How much car insurance do you need: A comprehensive guide

The amount of coverage you need depends on your state, vehicle and financial situation. Most drivers should start by understanding liability coverage, which is required in most states, then consider whether additional protection, such as collision, comprehensive, uninsured/underinsured motorist coverage or personal injury protection makes sense for their needs.

Here are the essential car insurance coverages that every driver should consider:

Liability insurance

This helps protect you financially if you cause an accident that injures someone else or damages their property. Most states have minimum liability coverage requirements, so be sure to check your state’s rules.

Liability insurance typically includes two components:

• Bodily injury liability coverage helps pay for medical expenses, lost wages, and legal fees if someone else has been injured in an accident that you’ve caused.
• Property damage liability coverage helps pay to repair or replace another person's property if you damage it in an accident, such as a vehicle, garage door, or fence.

The required amount of liability coverage varies by state. Each state sets its own minimum coverage limits that drivers must meet, such as 25/50/25, which means $25,000 for bodily injury per person, $50,000 for bodily injury per accident, and $25,000 for property damage per incident. However, the state minimum is rarely sufficient to cover costs in the event of a major at-fault accident.

Collision insurance

This is designed to cover the cost of repairing or replacing your vehicle if it’s damaged in a collision with another vehicle or an object, such as a tree or guardrail. It applies regardless of who is at fault, but you’ll typically need to pay your deductible before coverage kicks in. When deciding whether to carry collision coverage, consider your vehicle’s value and how much you could afford to pay out of pocket after an accident.

Comprehensive insurance

Comprehensive coverage helps pay to repair or replace your vehicle if it’s damaged in a non-collision incident, such as theft, vandalism, fire, hail, flooding, or an animal encounter. Similar to collision coverage, you’ll need to determine appropriate deductibles and coverage limits based on your vehicle’s value and your budget.

Uninsured/underinsured motorist (UM/UIM) insurance

Uninsured/underinsured motorist coverage steps in when you’re involved in an accident with a driver who lacks insurance or has inadequate coverage. Depending on your state and policy, it may cover medical expenses and property damage that the at-fault driver’s insurance cannot fully pay for.

Personal injury protection (PIP)

Personal injury protection insurance, sometimes known as “no-fault” insurance, is required in some states and optional in others. It covers medical expenses, lost wages, and other related costs for you and your passengers, regardless of who caused the accident.

Each state sets its own minimum car insurance requirements for drivers. These rules establish the baseline amount of coverage you need to legally drive and show financial responsibility if you cause an accident. However, these amounts may be too low to provide adequate financial protection in the event of a serious accident.

Here are the state minimum requirements for car insurance by state, including coverage limits for bodily injury and property damage.

Sources: Property Casualty Insurers Association of America and Insurance Information Institute; state departments of insurance and motor vehicles.

Even if you have “full” coverage, which includes liability, comprehensive, and collision insurance, there are other types of car insurance that you may wish to consider. These options offer extra layers of protection to you and your car, including:

Medical payments (MedPay) insurance

This helps pay for accident-related medical expenses for you and your passengers, regardless of who was at fault. It may cover costs such as ambulance rides, hospital bills, and doctor visits, depending on your policy. MedPay can be useful even if you have health insurance because it may help cover deductibles, copays or other out-of-pocket medical costs after an accident. Coverage limits are usually lower than PIP limits, however, and more limited in scope.

Rental car reimbursement

This covers the cost of renting a vehicle while yours is being repaired due to a covered incident. This coverage is convenient and can save you money on rental fees.

Towing and roadside assistance

Towing and roadside assistance coverage provides assistance if your vehicle breaks down, needs a jump start, or if you lock yourself out. It offers peace of mind and ensures you’re never stranded on the road.

Gap insurance

If you finance or lease your vehicle, gap insurance can help protect you if your car is totaled or stolen. It helps pay the difference between your car’s actual cash value and the amount you still owe on your loan or lease. This coverage can be especially useful if you made a small down payment, have a long loan term, or owe more than the vehicle is worth. Many lenders and leasing companies require this coverage.

Non-owners insurance

This coverage is designed for individuals who don’t own a car but regularly rent or borrow vehicles. It provides liability coverage when driving a rented or borrowed car, protecting you financially in the event of an accident or damage you cause while driving.

Non-owner insurance usually includes bodily injury and property damage liability, but it generally does not cover damage to the vehicle you’re driving, your own injuries or personal belongings.