you can buy and help you understand what’s required and what’s optional.
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Types of Car Insurance
There are six standard types of car insurance: auto liability coverage, uninsured/underinsured motorist coverage, comprehensive coverage, collision coverage, medical payments coverage and personal injury protection. Each type of coverage serves a specific purpose.
Auto Liability Insurance
Mandatory in most states, liability coverage consists of two components:
- Bodily injury liability: Pays for the medical care of other parties when they are injured in a car accident you caused
- Property damage liability: Pays to repair damage to personal property that resulted from the car accident that you caused
Almost all states require a certain amount of liability coverage, but you can purchase more than the state’s minimum limits if you want to make sure you’re protected after an accident. If your liability insurance does not have high enough limits to cover the damage or medical bills that result from an accident you cause, you will be on the hook for the remainder of the costs. If you cannot pay them, you can be sued in civil court.
Underinsured and Uninsured Motorist Coverage
Uninsured motorist coverage kicks in to cover your medical bills and vehicle repairs when an uninsured driver causes a car accident. Underinsured motorist coverage pays your costs resulting from a car accident when the other driver’s auto policy doesn’t have high enough limits to cover the full cost of your bills. It’s typically referred to as UIM or UM.
Insurance companies offer this type of policy to repair or replace your vehicle in the event of vandalism, theft, fire, weather or other types of damage not resulting from a car accident. When you buy comprehensive coverage, you’ll also choose a deductible, which is the amount you’ll pay out of pocket before your car insurance coverage kicks in. With this type of policy, if your car is stolen, your insurance company will pay out the actual cash value of your vehicle, minus the deductible, so that you can purchase a new car.
While liability insurance pays to repair other parties’ vehicles after an accident, collision insurance covers damage to your own car. This auto insurance coverage pays to repair or replace your vehicle up to its cash value, minus your deductible, and it is usually required by lenders and leasing companies. If you own your car outright, this insurance is optional.
Medical payments insurance covers the medical care for you and your passengers if they’re injured in an auto accident. Some states require medical expense coverage. In other states, it’s optional. Typically, this coverage is called MedPay. These policies do come with coverage limits, which you choose when you buy a policy.
Personal Injury Protection
Offered most often in states with no-fault insurance laws, this car insurance coverage pays for medical expenses after a car accident, regardless of who is at fault. Personal injury protection, or PIP, also covers lost wages or child care if you’re unable to work after an accident.
In addition to the six basic types of car insurance, depending on your insurer, you can opt for a policy that pays for a rental car while yours is being repaired or purchase a roadside assistance plan. You can also add on a new car replacement policy, rideshare coverage and gap insurance, which pays off your car loan if your car is totaled in an accident or is stolen.
What Do States Require for Car Insurance?
All but two states (Virginia and New Hampshire) have minimum coverage requirements for car insurance, and they vary from state to state. Some states only require liability insurance, while others also require a form of medical coverage and/or uninsured motorist coverage.
Let’s take a look at how minimums vary. Consider New York. The state requires minimum coverage of:
- $25,000 per person in bodily injury liability
- $50,000 per accident in bodily injury liability
- $10,000 in property damage liability
- $50,000 per person in personal injury protection
- $25,000 per person in uninsured motorist coverage
- $50,000 per accident in uninsured motorist coverage
In contrast, North Carolina only requires $30,000 per person and $60,000 per accident for bodily injury, plus $25,000 in property damage liability coverage. There are no additional requirements in North Carolina, but you can always purchase more coverage if you would like.
So, How Much Car Insurance Do I Need?
When deciding how much car insurance you need, you’ll want to look up the minimum requirements in your state. Typically, insurers do not allow drivers to purchase policies that are lower than the required limits in their state. Keep in mind that minimum insurance coverage limits are just that – minimums – and may be too low to protect you financially in the event of an accident.
If you have a high net worth, higher insurance limits will ensure your assets, such as your home, your salary and any savings or investments, are protected from litigation since your insurance will cover the costs arising from a car accident.
For most drivers, the best coverage to opt for is a 100/300/100 policy. This provides $100,000 per person and $300,000 per accident in bodily injury liability and $100,000 per accident in property damage liability.
You may also want to purchase comprehensive and collision coverage, especially if your car is newer.
How much you’ll pay for coverage depends on a variety of factors, including how much coverage you purchase, as well as the type of car you’re insuring. Insurers also base your rate on where you live, your driving record, age, marital status, credit score and your insurance history. According to a report from the National Association of Insurance Commissioners, the average cost of auto insurance in the U.S. is $1,134 per year.
Our Recommendations for Car Insurance
Now that you have an idea of how much car insurance you need, you can start finding the best price. If you need a new car insurance policy, it pays to get quotes from more than one insurer. Even if you think you’re paying a low price with your current provider, you can save by shopping around and getting a few free estimates.
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GEICO: Best Overall
In our research of the best auto insurance companies, we ranked GEICO No. 1 overall, with a rating of 9.1 out of 10.0. Not only does the company have a strong industry reputation, but its coverage and costs are among the strongest in the industry. GEICO is known for its low insurance premiums as well as a multitude of discounts that can help drivers save even more.
Progressive: Best for High-Risk Drivers
You might also want to check rates from Progressive, particularly if you have a less-than-stellar driving record. Progressive specializes in covering high-risk drivers. We rate the company 8.9 out of 10.0 for its positive reputation and coverage options. Prices are typically a little higher with this insurer, but many drivers are able to find low premiums, especially on basic policies.
The Detroit Bureau collects data from every major car insurance provider to formulate rankings of the best insurers. Our in-depth rating system takes into account market share, coverage, pricing, customer satisfaction and ratings from industry experts. Each insurer is given a weighted score in four categories, as well as an overall score out of 10.0.
We recommend auto insurance companies based on these rankings, but we also encourage you to perform your own research and compare quotes to find the best coverage.