Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products, including home, life, auto, and commercial, and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, mainly in the insuranc...

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UPDATED: Oct 14, 2021

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Here's what you need to know...

  • When searching for car insurance, you should first make sure that you have at least the minimum coverage required under state law
  • Above the state minimum coverage, there are additional policies you can consider based on your tolerance for risk and your ability to pay out of pocket for damages in an auto accident
  • The car you are driving, your driving record and your age are major factors in determining what rates you qualify for and how much coverage you should consider
  • Even though state laws require other drivers to have insurance, that does not mean they will comply. Consider your ability to repair or replace your car if an uninsured driver causes an accident

Every state, with the exception of New Hampshire, has some minimum level of coverage drivers are required to maintain in order to drive.

No matter what additional policies you may consider, your first priority is to make sure you have met this mandatory limit.

There are several additional policies to choose from with the major factors for consideration being your risk tolerance and how you expect to pay for damages in an accident that are not covered by the state minimum coverage.

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Auto Insurance Requirements Under the Law


State laws regarding minimum auto insurance amounts focus on liability coverage, which generally covers the damages that you cause to another car or person if you are responsible for an auto accident.

It is important to remember that auto liability coverage does not cover the damage caused to you or your vehicle. If you do not have additional insurance coverage, then these costs would have to be paid by you out of your pocket for an accident that you cause.

Liability insurance falls into two categories, bodily injury and property damage. If you cause an auto accident in which the other driver is injured, liability insurance would pay for the medical bills and lost wages of the other driver.

Property liability insurance will cover the cost of repairing or replacing the vehicle of the other driver in an accident in which you are at fault.

If you maintain an auto liability policy, you are considered the named insured under the policy. In addition to the named insured, your spouse may also be covered under the liability policy.

You can also give someone permission to drive your car, and that person would be covered by your liability policy.

The named vehicle on the policy is the one that you currently drive and list on the policy. As you replace your vehicle or buy an additional car, added vehicles are covered on your liability policy as long as you give the insurance company the required notice of the added vehicle.

According to the Insurance Information Institute, recommended amount of liability protection that you should actually have as a driver is at least 10 times the state minimum.

This is because the state minimum coverage requirements tend to be very low and will likely not cover all of the damage sustained in an auto accident.

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Types of Supplemental Auto Insurance Policies

These supplemental policies are optional coverage that you might want to consider in addition to what is required in your state.

Auto Collision Coverage

If you are involved in an auto accident, collision coverage will cover the property damage to your own car from the accident. According to the Insurance Information Institute, an estimated 72 percent of insured drivers in the U.S. have collision coverage in addition to the state-required minimum coverage.

For collision coverage, the amount of insurance you will need is determined by the current market value of your car and the estimated cost of repairing your particular car. So the more valuable your car, the higher the amount of coverage you will have for collision insurance.

What you will need to decide for this supplemental auto coverage is the amount of the deductible you will pay.

A deductible is the amount of money that you pay out of pocket before you get any reimbursement from the insurance company. If you want to lower your monthly premium, you can choose to have a higher deductible for this policy.

Comprehensive Auto Coverage

Comprehensive auto insurance is used for damage to your vehicle that is not caused by an accident or a collision. For example, if your vehicle was broken into or vandalized, the damage would be covered under a comprehensive policy.

Comprehensive insurance would also cover physical damage to your vehicle from fire, severe weather and floods.

According to the Insurance Information Institute, an estimated 78 percent of insured drivers in the U.S. have comprehensive coverage in addition to the state-required minimum coverage.

This is such a popular insurance option because it covers such a wide range of physical damage to your vehicle that may not otherwise be covered.

Uninsured Motorist Coverage

Uninsured motorist coverage helps to cover the injuries you sustain in an accident caused by an uninsured driver. Even though there are state laws requiring that all drivers have auto insurance, this does not necessarily mean that all drivers will comply with the requirements.

According to the Insurance Research Council, an estimated 12.6 percent of the drivers in the U.S. do not have any auto insurance coverage.

If you are in an accident caused by an uninsured driver, you will have to go out of pocket to pay for damage to your vehicle without uninsured motorist coverage. Also, if you are hit by a driver who flees the scene of the accident, uninsured motorist coverage will kick in for you.

Underinsured Motorist Coverage

This coverage is very similar to uninsured motorist coverage. Even if another driver at fault in an accident carries the state minimum coverage, it may not be enough to cover the damage caused to your car.

Uninsured motorist coverage helps to cover the amount of the damage that the other driver’s auto insurance policy limits do not cover.

Part of determining whether you should have this coverage is if you can afford to make up the difference out of your own pocket for damage caused by another driver without enough insurance.

No-Fault Automobile Insurance

Half of the states in the U.S. have a no-fault law, which means that each person involved in an auto accident has their medical bills and lost wages covered by their own insurance policy to a certain limit. This is true no matter which driver caused the accident. This is called personal injury protection (PIP).

Even in states with no-fault laws, you should keep in mind that the amount of coverage for medical bills and lost wages under PIP is very limited. It is often the case that accident victims are not fully reimbursed through PIP for their medical bills and lost wages.

In any event, PIP does not provide coverage for any physical damage to a vehicle in an accident, regardless of who was at fault. When speaking with an insurance company, an agent will be able to tell you if your state is a no-fault state and whether PIP applies to you.

Other Requirements for Car Insurance Policies


In addition to the state minimum coverage, you may be required to have comprehensive and collision coverage by contract. This would occur if you lease a car or finance the purchase of the car through a private lender or dealership.

These institutions are aware that liability insurance rarely covers the total damage in an auto accident and want to be sure that their secured asset under your loan agreement is covered for damage.

When shopping for a new or used car, be sure to ask the dealership if you are required to carry any of these additional coverages. When you request a quote from an insurance company, you should be sure to provide this information since it may influence the quotes you receive.

You should also provide the insurance company information about the car you are looking to buy and whether it is new or used because this could also affect your monthly premium.

The Bottom Line on Auto Insurance Coverage

While coverage above the state minimum is not required, it is certainly recommended. The cost of having to repair damage from a single accident can wipe out your personal savings if you do not have adequate auto insurance coverage.

In addition to considering your personal ability to pay for damages that you may cause in an accident, you should also keep in mind that there may be drivers who do not carry insurance regardless of the state laws.

To account for this possibility, you can supplement your liability coverage with uninsured motorist coverage that will make up for the difference up to your specific policy limits.

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