Car insurance is legally required almost everywhere – but the minimum your state requires and the minimum you actually need are two very different numbers. Here’s how to figure out the right coverage without overpaying for things you don’t need.
The Coverage Types – What Each One Does
Before deciding how much, understand what you’re buying.
Liability insurance – covers damage and injuries you cause to other people and their property. If you rear-end someone and injure them, liability pays their medical bills and repairs their car. It does not cover your own injuries or your own car.
Liability limits are expressed as three numbers – for example, 25/50/25:
- $25,000 per person for bodily injury
- $50,000 per accident for bodily injury
- $25,000 for property damage
Collision – pays to repair or replace your car after an accident regardless of who caused it. Subject to your deductible.
Comprehensive – covers damage to your car from non-collision events: theft, vandalism, fire, flooding, hitting an animal, hail, falling objects.
Uninsured/underinsured motorist (UM/UIM) – covers your medical expenses and property damage if you’re hit by an uninsured or underinsured driver. About 15% of drivers are uninsured – this coverage is one of the most overlooked and most valuable on the list.
Personal injury protection (PIP) – covers your medical bills and lost wages after an accident regardless of fault. Required in 12 states, optional in others.
Medical payments (MedPay) – similar to PIP but narrower. Covers medical expenses for you and passengers regardless of fault.
Why State Minimums Aren’t Enough
Every state except New Hampshire requires at least liability insurance, but minimums vary widely. Florida requires just $10,000 in personal injury protection and $10,000 in property damage liability with no bodily injury coverage required at all – leaving you personally liable for medical costs above $10,000 if you cause a serious injury.
Most states land around 25/50/25 – which sounds adequate until you consider that a single hospital stay can exceed $50,000.
The problem with minimum coverage: if you cause an accident that exceeds your policy limits, you pay the difference out of pocket. With a $50,000 bodily injury limit and a serious accident resulting in $150,000 in medical bills, you’re personally on the hook for $100,000.
A good rule of thumb is to supplement your state’s required minimums with enough coverage to match your net worth. This protects your savings and assets from being wiped out by a lawsuit.
How Much Coverage You Actually Need
Liability – go higher than the minimum. Most experts recommend at least 100/300/100 for liability:
- $100,000 per person bodily injury
- $300,000 per accident bodily injury
- $100,000 property damage
The overall average cost of car insurance for 2026 is $2,678 for full coverage or $799 annually for minimum liability-only coverage. The jump from minimum to solid liability coverage is often $200-400/year – worth it for the protection difference.
Collision and comprehensive – depends on your car’s value. The general rule: if your car is worth less than $4,000-5,000, dropping collision and comprehensive often makes financial sense. The coverage costs roughly $500-800/year and comes with a deductible – on a $4,000 car, the math rarely works in your favor.
If your car is worth more, keep both. Choose the highest deductible you could comfortably pay out of pocket – $1,000 instead of $500 can save $200-300/year in premiums.
Uninsured motorist – always worth having. This is one of the most overlooked coverages – drivers in states where it’s not required frequently skip it, then have no protection when an uninsured driver totals their car. Match your UM limits to your liability limits.
PIP or MedPay – check your health insurance first. If you have solid health insurance, PIP and MedPay provide overlapping coverage. If your health insurance has high deductibles or gaps, PIP adds a meaningful layer of protection.
What Affects Your Premium
Your driving history, age, location, credit score in most states, the vehicle you drive, and your annual mileage all affect your rate. Newer vehicles cost more to insure. Vehicles in areas with higher theft rates or natural disaster risk cost more to insure.
Factors you can control:
- Deductible – higher deductible means lower premium. Only raise it to an amount you could actually pay.
- Bundling – combining auto and homeowners or renters with the same insurer typically saves 10-25%.
- Multi-car discount – most insurers allow four to five cars on a multi-car policy at the same address. Multi-car policies save 10-25% compared to separate policies.
- Annual mileage – if you work from home or drive rarely, low-mileage discounts can be significant.
- Shop at renewal – loyalty rarely pays in insurance. Get competing quotes every 1-2 years.
The Right Coverage for Most People
For a standard driver with a car worth $15,000+ and some assets to protect:
- Liability: 100/300/100 minimum
- Collision: yes, with $500-1,000 deductible
- Comprehensive: yes, with $500-1,000 deductible
- Uninsured motorist: yes, match liability limits
- PIP/MedPay: optional if you have solid health insurance
For an older car worth under $5,000:
- Liability: 100/300/100
- Collision and comprehensive: consider dropping
- Uninsured motorist: keep it
Use PolicyGenius to compare quotes from multiple insurers side by side – rates vary dramatically for identical coverage.
Related: The Insurance You Actually Need – and What’s a Waste of Money