Coverage 101

How much car insurance coverage do you actually need?

Your state sets a legal minimum, but the minimum is rarely the smart amount. Here’s how to think about coverage so you’re protected without paying for things you don’t need.

Start with liability — and don’t skimp

Liability coverage pays for the injuries and property damage you cause to other people in an at-fault accident. It comes in two parts: bodily injury liability and property damage liability, usually written as three numbers — for example, 50/100/50 means $50,000 per person and $100,000 per accident for injuries, and $50,000 for property damage.

State minimums are often far lower than the cost of a serious accident. A single hospital stay or a totaled late-model SUV can blow past a low limit in an afternoon — and you’re personally on the hook for the difference. A common rule of thumb is to carry enough liability to cover your net worth, so a lawsuit can’t come after your savings or home. Bumping up from minimum limits is usually surprisingly cheap.

Collision and comprehensive: for your own car

Liability doesn’t repair your vehicle. For that you need two optional coverages: collision (damage from hitting another car or object) and comprehensive (theft, vandalism, weather, fire, hitting an animal). Together these are what people loosely call “full coverage.”

If your car is financed or leased, your lender will almost always require both. If you own the car outright, it becomes a judgment call based on the car’s value — which we break down in our liability-versus-full-coverage guide.

The coverages people forget

• Uninsured/underinsured motorist: Pays when the at-fault driver has no insurance or not enough. Given how many drivers are underinsured, this is one of the best values in a policy.
• Medical payments or PIP: Covers medical bills for you and your passengers regardless of fault. Required in some states, optional in others.
• Roadside and rental reimbursement: Inexpensive add-ons that save a headache when you’re stranded or your car is in the shop.

A simple starting point

For most drivers: carry liability limits high enough to protect your assets (often well above the state minimum), add uninsured-motorist coverage, and keep collision and comprehensive as long as your car is worth enough to bother repairing. Then set your deductible at the highest amount you could comfortably pay out of pocket to keep your premium down. Requirements and pricing vary by state and situation, so confirm specifics with the carrier before you buy.