How Much Car Insurance Do You Really Need?

Too little car insurance and you’re financially vulnerable. But too much, and you’ll overpay. Here’s what to know.
Ben Moore
By Ben Moore 
Edited by Lacie Glover

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Choosing the right amount of car insurance can be tricky. While your state probably requires some coverage, you may find yourself wondering if it’s enough, or if you should buy more.

There’s no quick and easy answer. While you’re obligated to get the minimum amount of car insurance required to drive in your state, how much you purchase beyond that should depend on your own financial situation.

Protect your wallet with sufficient liability coverage

The main component of car insurance — liability coverage — doesn’t pay you if you cause a crash. Instead, it pays for injuries, deaths and property damage you cause, up to your policy’s limits. Liability limits are often listed in a format such as “25/50/15,” which means your insurer will pay $25,000 per person and $50,000 per wreck for injuries you’re responsible for, and up to $15,000 for property damage you cause.

In states where it’s required, minimum bodily injury limits can be as low as $15,000, but a bad wreck can easily result in medical bills higher than that. The average cost of a crash resulting in non-disabling injuries was more than $28,000 in 2019, according to the National Safety Council. And if you’re sued with insufficient liability coverage, you’ll pay the rest out of pocket.

So how do you know when you’ve bought enough? TJ Roberts, a Farm Bureau insurance agency owner in Mission, Kansas, recommends you consider your net worth and how much you drive when determining your auto policy’s liability limits. Roberts stresses that the most important thing about car insurance is having the proper coverage limits for your financial situation.

To determine your net worth, add up all of your assets, including investment and retirement accounts, and subtract any debt you owe. Then make sure you have enough bodily injury liability coverage to cover that amount.

If your liability limits are maxed out but you want more coverage, you can purchase more coverage with an umbrella insurance policy. These policies add additional liability coverage for both your car and home, often in $1 million increments.

If you don’t have any assets to protect besides your car, you’re probably OK purchasing minimal liability coverage.

Choose full coverage based on the deductible you can afford

Typically referred to as “full coverage” when added to a liability policy, collision and comprehensive coverage pay for damage to your own vehicle, regardless of fault. Collision coverage pays out when your car crashes with another one. Comprehensive coverage pays for damage to your car from situations outside your control, like vandalism, theft or a deer collision.

Both are optional unless you lease or finance a car. If you’re driving an expensive vehicle that would be difficult to replace, full coverage could offer some peace of mind after an accident. If your car has low cash value, or you’re willing to pay for a replacement, you’re probably better off skipping comprehensive and collision.

If you do buy collision and comprehensive coverage, pay attention to the deductible — how much you pay out of pocket before your insurance pays out for a claim. Collision and comprehensive deductibles tend to range from $250 to $1,000; choose an amount you could afford to pay in a jam.

Uninsured motorist coverage is recommended

About 1 in 8 drivers on the road don’t have car insurance, according to 2019 data from the Insurance Research Council. If you’re hit by one of them, you may be out of luck unless you have uninsured motorist coverage — or underinsured motorist coverage in case the person whose car hits yours doesn't have enough liability insurance. They're often sold together, in limited amounts like liability coverage.

While many states don’t require it, Roberts recommends adding it to your policy anyway. “Why would you insure other people’s stuff and not your own?” he asks.

If you’re wondering how much to add to your policy, keep it simple. Match the limits you’ve selected for bodily injury and property damage liability.

Some optional coverage types may be worth it

Insurers offer a variety of other useful coverage types:

  • Glass coverage pays to repair car windows if they’re damaged, handy coverage to have if a rock on the road hits your windshield.

  • Medical payments coverage will pay for your or your passengers’ injuries after an accident and can be useful to cover health insurance deductibles.

  • Roadside assistance for if you need a tow or jump start, though some companies may charge you out-of-pocket for services in addition to the regular premium.

Whichever coverage types you choose, Roberts advises you to prepare for possible scenarios that might happen on the road when you buy insurance. “You don’t want to wonder what coverage you have when it’s too late.”

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