How much insurance coverage do I need?

Buying a car is an exciting time for anyone, but learning about the process can be confusing, especially for first-time buyers. Most everyone knows that you need insurance to protect your car, but knowing how much insurance coverage you need can be complicated.

There are several factors to consider regarding insurance. For example, nearly every state has a minimum liability requirement, but the amount that you’ll need depends on where you reside. Additionally, you’ll likely need more insurance on a financed car than you will when purchasing a used car. (For more information, read our “Do you need full coverage on a financed car?“).

If you’re asking yourself, “How much car insurance coverage do I need?,” the answer isn’t as complicated as you might think.

One of the first steps in calculating the amount of insurance coverage you need is to shop around for quotes to determine what fits your budget. Enter your ZIP code into our free tool if you want to discover what quotes might look like for you.

Types of Car Insurance

The first thing to understand regarding car insurance is the types of coverage you can purchase. If you don’t know what the terms mean, how can you determine what to buy?

Insurance companies have numerous products for you to choose from, but there are three main types of car insurance: liability, collision, and comprehensive.

Liability covers any damage that you may cause to property and people. Most states have laws requiring a minimum amount of liability coverage, but it’s usually a good idea to obtain more than the minimum. If your liability insurance expires before your bills are paid, you’ll be responsible for the remaining out-of-pocket expenses.

Collision covers repairs to your car after an accident, no matter who is at fault. And it also covers accidents involving other drivers and stationary objects, like trees or walls.

Comprehensive compensates car repairs for damage caused beyond the scope of accidents. Each company covers different events, but weather, vandalism, theft, and animal contact are usually included.

These are some additional types of insurance that you can purchase:

• Underinsured/uninsured motorist – Liability is required in most states, but that doesn’t stop some people from driving without insurance. This coverage protects you against drivers with inadequate coverage and is legally required in 20 states.
• Personal injury protection – Medical bills can be outrageously expensive, which is the last thing you want to worry about after a car accident. Personal injury protection will help pay medical expenses for you and your passengers.
• Roadside assistance – Some roadside assistance plans will come to your rescue at any time, while others go into effect only after an accident. Either way, roadside assistance is a valuable tool if you’re stranded on the side of the road.
• GAP coverage – If you have an auto loan and your car is totaled, there’s a chance that you’ll owe more on it than the total value of the car. When your loan is upside down, GAP coverage pays the difference. (For more information, read our “Does GEICO offer GAP insurance?“).

While there are many configurations you can select, having the three main types of coverage is generally a good idea. Liability, collision, and comprehensive provide the most possible protection for your car.

However, you might not need all three types. For example, if your car is older and you can afford to replace it, you can likely avoid comprehensive coverage.

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How much insurance do I need for liability?

Most states — except for New Hampshire and Virginia — require a minimum amount of insurance coverage. For the most part, state-required minimum insurance typically means a liability-only policy. Of all the types of insurance, liability is usually the least expensive option.

If your car is older or less valuable, you own it outright, or you’re on a tight budget, state-required minimum liability might be the best choice for you. When you choose minimum coverage, you’ll receive the most affordable rates possible.

However, the lowest rates aren’t necessarily the best selection. If you’re opting for liability-only, you should consider obtaining more coverage than the minimum requirement. It’ll cause your monthly costs to increase, but it could save you thousands if you are involved in an at-fault accident.

Generally speaking, you should purchase the highest amount of liability that you can afford. The more liability coverage you have, the better protection you’ll receive.

The best liability plan to buy is a 100/300/100 plan. These numbers reflect the amount of coverage you’ll have  ($100,000 per person, $300,000 per accident in bodily injury, and $100,000 per accident for property damage).

You can determine how much minimum coverage you need by checking your state DMV site.

How much insurance coverage do I need for full coverage?

Full coverage is not a legal requirement, but most car loan providers require it. When you buy or lease a new car, you protect the lender’s financial interests by getting full coverage.

Beyond budget constraints, it’s usually a good idea to acquire comprehensive and collision coverage. Whether your car is worth $1,000 or $100,000, you’ll need to replace it if it’s totaled. If you don’t have more coverage than liability-only, you’ll be on your own to displace your car.

You should also consider comprehensive coverage if you live in a high-risk area. In places with extreme weather, like Oklahoma and Florida, comprehensive will help pay to repair your car. Rural areas have a higher likelihood of animal contact, while some cities have high rates of car thefts.

How much does insurance cost?

Insurance companies have unique formulas to determine how much you’ll pay for insurance. However, there are some common factors that all insurance companies consider:

• Your age
• Your gender
• Your vehicle make, model, and year
• Where you live
• Your driving history
• Your insurance history
• Your credit score
• How often you drive

These factors combined will determine the price of your insurance. However, companies place different emphasis on each factor, resulting in various rates from each company. This is why comparing companies is essential to finding rates that fit your budget.

Read more: What’s the difference between make and model?

Below you can view the average price of the top insurance companies:

Before you decide on an insurance policy, you should assess your budget. Once you know how much you can afford to spend on insurance, selecting the appropriate company will be much easier.

Find the Best Insurance for You

Buying insurance can be a confusing, complicated process, but you don’t have to do it alone. Using this guide is a good starting point, and you can also work with an insurance agent.

When you’re ready to choose how much insurance coverage you need, you should obtain quotes from as many companies as possible. Enter your ZIP code into our free tool to determine what quotes might look like for you.

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