Guide
"How much car insurance do I need?" has two answers: the legal minimum, and the amount that actually protects you. They are rarely the same. Buying only the state minimum keeps you legal while leaving you exposed to costs that can dwarf the premium you saved. Here is how to think about each part of a policy so you carry enough — without paying for coverage you don't need.
Liability pays for the injuries and property damage you cause to others. State minimums are often startlingly low — sometimes $25,000 or less per person for bodily injury — while a single serious accident can generate hundreds of thousands in medical bills. If your income and assets are worth protecting, most guidance points toward carrying substantially more, commonly $100,000 per person and $300,000 per accident. If a judgment exceeds your limits, the rest can come out of your own pocket.
Liability actually has two parts: bodily injury liability (medical bills, lost wages, and pain-and-suffering claims from people you injure) and property damage liability (repairs to the other driver's car, plus fences, buildings, or anything else you hit). You'll see limits written as three numbers, such as 100/300/100 — that means $100,000 per person injured, $300,000 total per accident for injuries, and $100,000 for property damage. Because modern vehicles are expensive to repair or replace, even the property-damage figure can be exhausted by a single collision with a late-model SUV or work truck. Raising liability limits is usually cheaper than people expect, because the odds of the largest claims are low; the extra premium buys a lot of protection per dollar.
Collision covers damage to your car from an accident; comprehensive covers non-collision events like theft, hail, fire, and animal strikes. If your car is financed or leased, your lender requires both. If you own the car outright, they are optional — and their value depends on what the car is worth. The Insurance Information Institute offers a clear overview of what a basic auto policy covers.
A meaningful share of drivers carry no insurance or too little. The Insurance Information Institute, citing an Insurance Research Council study, reports that about 14 percent of motorists — roughly one in seven — were uninsured in 2022. Uninsured/underinsured motorist coverage steps in when the at-fault driver can't pay for the harm they cause you: it can cover your medical bills, lost wages, and pain and suffering when the other driver has no policy, or a policy too small to cover your injuries. It is inexpensive relative to the protection it provides, and in many states it is one of the most overlooked-but-valuable coverages you can add.
Requirements vary by state. In about 20 jurisdictions, uninsured motorist coverage is mandatory; in most others, insurers must offer it but you can decline it in writing. Given how many at-fault drivers carry no insurance or too little, declining it means betting that whoever hits you happens to be well insured — a bet the statistics don't favor. The Institute's overview of compulsory auto and uninsured-motorist rules breaks down how these mandates differ from state to state.
A common rule of thumb: if your annual comprehensive-and-collision premium exceeds roughly 10% of the car's actual cash value, those coverages may no longer be worth it — provided you have savings to replace the car yourself. On an older, low-value vehicle you could be paying most of the car's worth every few years just to insure it.
Our car insurance coverage calculator and rate estimator turns these questions into a personalized recommendation and shows how much you might pay in your state.
Suppose you own a paid-off sedan worth about $4,000 in actual cash value. Your renewal shows that comprehensive and collision together cost $520 a year. Run the test: 10% of the car's value is $400, and your comp-and-collision premium of $520 is above that threshold. On top of that, if you filed a total-loss claim, the most the insurer would pay is roughly $4,000 minus your deductible — say $500 — leaving a $3,500 payout after you'd already spent $520 a year insuring it. For a driver with an emergency fund large enough to replace a modest car, dropping comp and collision here and keeping strong liability limits is a defensible choice. Change one detail — a $22,000 car still being financed — and the math flips completely: the lender requires those coverages, and the potential payout dwarfs the premium. The point of the example is not the exact dollar figure but the habit of comparing what you pay against what the coverage could ever pay back.
Is state-minimum car insurance ever enough? For a small number of drivers with few assets and an older car, minimum liability may be all that's practical. But minimums are legal thresholds, not safety recommendations — if you injure someone and the bills exceed your limit, you are personally responsible for the difference. Most drivers with income or savings to protect carry more.
Should I lower my liability limits to save money? This is usually the last place to cut. Liability protects everything you own from a lawsuit. If the budget is tight, it's generally safer to raise your deductible or trim optional coverages before reducing liability limits.
Do I need uninsured motorist coverage if I already have health insurance? They cover different things. Uninsured/underinsured motorist coverage can pay for costs your health plan won't — such as your deductible, lost wages, and pain and suffering — when an at-fault driver has no insurance or too little. The Insurance Information Institute has more detail on standard auto coverages.
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