Most states require drivers to carry car some amount of car insurance, but the amount of coverage you need depends on your assets, vehicle’s value and risk tolerance.

Deciding which coverages to buy

Some types of car insurance are mandatory, while others are optional but provide added protection.

Determining which type of coverage you need — and how much of it to buy — means considering your financial situation and the laws in your state. Here’s a look at some of the recommended auto insurance coverages and what to consider when buying them.

H2: Liability coverage

Liability coverage provides financial protection if you cause an accident that injures someone else or damages their property. Rather than covering those losses out of your own pocket, liability insurance protects you up to your selected coverage limits.

Auto liability falls into two categories, both of which are required in most states.

• Bodily injury liability (BI) covers others’ injuries in an accident you cause.
• Property damage liability (PD) covers others’ property damage in an accident you cause.  

In many states, you can be held personally liable for any damages that exceed your policy’s coverage limits, as an at-fault driver. This means if you don’t have enough liability insurance and another driver sues you, you could lose personal assets and be forced to pay the difference out of pocket.

H3: How much liability coverage do I need?

Rule of thumb: Buy enough coverage to match or exceed your net worth.

Most states require drivers to carry a minimum level of liability insurance, usually including both BI and PD.

These state minimum requirements may not be enough to adequately protect you and your assets in the event of an at-fault accident. For example, Louisiana requires drivers to carry $15,000 in bodily injury liability per person, but the national average cost of an accident-related injury that doesn’t cause disability is $44,000, according to the National Safety Council (NSC). 

Buying at least an amount of liability coverage that matches your net worth will help protect your assets in case of a lawsuit. To find your net worth, add up your assets (home equity, savings accounts, investments, future income, annuities) and subtract your liabilities (debts).

If you have $200,000 in assets, consider a 250/500/200 policy. This will give you $250,000 per person and $500,000 per accident in bodily injury liability, as well as $200,000 in property damage liability.

H2: Uninsured/Underinsured Motorist (UM/UIM) coverage

Uninsured/underinsured motorist (UM/UIM) coverage is designed to protect you if you’re hit by a driver with no or too-little auto insurance. This coverage required in some states but optional in most.

Though nearly every state requires drivers to carry insurance, about one in seven drivers in the U.S. is uninsured, according to the Insurance Research Council (IRC). 

The NSC study found that disabling injuries from car crashes carried an average cost of $167,000. If the driver who hits you doesn’t have enough bodily injury coverage and you haven’t purchased UM/UIM coverage, you’ll have to pay those bills out of pocket or consider taking the driver to court.

H3: How much UM/UIM coverage do I need?

Rule of thumb: Match your liability limits, which may be the most you can buy.

UM/UIM coverage is designed to protect you, the policyowner, so it’s in your best interest to purchase as much coverage as you can afford, and to choose limits that make you feel secure. It’s generally wise to choose UM/UIM coverage limits that match your policy’s liability limits.

In fact, many insurers won’t allow you to buy more UM/UIM coverage than liability coverage, so that may be your maximum. If you want more protection, consider buying additional liability coverage to unlock a higher UM/UIM limit. 

H2: Comprehensive and collision coverage

Comprehensive and collision coverage are often sold together, and combined with liability, they make up what’s known as a full coverage auto policy. These insurances pay for damages to your own vehicle, regardless of fault.

Here are some situations where either of these coverages would apply.

Comprehensive and collision coverage can also pay to replace your vehicle if it’s stolen or totaled, though this is typically assessed at actual cash value (ACV) at the time of the loss, which is often lower than what you originally paid.

H3: Do I need comprehensive and collision coverage? 

Rule of thumb: Buy it if you can’t afford to fix or replace your vehicle out of pocket, have a valuable car, or have a leased or financed car.

Drivers should consider purchasing comprehensive and collision coverage if they couldn’t afford to repair or replace their vehicle if it were damaged in an accident or stolen. While neither type of coverage is mandated in any state, it may be required by your lender or lessor if you have a financed or leased vehicle.

Comprehensive and collision coverages are sold on a yes/no basis, rather than choosing coverage limits like with liability insurance. While you won’t choose a coverage limit, you will need to choose a deductible, which is the portion of each claim’s loss that you cover upfront before your insurer kicks in. The lower your deductible, the less a claim will cost you, but the higher your premium may be. 

You may not need comprehensive or collision coverage if your vehicle’s current cash value is low. It may not be necessary if you could easily pay to repair or replace your car, either. 

H2: Medical payments and personal injury protection coverage

MedPay and personal injury protection cover medical treatments, medications, co-pays and other auxiliary expenses if you or your passengers are injured in an accident, so you aren’t forced to cover these costs out of pocket.

Here’s a look at what these coverages can pay for.

You are generally able to choose one coverage or the other, but not both.

MedPay and PIP benefits kick in regardless of accident fault, and even follow you when you’re traveling in someone else’s car, riding your bike or walking down the street. Unlike health insurance, these coverages may not have a deductible, copay or coinsurance. 

A handful of states — namely those with no-fault insurance laws — require drivers to purchase MedPay or PIP. Drivers in other states may have the option to purchase either of these coverages for added protection.

H3: How much MedPay or PIP coverage should I buy?

Rule of thumb: If not required by your state, consider buying at least enough coverage to pay for any out-of-pocket medical expenses you might encounter, such as a health insurance deductible.

Whether you’re electing to buy this type of coverage or your state requires it, it’s wise to buy at least enough to meet your health plan’s annual maximum and deductible. Medpay or PIP can cover co-pays, prescription cost-shares and deductibles for you. 

Since medical expenses coverage is relatively inexpensive, you may just want to purchase the maximum allowed to fully protect you and your family. While the cost varies by driver, coverage limits and other factors like location, up to $10,000 of this medical expenses coverage can usually be added to a policy for less than $10 a month.

H2: Additional coverages and protections

Many insurers offer other protections that can be added to your policy, sometimes at little or no cost. These include things like:

• Emergency roadside assistance.
• Accident forgiveness.
• New car replacement.
• Glass repair or replacement.
• Gap coverage.
• Rideshare insurance.

Consider the value of these and how much adding them would increase your premium. For example, a single tow can cost $100 to $250 depending on your vehicle and distance, according to J.D. Power. If adding roadside assistance to your policy is only a few dollars a year, the added peace of mind could be worthwhile.

MEET OUR EXPERTS

Stephanie Colestock

Stephanie Colestock is a seasoned writer specializing in personal finance. With over 14 years of experience, she crafts insightful and accessible content on a wide range of financial topics, including insurance, credit and debt management, banking, investing, retirement planning, and household finances.

Her bylines appear in top-tier publications such as TIME, Fortune, MSN, Forbes, USA Today, Money, Fox Business, and CBS. Stephanie’s deep understanding of complex financial concepts and her ability to communicate them clearly have made her a trusted voice in the industry.

When she’s not writing, Stephanie enjoys helping individuals make smarter financial decisions through her engaging and well-researched articles.

Annie Millerbernd

Annie is a writer and editor at Jerry and has more than a decade of experience writing and editing digital content. Before joining Jerry, she was an assistant assigning editor at NerdWallet, where she covered loans. Previously, she worked at USAA and newspapers in Minnesota, North Dakota, California, and Texas. She holds a bachelor’s degree in journalism from the University of Minnesota.