Insurance coverage

How Much Auto Insurance Coverage Do You Really Need?

Purchase car insurance before driving isn’t just smart, it’s mandatory in most states. Although each state has its own standards for how much car insurance coverage you should have, there are other factors to consider.

Collisions, whether they occur with another vehicle or a stationary object, can be costly. If you don’t have adequate coverage, you could face huge expenses. However, how much you need depends on your particular circumstances, including where you live, how long you’ll be driving, and your particular personal and financial needs.

“Having adequate car insurance coverage is both smart and prudent to ensure that you and your family are financially protected against catastrophic loss,” said Mark Friedlander, director of corporate communications at Insurance Information Institute. “To have adequate financial protection for you and your family, buy as much as you can afford. Shopping around when looking for insurance coverage is time well spent, as premiums can vary by hundreds dollars between insurers based on many factors.”

Here’s what to consider when buying car insurance.

Types of Auto Insurance Coverage

First, let’s review the main types of coverage you’ll see when purchasing a policy.

Types of coverage can be divided into three categories:

  1. Mandatory
  2. Often required
  3. Optional

Note that this list does not include all types of coverage offered by carriers – these are just the most common.

1. Compulsory coverage

Almost all states require both types of coverage below, which do not cover damage to your own car or property.

Personal injury liability protection: This coverage covers injuries to others caused by the policyholder and other drivers listed on the policy.

Material damage civil liability protection: This cover indemnifies the damage that the insured causes to the property of others. Primarily, this includes other vehicles, but can also include personal property like fences or mailboxes.

2. Often required

Many states also require these types of coverage.

Injury Protection: This coverage pays the medical expenses and lost wages of the driver and passengers of the insured’s car in the event of injury, up to the policy limits, regardless of fault. PIP may also include coverage for funeral expenses and essential services, such as babysitting or dog walking, that you may not be able to perform due to physical injury.

PIP is mandatory in 14 states: Delaware, Florida, Hawaii, Kansas, Kentucky, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Dakota, Oregon, Pennsylvania, and Utah.

Coverage for uninsured or underinsured motorists: This coverage covers medical expenses for you and your passengers, up to policy limits, when an underinsured or uninsured motorist causes an accident. Uninsured Motorist Property Damage Insurance is available in some states to help cover repairs to your vehicle if it is damaged by an uninsured driver.

Medical payments: Similar to PIP, this type of coverage helps pay the medical expenses of the policyholder and their passengers up to the policy limit, regardless of fault. Unlike PIP, medical payments do not cover loss of wages or essential services. Med Pay is optional coverage in most states, but is mandatory in a few states.

3. Optional coverage

State-mandated insurance coverage is the minimum for driving and generally does not include damage to your car. If your car is financed or leased, your lender may require you to have comprehensive coverage, meaning both comprehensive and collision.

Collision coverage: This coverage covers damage to your vehicle in an accident resulting from a collision between your car and another car or object.

Full coverage: This coverage covers damage to your car caused by an event other than a collision. This includes theft, fire, flood, hail, vandalism and more.

Learn your state’s auto insurance requirements

All but two states (New Hampshire and Virginia) require residents to carry an auto insurance policy. However, even if your state doesn’t require you to carry insurance, it’s a good idea to do so anyway, according to Friedlander. Accidents can be costly, and collisions and injuries can happen just about anywhere while you’re on the road. That said, required coverages and limits vary from state to state.

For example, while Massachusetts requires liability of at least $20,000 per person and $40,000 per accident, New York requires bodily injury liability limits of $25,000 per person and $50,000 per accident. Geico has a helpful tool which allows you to check your state’s minimum coverage requirements as well as a breakdown of each state’s laws.

That said, most insurance experts warn that buying only your state’s minimum insurance requirement will leave you with severely inadequate coverage.

“Wherever possible, we strongly recommend that you purchase insurance well above the state minimums,” Friedlander said. “Only buying state minimums makes you and your family financially vulnerable.”

So, being aware of your state’s requirements is only the first step. You will want to start with what is required and add to your policy from there.

What coverage do I need?

Triple-I recommends this amount of coverage for the two types of coverage required, according to Friedlander:

  • A minimum of $100,000 in bodily injury liability coverage per person.
  • A minimum of $300,000 in bodily injury liability coverage per accident.
  • A minimum of $100,000 in liability insurance for property damage.

From there, you can start looking at other types of coverage. Policies cover a variety of risks and damages. So the first step in determining what coverage to buy and how much is to determine your risks and how you can offset them.

For example, insurance experts agree that you should consider purchasing coverage for uninsured or underinsured motorists. Even though it’s illegal in most states, there’s often a large percentage of people who drive without a policy. You can check the percentage of uninsured motorists in your state here.

Friedlander recommends purchasing this coverage if your state is in the top 10 on this list, or if there are 10% or more uninsured motorists driving in your state. This coverage will help pay for your medical expenses and those of your passengers if you are involved in an accident caused by an uninsured driver. Without this type of coverage, you may have to pay entirely out of pocket if you are hit by an uninsured driver. That said, some states allow PIP to cover these types of losses while others do not, according to Friedlander.

You can also consider taking out comprehensive insurance (casco and collision). Collision will cover your vehicles for damage resulting from a collision with another car or object, and comprehensive insurance will cover you against many other types of non-accidental damage: flood, fire or even a tree falling on your car.

Especially if you live near an area that is going major flood or experiences hurricanes during the season, adding full coverage may be a good idea. And even if you don’t live near a flood zone on the coast, Friedlander still suggests buying comprehensive coverage, because 90% of natural disasters involve flooding, which means you can experience flooding just about n. anywhere in the country.

The basics of auto insurance coverage

Accidents are expensive. Whether it’s a collision or a natural disaster, damage to your car and personal injury while driving can happen just about anywhere. Purchasing more robust insurance coverage will give you greater peace of mind that you are financially protected should anything go wrong while you are on the road. We recommend buying what you need based on your personal situation, but buy above your state’s minimum requirements if you can.

To make this more affordable, shop around and make sure you implement the best strategies for save on your car insuranceincluding grouping your auto insurance with your life and home insurance.

“We recommend working with a good agent, getting a carrier that offers a variety of discounts, and finding ways to lower your premiums…rather than buying less coverage,” says Friedlander.