The next time you're on the freeway, think about this: Approximately one of every seven U.S. drivers on the road has no automobile insurance. That's the most recent estimate from the Insurance Research Council, which noted that the five states with the highest percentage of uninsured drivers were Florida, Mississippi, New Mexico, Oklahoma and Tennessee. With that many people driving without coverage, it's more important than ever for you to be insured. But how much car insurance do you need to have?
If you're like many people, you might be in an economic pinch these days. Your inclination might be to get the minimum insurance coverage required by law in your state. The trouble with minimum coverage is that it might not fully protect you — or your assets — if you're at fault in an accident. It's a better idea to carry more than the minimum coverage unless you are driving an older car with little value and have no assets to protect.
Every state in the nation except for New Hampshire requires you to have liability insurance. That mandatory coverage varies according to state.
The chart below shows minimum liability limits (in thousands of dollars):
In Alabama, for example, the minimum requirements are $25,000 of bodily injury liability for one person, $50,000 bodily injury liability for all people in an accident and $25,000 property damage liability. Another type of coverage, personal injury protection (PIP), or a system called medical payments (MedPay) in some states, pays for your own medical expenses, any lost wages and whatever other costs may arise when you're injured in an accident. It usually pays about 80 percent of your losses, and it also pays a death benefit. PIP is required in Delaware, Florida, Hawaii, Kansas, Kentucky, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Dakota, Oregon, Pennsylvania and Utah. In Arkansas and Maryland, the coverage is not required, but drivers must reject it in writing if they choose not to purchase it.
Some states also require you to purchase car insurance that will cover your medical expenses, pain and suffering losses and, in some states, car damage, in the event that the other motorist is at fault and is either uninsured or underinsured. The chart below also lists the states that require this uninsured or underinsured motorist coverage.
State
Liability limits
(in thousands of dollars)
Uninsured/Underinsured motorist coverage required?
Alabama
25/50/25
No
Alaska
50/100/25
No
Arizona
15/30/10
No
Arkansas
25/50/25
No
California
15/30/5
No
Colorado
25/50/15
No
Connecticut
20/40/10
Yes
Delaware
15/30/10
No
D.C.
25/50/10
Yes
Florida
10/20/10
No
Georgia
25/50/25
No
Hawaii
20/40/10
No
Idaho
25/50/15
No
Illinois
20/40/15
Yes
Indiana
25/50/10
No
Iowa
20/40/15
No
Kansas
25/50/10
Yes
Kentucky
25/50/10
No
Louisiana
15/30/25
No
Maine
50/100/25
Yes
Maryland
30/60/15
Yes
Massachusetts
20/40/5
Yes
Michigan
20/40/10
No
Minnesota
30/60/10
Yes
Mississippi
25/50/25
No
Missouri
25/50/10
Yes
Montana
25/50/10
No
Nebraska
25/50/25
No
Nevada
15/30/10
No
New Hampshire
Not required. If elected: 25/50/25
Yes
New Jersey
15/30/5
Yes
New Mexico
25/50/10
No
New York
25/50/10
Yes
North Carolina
30/60/25
Yes
North Dakota
25/50/25
Yes
Ohio
12.5/25/7.5
No
Oklahoma
25/50/25
No
Oregon
25/50/20
Yes
Pennsylvania
15/30/5
No
Rhode Island
25/50/25
No
South Carolina
25/50/25
No
South Dakota
25/50/25
Yes
Tennessee
25/50/15
No
Texas
30/60/25
No
Utah
25/65/15
No
Vermont
25/50/10
Yes
Virginia
25/50/20
Yes
Washington
25/50/10
No
West Virginia
20/40/10
Yes
Wisconsin
25/50/10
Yes
Wyoming
25/50/20
No
Even though each state, except for New Hampshire, has minimum requirements for bodily injury liability, it is probably in your best interest to purchase higher limits. If someone else is injured and you're at fault, the minimum liability coverage may not cover the other motorist's medical expenses, in which case he or she will most likely come after your assets. Insurance experts generally recommended that you purchase 100/300 limits of bodily injury liability (meaning $100,000 for one person in an accident and $300,000 for all people injured in one accident). On the other hand, if your personal assets don't amount to much, there's little for another driver to get if he were to sue you. The minimum requirements might actually suit you and will save you some much-needed cash.
Besides various forms of liability insurance, there is collision and comprehensive auto insurance coverage to consider. Collision insurance covers damage to the policyholder's car resulting from running into anything, be it another car, a fire hydrant or a light post. Comprehensive coverage takes care of your car in the case of theft, fire, falling objects, explosions or other unexpected problems.
Collision and comprehensive coverage are required in most lease contracts, and are essential if you own an expensive car. If you're driving a rattletrap, on the other hand, and the sum of your premium and your deductible are close to the value of your vehicle — or if they exceed it — you might want to consider doing without this coverage.
Before you purchase any type of auto insurance coverage, be sure to study your other insurance policies so you don't end up paying for something you don't need. If you have a decent health insurance plan, you might get away with purchasing the bare minimum personal injury protection coverage — or none at all if your state doesn't require it. However, you might end up paying a co-pay and deductible that wouldn't apply if you have PIP or MedPay.
Uninsured or underinsured motorist coverage also might be a wise buy, even if you have full medical coverage, since it can pay for your pain and suffering damages. If you're offered roadside assistance coverage by your insurer, you might not need it if you already belong to an organization such as AAA that offers it. The same thing applies for mechanical breakdown insurance. If you own a newly financed or leased vehicle that's still covered under warranty, such coverage is unnecessary.
It's easy to resent having to spend money on insurance. But keep in mind that auto insurance will most likely come to your rescue at some point, so it's imperative to purchase a worthwhile policy. Know what coverage you must have and know what additional coverage fits your lifestyle. Then if trouble strikes, you'll be ready.
