How to Determine How Much Car Insurance You Need

FREE Car Insurance Comparison

Compare quotes from the top car insurance companies and save!

Secured with SHA-256 Encryption
Important facts to know...

  • By law, you have to carry at least a minimum amount of insurance to satisfy the mandatory laws in the state
  • Any driver who carries the state minimum will be at risk of being underinsured and uninsured for some losses
  • You should consider how much coverage you need based on your assets and income or you could lose both
  • Most insurance experts recommend that all drivers hold at least 100/300/100 in third-party liability coverage
  • Review first-party coverage options that help you pay for your own doctor and repair bills before you reject options

Being uninsured could put you at risk financially. As much as you’d like to keep your premiums low, sacrificing the coverage that you’re carrying isn’t the wisest way to save money.

Since auto insurance is such an important financial products, it’s crucial that you select the right coverage options and the right coverage limits of liability.

You can visit auto insurance agencies and sit down with licensed agents to discuss your financials and your budget if you’d like to build the right policy. That’s a great way to learn more about coverage options, what insurance pays for, and how much coverage you’ll need.

Unfortunately, not everyone has the time to go to an agency for quotes. Thankfully you can quickly and easily get quotes right now by using our free comparison tool above. Just enter your zip code to get started.

For consumers who need help picking coverage from home, here’s a helpful guide.

What are state mandatory minimums?

Not many forms of insurance are mandatory. You have the option to buy life insurance, you have the option to buy renter’s insurance, but you don’t have an option when it comes to insuring your vehicle.

When it comes to car insurance, it’s virtually always mandatory.

You might be asking yourself, “What if I don’t want to insure my car?” That’s fine, you don’t necessarily have to.

In all states, physical damage coverage that pays for your car is considered optional. It’s the third-party liability coverage, and sometimes uninsured motorist coverage, that’s considered mandatory in the eyes of the law.

What does third-party liability insurance pay for?

The term third-party insurance can be a bit misleading. If you really break it down, it might leave you wondering why you’re required to buy insurance to cover someone else.

While third-party insurance does technically pay for damages incurred by another party, the insurance itself protects you from lawsuits and financial loss when you’re negligent for an accident. Here’s how each coverage works:

  • Bodily Injury Liability – coverage that offers compensation to third parties when they are injured in an accident with you and you’re negligent
  • Property Damage Liability – coverage that offers compensation to third-parties when their property is damaged in an accident with you and you’re negligent

How much liability insurance are you required to buy?

How much liability insurance that you’re required to have depends entirely on where you live. Some states have much higher requirements than others. When you look at requirements, there will be three different numbers you have to reference.

Each number refers to a different type of limit. Here’s how the limits are broken down when you see requirements that say 15/30/5:

  • $15,000 per person for Bodily Injury claims
  • $30,000 per accident for Bodily Injury claims when multiple people are injured
  • $5,000 per person for Property Damage claims when any third-party property is damaged

Every state has varying limit requirements but most of these requirements are pretty low. States with the lowest mandatory limit requirements include Florida and Ohio.

States with the highest requirements include Arkansas and Wisconsin. Make sure to check your state’s requirements before buying insurance.

Why should you buy more than what’s required by law?

You’re complying with the law and avoiding fines when you buy state minimums but that doesn’t mean you’re not doing yourself a disservice.

No amount of insurance will guarantee that you’ll have protection against any type of auto accident, but carrying higher limits provides you with more protection.

If you decide to carry state minimums, even just a minor accident could lead to a financial loss. If someone needed chiropractic care or medical treatment for a broken leg after a collision, it could definitely cost more than the $15,000 minimum in states like California.

When the total damages exceed your limits, you have to pay out of pocket.

If you’re taken to court, that could lead to wage garnishments and asset liquidation.

How much liability insurance do you need?

It’s really hard to determine how much liability insurance enough insurance. Even financial experts can’t predict how much is going to be sufficient. You never know if you’ll have an accident and you also never know how much will have to be paid out if there is one.

This uncertainty is what makes building a comprehensive policy so difficult.

There are a few rules of thumb to consider when you’re picking your limits. Some experts recommend that every carries at least 100/300/100.

Other experts recommend that you carry limits that will protect your assets and the value of the properties that you own. Here are a few things to remember:

  • You have to carry at least 100/300/100 when you’re entering into a lease contract
  • If you plan to buy a Personal Liability Umbrella for more liability protection, you have to carry at least 250/500/100

Do you need to carry physical damage coverage?

You don’t have to worry about picking physical damage coverage limits when you’re trying to decide whether or not to cover your car. Anytime that you have comprehensive and collision on your car, the limit of coverage is based on your car’s fair market value.

It’s whether or not it’s worth it to pay the premium that needs to be considered.

If you’re financing a car or leasing it, you have to have comprehensive and collision. When you aren’t required to cover the car, look up the car’s Actual Cash Value. If the premiums cost more than 1/10th of the car’s value, it’s probably not worth the cost.

Building an insurance policy isn’t exciting but it’s important. There are tools that can help you choose coverage limits and options if you don’t know where to start.

Be sure to choose limits first and then you can use our quoting tool to get instant quotes to see how much insurance will cost you.

Are you looking for free insurance quotes?

Your one-stop online Car Insurance guide. Get a Free Quote Now!

[0-9]
[0-9]