Choosing the right auto insurance coverage levels is important not only to keep you legal on the road, but to keep your personal assets protected in the event of an accident. This guide will help you balance cost with coverage.
First, it’s important to understand three of the key components of an auto insurance policy:
- (BI) Bodily Injury Liability Per Person: Coverage limit, per person, for the expenses, like medical bills and lost wages, due to injuries you cause to others in an accident.
- (BI) Bodily Injury Liability Per Accident: Coverage limit for the expenses due to injuries you cause to others, in total for the accident.
- (PD) Property Damage Liability Per Accident: Coverage limit for damages you cause to other people’s property in an accident, which could include cars, fences, etc.
When you compare coverages, policies will often be written like this: 25/50/25.
Which means your liability coverage is:
State Minimum Auto Insurance Requirements
Every state determines its own laws regarding what types of coverage it requires its drivers to hold, and what level it requires of each. No matter how much insurance you decide is appropriate for your circumstances, it’s important to make sure you meet at least the minimum requirements for your state where your car is registered.
States with the highest minimum coverage levels
States with the lowest minimum coverage levels
New Hampshire and Virginia do not require car insurance coverage.
Do You Need More than the Minimum Coverage?
Probably.
When it comes to car insurance, you’re paying for protection, so don’t assume the minimum coverage required by law is the same thing as the level of coverage to feel adequately protected. Think about it this way: If you get into an accident, you’re not going to be asking if you have the state’s legally required minimum coverage. You’re going to want to know whether you will have to pay out of pocket for the damage you unintentionally caused. In many cases, state minimum coverage simply isn’t enough.
Overall, as youchoose your coverage levelsin each category, it is important to cover all of the financial assets you have that would be at risk from a large insurance claim by protecting yournet worth. You may also want to consider whether you want to extra coverage in case an accident extends to a civil lawsuit.
How Much Bodily Injury Liability Coverage Should You Have?
Injuries caused by accidents have a wide range of potential costs. In a fender bender, there could be little to no expense, while a more serious accident could result in a claim demanding hundreds of thousands of dollars for someone like a surgeon or other highly paid professional who suffered an injury that put them out of work. This is why it’s helpful to reframe the question of how much coverage to get as a question of how much you personally have to protect.
Arriving at a number for this coverage involves tallying up the financial assets you currently have, such as a house, car, savings accounts, and (in some cases) retirement savings. And if you don’t have many assets yet, but are at the beginning of a lucrative career path, it may make sense to consider the earning potential you’d like to protect in case you are involved in a serious accident where wage garnishment could be possible.
The good news is, if you’re looking for higher bodily injury liability coverage, you can typically increase your limits significantly without paying too much more in your premiums.
How Much Property Damage Liability Coverage Should You Have?
Depending on the vehicles (or other property) involved, property damage resulting from an accident can vary widely, but the potential for a catastrophic loss is smaller than it is for bodily injury. For example, luxury cars may be worth more than typical minimum property damage limits, but even a fancy car can’t sue for lost wages or pain and suffering. In this category, you’ll want to make sure you’re comfortable with your level of product liability coverage for both your assets and your circumstances. Do you mainly drive in a smaller, rural town where older vehicles are more commonplace? Or do you commute regularly in a city or affluent suburb, surrounded by newer BMWs and other luxury vehicles?
Average liability claims paid
Source:Insurance Information Institute
Do You Need Personal Injury Protection (PIP)?
It mostly depends where you live.
Personal injury protection, or PIP, is mainly used, and required, in “no-fault” states, although it may be possible to get protection in other states. In these states, your own insurance will pay for your injuries up to your PIP limit, and then you may be able to sue the other party if you meet acertain threshold. This type of coverage will pay for your medical costs and those of your passengers as well as lost income related to the accident, regardless of whose fault it was.
Even if you don’t live in a state where this coverage is a requirement, this could be useful protection if you don’t have great health insurance to rely on, which would normally cover many of the same costs.
Do You Need Medical Payments Coverage (aka MedPay)?
It depends mostly on your other insurance coverages.
MedPayis coverage that specifically covers any medical expenses you and your passengers have after an accident, regardless of whose fault the accident was. This is useful because it is coverage that kicks in right away while your insurance companies work things out, and usually has a lower limit around $1,000 to $5,000. It can help pay for health insurance deductibles and even your PIP co-pay. Unlike PIP, however, MedPay will not cover the replacement of any lost wages.
It is possible that your health insurance may not cover costs related to a car accident, and in that case MedPay would be very valuable protection. Even if your insurance will kick in, MedPay may also be worthwhile if you have a relatively high deductible.
Do you need comprehensive and collision coverage?
It mainly depends on the value of your car.
Comprehensive and collision coverageare coverages that protect the value of your own car.
- Collision coveragewill pay to repair or replace your car if you are at fault in an accident.
- Comprehensive coveragewill pay to repair or replace your car if it is damaged outside of an accident or stolen.
If you lease or finance your car, you’re most likely going to be required to hold these coverages. If you own your car outright, it’s up to you whether you want to add these protections and this will depend on the value of your car, the cost of coverage, and your comfort level taking the chance of paying out of pocket for these expenses, or having no coverage in the event of certain types of accidents or damage to your vehicle. According toIII analysisof NAIC data, 77% of consumers purchased comprehensive and 73% purchased collision coverage in 2016.
Industry experts have their own rules of thumb for this decision:
“When 6 months of collision coverage exceeds 25 percent of the vehicle’s value, it’s no longer worth it because two years of collision coverage would cost more than replacing the car.”
Chane Steiner, CEO ofCrediful
“A general rule of thumb is your vehicle needs to be older than 10 years or worth less than $4,000 to drop comprehensive or collision.”
Ava Lynch, Resident property insurance expert forThe Zebra
Adding this type of coverage is usually costly, and in some cases could even double your premium. But as with any insurance, for those who end up needing it, it is money well spent.
Do You Need Uninsured/Underinsured Motorist Coverage (UM/UIM)?
We highly recommend it.
Nearly every insurance expert we consulted stressed the importance of this protection for people in all situations. Not only does this coverage protect you if the driver at fault in an accident doesn’t have enough insurance to cover your expenses, but it can also provide coverage after a hit-and-run. Personal injury attorney Gabriel Levin describes UM/UIM this way: ”It insures that you get properly compensated for your harm regardless of the amount of insurance the defendant has.”
“The one tip I would give consumers when deciding coverage limits is to make sure their UIM/UM limits, at a minimum, match the coverage limits they have purchased for their liability insurance. It insures that you get properly compensated for your harm regardless of the amount of insurance the defendant has.”
Gabriel Levin, Attorney,The Levin Firm
Do You Need Umbrella Liability Insurance?
If you have a large net worth, probably.
Umbrella liability insuranceis not coverage that is specific to auto insurance, instead it’s a separate insurance policy that sits on top of your other coverages (home and auto) and protects your assets from claims above those policy limits. Because policies are usually issued in million-dollar increments, this coverage is typically appropriate for people with substantial assets to protect or with a higher risk of attracting a lawsuit, like owning a pool or being a landlord.
“[S]ince these policies don’t begin to pay out until after the liability limits of the related homeowners or automobile policy are exhausted, the rates for umbrella policies are generally quite reasonable.”
Timothy G. Wiedman, Personal Finance Professor, Retired,Doane University
Keep in mind that although rates for umbrella insurance are typically low, you may be required to increase your liability coverage on your auto insurance policy in order for the umbrella coverage to apply, which will add to the cost.
What’s Next?
- Ready to find a quote for your car insurance? Check out our reviews of theThe Best Car Insurance Companies.
- Ready to buy your auto insurance? Find out everything you need to know with ourchoose your coverage levels.
- Still have questions about coverage, the buying process, or getting quotes? We probably have the answer to your question in ourAuto Insurance FAQ.
FAQs
Which level of car insurance is best? ›
Fully comprehensive
This is the highest level of insurance you can have. It covers you, your car and any others involved in an accident. It includes all the cover of a third party fire and theft policy, but also protects you as a driver and might pay out for damage to your car.
Third-party insurance
This is the most basic type of cover, and the minimum legal requirement for car insurance. It covers the cost of accident damage suffered by any third party (including your passengers) and the their vehicle and/or property, but it doesn't cover damage to your own vehicle.
Fully comprehensive car insurance policies offer the most coverage out of all your options for cover. It offers protection against injury and damage for you and your vehicle, as well as any third-parties involved in a claim.
What are the 3 major car insurances? ›- Liability coverage. Protects you if you cause damage to others and/or their stuff. ...
- Collision coverage. Covers your car if you hit another car, person or non-moving object (like those darn ornamental rocks cousin Todd has at the end of his driveway). # ...
- Comprehensive coverage.
While third-party, fire and theft car insurance only covers your vehicle for theft and fire damage, a fully comprehensive policy offers much more protection. This can include extra features like motor legal protection, personal accident cover and breakdown cover.
What voluntary excess should I choose? ›The voluntary excess amount that you commit to will mostly be determined by the disposable income you have access to if the need for a claim arises. It should be set at an amount that you can comfortably manage to pay whilst taking the inclusiveness of compulsory excess into consideration.
What does fully comprehensive car insurance mean? ›In a nutshell, comprehensive car insurance cover – sometimes known as fully comprehensive cover, pays out if you damage your car, someone else's car or injure someone in an accident, regardless of who is at fault. Comprehensive car insurance also covers you against fire and theft.
What is cheaper comprehensive or third party? ›Not only could comprehensive insurance be cheaper than paying for third party cover, but if you get into an accident, your insurance company may pay for the damages to your vehicle. You may receive compensation when the fault can't be proven too.
Is third party better than comprehensive? ›One major difference between third-party insurance and comprehensive insurance is the range of protection offered to you and your vehicle. While a comprehensive plan provides multiple protection covers for you and your vehicle, a third-party cover is limited to offering protection against the claims of a third party.
Can I drive someone else's car with comprehensive insurance? ›As we've seen, driving other cars (DOC) insurance isn't usually included as part of a fully comprehensive policy. Unless your policy states otherwise, you'll only be able to drive your partner's car if they've added you as a named driver or have a family or any driver car insurance policy.
What is the difference between full coverage and comprehensive insurance? ›
The difference between full coverage and comprehensive insurance is that full coverage is a car insurance policy that includes both comprehensive and collision insurance along with the state's minimum requirements. Comprehensive insurance covers damage to a car from things other than accidents, like theft or fire.
Who is the number 1 auto insurer in the US? ›1. USAA. USAA is the best insurance company in our ratings. According to our 2022 survey, USAA customers report the highest level of customer satisfaction and are most likely to renew their policies and recommend USAA to other drivers.
What is the most trusted insurance company? ›| Car Insurance Company | Overall Rating | Our Award |
|---|---|---|
| 1. State Farm | 9.3 | Editor's Choice |
| 2. USAA | 9.2 | Low Rates for Military |
| 3. Geico | 9.1 | Affordable for Most Drivers |
| 4. Erie | 9.0 | Affordable for Basic Coverage |
Geico Auto Insurance. State Farm is currently the largest auto insurer in the U.S. according to the National Association of Insurance Commissioners (NAIC), closely followed by Geico. Both companies hold strong financial reputations and customer service ratings.
What type of damage is not covered by third party insurance? ›What type of damage is not covered by third-party insurance? Damage to your own vehicle. Damage to someone else's vehicle. Personal injury.
Does third party fire and theft cover accidents? ›Third party, fire, and theft car insurance covers you for any damage made to a third party, their vehicle, or property due to an accident. It also covers you for damage caused by fire or having your vehicle stolen. Third party, fire, and theft does not cover your own vehicle if it's damaged in an accident.
Why is third party more expensive? ›Well, it's all down to the level of risk that a driver with third-party insurance represents to the insurance company. The higher the risk an insurer considers you to be, the higher the policy cost will be.
How much should my excess be? ›As a general guide, standard excesses tend to range from around $200 up to $700, but could be higher or lower depending on your circumstances.
Is it worth paying a higher excess? ›Often people see a higher excess as one of the most effective ways to save on insurance costs but it may not be the wisest option. The reality is, that when you do make a claim, you will have to pay more towards it. And in the event of multiple claims, the total can become high.
Is it better to pay higher excess on car insurance? ›Generally, a higher excess is considered higher risk. But it might save you money right now. If you're an infrequent driver and mostly have your car safely stored then the level of risk may be low and the savings could be great.
What's the difference between comprehensive and comprehensive plus? ›
Comprehensive Plus
An enhanced version of our Comprehensive insurance. You'll get some higher cover limits, plus extras such as Guaranteed Hire Car Plus, Motor Legal Cover and Automatic Foreign Use included in the price.
In a nutshell, small dents/scratches on your car's surface does not require a car insurance claim. In fact, it is best to refrain from raising a claim in such a scenario, as you may otherwise lose a lot of money.
Can I claim insurance if I damage my own car? ›Under your standalone damage cover or comprehensive car insurance plan, you can claim for the damage caused to the insured car during an accident. However, you must have to inform the insurer and submit the necessary documents to proceed with the own-damage car insurance claim process.
Can I change my car insurance from third-party to fully comp? ›You can change the third-party car insurance policy to comprehensive car insurance policy after getting the inspection done and paying the required premium for the comprehensive car insurance policy.
Is comprehensive insurance better? ›The difference is in what they cover. Third party insurance is the lowest level of car insurance you can get, and is the minimum level of cover you'll need to legally drive on the roads. Fully comprehensive is the highest level, and typically covers you for a lot more.
Is third-party insurance enough for car? ›It is mandatory as per The Motor Vehicles Act, 1988 and driving without a Third-party Liability policy is a punishable offense. However, it is not the most ideal coverage with regards to the above-mentioned purpose of insurance. Read ahead to know 3 reasons why a Third-party Liability car insurance is just not enough.
What is not covered under comprehensive coverage? ›What damage is not covered by comprehensive coverage? Comprehensive coverage does not cover damages caused by hitting another vehicle or object. These incidents are covered under collision coverage. It will also not cover normal wear and tear on your vehicle.
What is the difference between fully comprehensive and third-party car insurance? ›Comprehensive cover protects your vehicle against accidental damage claims while third party fire and theft doesn't.
What is the benefit of zero depreciation car insurance? ›Zero depreciation means – If you have nil depreciation cover then you can claim the total cost of replacement of car parts in case of accidental damage. The depreciation value of the damaged parts won't be deducted from the claim amount. Thus, it helps you save a huge amount.
Can I drive my parents car without insurance? ›Can I drive my parents' car without insurance? No, you'll need at least third party car insurance if you want to drive your parents' car.
Can my friend drive my car? ›
It might be an emergency or you may have permission from the car owner, but that doesn't mean it's legal. Unless you're a 'named driver' on their car insurance, you almost certainly won't be insured.
Can I be the main driver on someone else's car? ›But the main driver doesn't necessarily have to be the owner or the registered keeper. This is pretty common for married couples. If you're married, one of you can own the car and be the registered keeper. But if your spouse drives the car more often than you do, they'll need to be listed as the "main driver".
When should I drop collision coverage? ›If the cost of your collision coverage is 10% or more of the value of your car, it's probably time to drop it. For example, if your collision insurance costs you $400 per year and your vehicle is only worth $4,000, cancelling collision will save you money.
What is a good collision deductible? ›Comprehensive claims tend to be filed for less damage than collisions, so having a lower deductible is often logical. Collision deductibles can sometimes go as low as $100 or $250, but most agents recommend that you start at $500 and increase if you can afford to.
Is it better to have full coverage or liability? ›Full coverage typically gives you more protection and is likely required if you are still making payments on your car. If you're driving a vehicle that's more than 10 years old or has high mileage, or you have enough money to easily replace it, you may want to consider going with liability-only.
Is insurance Group 22 high? ›Cars in insurance group 22 are moving towards the most expensive part of the scale in terms of insurance premiums. Indeed, cars in insurance category 22 are more powerful and expensive. Pieces are more difficult to find when the car is damaged and repairing costs are often higher.
Is insurance Group 20 high? ›What is insurance group 20? Insurance group 20 cars are often on the cheaper side to insure. With group 20 being at the lower end of the 50 insurance groups created by Thatcham Research, you can expect them to have relatively good car safety features and inexpensive repair costs.
What voluntary excess should I choose? ›The voluntary excess amount that you commit to will mostly be determined by the disposable income you have access to if the need for a claim arises. It should be set at an amount that you can comfortably manage to pay whilst taking the inclusiveness of compulsory excess into consideration.
What type of car insurance is cheapest? ›The cheapest type of car insurance will depend on your personal circumstances. However, fully comprehensive cover is usually the cheapest type of car insurance, even though it offers the most cover out of the three policy types.
Is 31e a high insurance group? ›What does car insurance group 31 mean? Vehicles in insurance group 31 are starting to reach the highest part of the scale in terms of insurance quotes. Cars in insurance group 31 represent higher risks to insure for providers. Engines are bigger, repairing costs are higher.
Is insurance group 17e expensive? ›
If you're driving a car in insurance group 17, you can expect it to be comparatively cheap to insure. These cars tend to have good car safety features, less powerful engines and are relatively inexpensive to repair.
Is insurance group 03e cheap? ›Cars in insurance group 3 are often on the cheaper side of the scale when it comes to car insurance, which is good news if you have a car in this group or if you're looking to purchase one.
What is Group 41 insurance? ›What does car insurance group 41 mean? Vehicles in insurance group 41 are among the most expensive to insure on the market. They have large engines and high performances on the road, and therefore represent a higher risk for insurance companies. It's often the case of sport or luxury car with high value as new.
Is insurance group 19e expensive? ›Insurance group 19 cars are among the cheaper ones to insure. With group 19 being at the lower end of the 50 insurance groups compiled by Thatcham Research, the cars that slide into this category tend to have good car safety features, are inexpensive to repair and possess less powerful engines.
What is insurance group 10 mean? ›Insurance group numbers run from 1 to 50, with 1 generally the cheapest to insure and 50 the most expensive. Cars in group 10 are at the cheaper end of the scale, but the overall cost of your insurance premium is also decided by your age, driving history and habits.
How much should my excess be? ›As a general guide, standard excesses tend to range from around $200 up to $700, but could be higher or lower depending on your circumstances.
Is it worth paying a higher excess? ›Often people see a higher excess as one of the most effective ways to save on insurance costs but it may not be the wisest option. The reality is, that when you do make a claim, you will have to pay more towards it. And in the event of multiple claims, the total can become high.
Is it better to pay higher excess on car insurance? ›Generally, a higher excess is considered higher risk. But it might save you money right now. If you're an infrequent driver and mostly have your car safely stored then the level of risk may be low and the savings could be great.
Are older cars cheaper to insure? ›Are older cars cheaper to insure? Yes, most older cars are cheaper to insure, especially in terms of comprehensive and collision insurance. Cars lose value as they age, so the potential insurance payouts after an accident drop as well. This is not the case with many classic or collector cars.
How can I make my insurance cheaper? ›- Increase your deductible.
- Check for discounts you qualify for.
- Compare auto insurance quotes.
- Maintain a good driving record.
- Participate in a safe driving program.
- Take a defensive driving course.
- Explore payment options.
- Improve your credit score.
Is it more expensive to insure a new or old car? ›
And getting insurance on a new car often will cost more simply because it's more valuable than an older one. One factor that goes into setting your auto insurance rates is the type of car you're buying. Generally, pricier cars cost more to insure because the cost to repair or replace them is higher.