Repairing your car can be a significant financial setback. By having the right amount of insurance coverage in place, you can cover yourself financially and protect yourself against unexpected costs.
In this article, we take a look at why you need car insurance, what you should consider, and how to get the right coverage in place.
Why Do You Need Car Insurance?
Buying car insurance coverage helps to protect you financially when something unexpected happens. Car accidents happen in the blink of an eye and we all make mistakes at some point in our driving career.
In addition to being a good financial decision, car insurance is also mandatory in most U.S. states. Here are three key reasons why you should have car insurance in place:
State law
Every state, with the exception of New Hampshire, requires motorists to carry minimum liability insurance.
We will cover this insurance in more detail later on, but essentially, minimum liability coverage ensures that you have the funds needed to pay for the damage you cause to another driver’s car, as well as injuries to their passengers when you are at fault in an accident.
These coverages are known as ‘bodily injury liability coverage’ and ‘property damage liability coverage’.
However, neither of these coverages pay for your damages or injuries. To cover your own damages, you need additional car insurance coverage, such as collision coverage and possibly comprehensive coverage.
Financial protection
Most of us don’t have enough cash lying around to pay for large, unexpected expenses. If you are involved in an accident, you may need to pay for medical bills, vehicle and property repairs, as well as any legal fees associated with the accident.
When you have the right insurance coverage in place, those bills will go to the insurance company instead of to you.
Lender requirements
If you have your car on a finance agreement with a lender or are leasing your vehicle, your lender will most likely require you to have a certain amount of comprehensive car insurance in place.
The lender still legally owns the car until you have paid for it in full. For this reason, they will generally insist that you have the right insurance in place to pay for any damages to the car, which in turn protects their investment.
What Happens If You Don’t Have Car Insurance in Place?
Driving without car insurance is illegal in most states and every state has its own penalties for driving without insurance.
Some states are more lenient than others, but none accept driving without minimum liability insurance, or some proof of financial responsibility.
This means that in most cases, you will face not only penalties for driving without auto insurance, but will also very likely face license suspension.
Getting your license back can be a struggle and an unnecessary cost. In addition, if your license is suspended, you will need to get an SR-22 certificate and SR-22 insurance. This is an extra financial burden as SR-22 insurance is costly.
If you are involved in an accident and severely injure someone else, you could also face jail time.
In states such as Michigan, the penalty for simply driving without car insurance can be up to a year in prison. The punishment for causing a serious accident is much more severe.
Here are the most common penalties for driving without auto insurance:
- A fine of up to $5,000.
- Suspended driver’s license.
- Suspended vehicle registration.
- SR-22 insurance requirement.
- Jail time.
- Mandatory community service.
- Vehicle impoundment.
Apart from the legalities surrounding driving without insurance, the cost of an accident may cause you financial difficulty.
Most minor car crashes will end up costing you between $200 and $1,000. When the accident involves more serious property damage or bodily injury, these costs go up significantly.
Consider that the average price for an emergency room visit is around $3,000 and the average inpatient hospitalization following a car crash is around $57,000. In addition to this, the average cost of property damage per accident is around $4,700.
A bill of between $10,000 and $60,000 is something that most people cannot afford.
This is why having car insurance in place is mandatory in most states. The state is trying to protect both you and other drivers on the road from the serious financial consequences of an accident, while ensuring that drivers and their passengers get the medical attention that they need.
What Is the Minimum Amount of Car Insurance That You Need to Have in Place?
By law, you will need to have a minimum amount of car insurance in place in order to legally drive.
To work out whether you need more car insurance than the minimum state-prescribed coverage, you can consider:
The value of all your assets (car, savings, home, and business)
If you are involved in an accident where the damages exceed your insurance coverage, a court may order you to make up the difference.
Let’s consider a scenario to put this into perspective:
Say you are involved in a serious car crash. You, as well as the other driver, both suffer injuries that require you to go to the emergency room. Your car is written off and the other driver’s car sustains serious damages. In addition, you destroy the fence of a property at the scene of the accident.
In this case, you may need to pay:
- $30,000 for your own injuries.
- $50,000 for the other driver’s injuries.
- $40,000 to replace your car.
- $10,000 to repair the other driver’s car.
- $1,000 to repair the damaged fence.
This would amount to a total of $131,000.
For example, if you live in Alaska and have minimum liability insurance in place, it will cover around $75,000 of the damages. This is because you will have a limit of $50,000 in bodily injury liability per person and $25,000 in property damage liability coverage.
This will leave you with $56,000 that you will need to pay for the accident out of pocket.
This could wipe out your savings if you are fortunate enough to have this kind of money saved. For most of us, we would need to sell assets in order to cover the amount outstanding.
You will need to consider the value of all your assets, as well as how much you have in savings in order to decide how much car insurance you need to have in place to protect you financially in the event of an accident.
It is important to remember that if you live in an area that is prone to severe weather events such as hurricanes or earthquakes, you will need to factor in the average cost of vehicle damage when flooding and earthquakes occur.
Very often your car will need to be replaced due to extreme weather events, which means that you will need enough car insurance to cover the replacement cost of your car.
To find out how much it will cost to replace your car, you can find its current book value by consulting the Kelley Blue Book. This is a trusted resource that many insurers and car dealers use to check on car valuations.
Your state’s minimum insurance requirements
Liability car insurance is a legal requirement in most states. The only state where you don’t legally require this insurance is New Hampshire.
In Virginia, where you can drive without insurance as well, you will need to carry proof of financial responsibility with you to prove that you have enough money saved to meet the state’s minimum liability limits.
We have spoken about minimum liability insurance a few times in this article, so let’s take a look at what exactly this is.
When you are at fault in an accident, you will need to cover the cost of injuries and property damage for the other driver, as well as his or her passengers. Minimum liability insurance covers these expenses.
It does not compensate you or your passengers—for that you will need additional insurance.
When you read your policy, you will see that minimum liability insurance is represented by three numbers.
If you live in Alabama for instance, you may see them listed as 25/50/25. These numbers respectively relate to the amount of coverage you have for:
- Bodily injury liability per person.
- Bodily injury liability per accident.
- Property damage liability.
Bodily injury covers the medical expenses of the other driver and passengers. Property damage liability coverage, on the other hand, pays for the repairs to property such as the other driver’s car.
It also covers any other property you damage in the accident.
There are minimum amounts of coverage that you need to have in place according to the law in your state.
Depending on your personal financial circumstances, you are able to increase these limits as you need.
The following table contains the minimum coverage amounts for each state in the U.S. where minimum liability coverage is required:
| State | Bodily Injury Liability (per person) | Bodily Injury Liability (per accident) | Property Damage Liability | Other Requirements |
| Alabama | $25,000 | $50,000 | $25,000 | N/A |
| Alaska | $50,000 | $100,000 | $25,000 | N/A |
| Arizona | $25,000 | $50,000 | $15,000 | N/A |
| Arkansas | $25,000 | $50,000 | $25,000 | N/A |
| California | $15,000 | $30,000 | $5,000 | N/A |
| Colorado | $25,000 | $50,000 | $15,000 | N/A |
| Connecticut | $25,000 | $50,000 | $25,000 | Uninsured Motorist: $25,000 per person ($50,000 per accident) |
| Delaware | $25,000 | $50,000 | $10,000 | Personal Injury Protection: $15,000 per person ($30,000 per accident) |
| Florida | N/A | N/A | $10,000 | Personal Injury Protection: $10,000 |
| Georgia | $25,000 | $50,000 | $25,000 | N/A |
| Hawaii | $20,000 | $40,000 | $10,000 | Personal Injury Protection: $10,000 |
| Idaho | $25,000 | $50,000 | $15,000 | N/A |
| Illinois | $25,000 | $50,000 | $20,000 | Uninsured Motorist: $25,000 per person ($50,000 per accident) |
| Indiana | $25,000 | $50,000 | $25,000 | N/A |
| Iowa | $20,000 | $40,000 | $15,000 | N/A |
| Kansas | $25,000 | $50,000 | $25,000 | Personal Injury Protection: $4,500 Uninsured Motorist: $25,000 per person ($50,000 per accident) |
| Kentucky | $25,000 | $50,000 | $25,000 | N/A |
| Louisiana | $15,000 | $30,000 | $25,000 | N/A |
| Maine | $50,000 | $100,000 | $25,000 | Uninsured Motorist: $50,000 per person ($100,000 per accident) MedPay: $2,000 |
| Maryland | $30,000 | $60,000 | $15,000 | Uninsured Motorist: $30,000 per person ($60,000 per accident) $15,000 property damage |
| Massachusetts | $20,000 | $40,000 | $5,000 | Personal Injury Protection: $8,000 Uninsured Motorist: $20,000 per person ($40,000 per accident) |
| Michigan | $50,000 | $100,000 | $10,000 | Personal Injury Protection: $250,000 for most drivers Property Protection Insurance: $1 million |
| Minnesota | $30,000 | $60,000 | $10,000 | Uninsured Motorist: $25,000 per person ($50,000 per accident) Personal Injury Protection: $40,000 |
| Mississippi | $25,000 | $50,000 | $25,000 | N/A |
| Missouri | $25,000 | $50,000 | $25,000 | Uninsured Motorist: $25,000 per person ($50,000 per accident) |
| Montana | $25,000 | $50,000 | $20,000 | N/A |
| Nebraska | $25,000 | $50,000 | $25,000 | Uninsured Motorist: $25,000 per person ($50,000 per accident) |
| Nevada | $25,000 | $50,000 | $20,000 | N/A |
| New Hampshire | $25,000 | $50,000 | $25,000 | Uninsured Motorist: $25,000 per person ($50,000 per accident) MedPay: $1,000 |
| New Jersey | N/A | N/A | $5,000 | Personal Injury Protection: $15,000 (up to $250,000 for certain injuries) |
| New Mexico | $25,000 | $50,000 | $10,000 | N/A |
| New York | $25,000 | $50,000 | $10,000 | Uninsured Motorist: $25,000 per person ($50,000 per accident) Personal Injury Protection: $50,000 |
| North Carolina | $30,000 | $60,000 | $25,000 | Uninsured Motorist: $30,000 per person ($60,000 per accident) $25,000 property damage |
| North Dakota | $25,000 | $50,000 | $25,000 | Uninsured Motorist: $25,000 per person ($50,000 per accident) Personal Injury Protection: $30,000 |
| Ohio | $25,000 | $50,000 | $25,000 | N/A |
| Oklahoma | $25,000 | $50,000 | $25,000 | N/A |
| Oregon | $25,000 | $50,000 | $20,000 | Uninsured Motorist: $25,000 per person ($50,000 per accident) Personal Injury Protection: $15,000 |
| Pennsylvania | $15,000 | $30,000 | $5,000 | Medical Benefits: $5,000 |
| Rhode Island | $25,000 | $50,000 | $25,000 | N/A |
| South Carolina | $25,000 | $50,000 | $25,000 | Uninsured Motorist: $25,000 per person ($50,000 per accident) $25,000 property damage |
| South Dakota | $25,000 | $50,000 | $25,000 | Uninsured Motorist: $25,000 per person ($50,000 per accident) |
| Tennessee | $25,000 | $50,000 | $15,000 | N/A |
| Texas | $30,000 | $60,000 | $25,000 | N/A |
| Utah | $25,000 | $65,000 | $15,000 | Personal Injury Protection: $3,000 |
| Vermont | $25,000 | $50,000 | $10,000 | Uninsured Motorist: $50,000 per person ($100,000 per accident) $10,000 property damage per accident |
| Virginia | $30,000 | $60,000 | $20,000 | Uninsured Motorist: $30,000 per person ($60,000 per accident) $25,000 property damage |
| Washington | $25,000 | $50,000 | $10,000 | N/A |
| West Virginia | $25,000 | $50,000 | $25,000 | Uninsured Motorist: $25,000 per person ($50,000 per accident) $25,000 property damage |
| Wisconsin | $25,000 | $50,000 | $10,000 | Uninsured Motorist: $25,000 per person ($50,000 per accident) |
| Wyoming | $25,000 | $50,000 | $20,000 | N/A |
What Other Types of Car Insurance Can You Buy to Cover Your Needs?
As we’ve mentioned earlier in this article, it is a good idea to review your assets to help you decide how much insurance cover you will need to protect yourself financially.
There are a few additional insurance coverages that you can choose which will help you pay for injuries and damages after an accident, or damages to your car for other unexpected events.
Collision coverage
Although not required by law, collision insurance is usually required by a lender if you are leasing or have finance on your vehicle.
This coverage pays for any damage after your vehicle has collided with another object. Such objects can include:
- Another vehicle – either parked or in motion.
- Telephone poles.
- Guard rails.
- Fences.
- Traffic signs.
- Trees and shrubbery.
- Homes and other buildings.
Depending on your policy and where you live, this insurance may also pay for repairs to your vehicle if you are involved in a hit-and-run or hit a pothole.
Comprehensive insurance
Comprehensive coverage is not required by law, but like collision insurance, a lender will often ask that you have this insurance in place when you are leasing or financing your vehicle.
Comprehensive insurance covers damage to your vehicle caused by events other than a collision, such as:
- Vandalism.
- Theft.
- Flood.
- Hail.
- Fire damage.
- Falling objects such as tree branches.
- Broken windshields.
- Damage caused by animals.
Uninsured motorist coverage and underinsured motorist coverage
This auto insurance coverage is required in many states and pays for your and your passengers’ medical bills and property damage if another driver is at fault in an accident and does not have sufficient insurance coverage in place.
Uninsured and underinsured motorist coverage also kicks in when the incident is a hit-and-run—where the other driver flees the scene of the accident.
Medical payments coverage
This insurance coverage is optional in most states. It covers your medical expenses no matter who is at fault in a car crash. However, it does not cover lost wages. If you already have health insurance in place, you may want to skip this coverage as these two policies may overlap.
Personal injury protection (PIP)
This car insurance policy is often referred to as no-fault insurance. Personal injury protection is required in states where a ‘no-fault’ insurance system is in place.
This coverage reimburses you for medical bills and lost wages if you or your passengers are injured in a car accident, regardless of who is at fault.
Gap insurance
This insurance is typically required for a car that is leased or financed. ‘Gap’ stands for ‘Guaranteed Asset Protection’. If your financed car is totaled in an auto accident, this insurance pays the gap between the car’s value and your loan.
Rental car coverage
This insurance pays for a rental car or another form of transportation while your car is in the repair shop. Rental car coverage is optional in all states and you will be useful if you have no one else that you can rely on for a ride while your car is off the road.
What Are the Steps You Need to Take to Buy Car Insurance?
Step 1: Gather your driver and vehicle information
To get a formal quote from an insurance company, you will need to provide the following information:
- Driver name.
- Driver date of birth.
- Driver’s license date and issuing state.
- Vehicle information number (VIN).
- Current mileage on your car.
- Address where the car is parked at night and during the day.
- Address where the car is registered to.
- Name of the registered owner.
- Prior insurance carrier and expiration date.
- Vehicle date of purchase.
- What you use the vehicle for (work or leisure).
Decide on the coverage you need
Apart from familiarizing yourself with the coverage limits required by your state, you can also decide on how much coverage will work for you depending on your individual financial situation.
This should help you decide whether you should stick with the minimum liability insurance for your state, or consider more comprehensive insurance coverage that will protect you financially.
Decide on a deductible
A deductible is the amount of money that you will need to contribute in the event of an insurance claim.
For example, if you need to repair your car after an accident, and the repairs are going to cost $4,500, your insurer will pay for the full damages minus your deductible.
If your deductible is $500, this means that you would pay $500 while your insurer would pay $4,000 toward the repairs to your vehicle.
Get car insurance quotes
The best way to start getting an idea of car insurance costs in your area, is to use a quote search website like ours. When you enter your zip code (head to the top of this page to do so), we will provide you with dozens of the cheapest car insurance deals available to you.
From here you can select an insurer that suits your needs and contact them to get a formal quote.
Agree on coverage limits
Once you have an idea of the premiums associated with your car insurance, you can negotiate with your insurer around the coverage that they are willing to offer you.
When negotiating this coverage, consider the cost of repairs to your vehicle in an accident, the cost to replace your vehicle, and the cost of medical care if you are involved in an accident.
Remember that you can increase the minimum liability coverage limits of your state if you feel that this will provide you with more sufficient cover in the event of an accident.
Get Cheap Car Insurance Today with CheapInsurance.com
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All you need to do is head to the top of this page and enter your zip code. You will find a wide selection of insurance quotes to choose from.
Once you have an idea of the auto insurance premiums that you could be paying, it will be time for you to contact the insurers that are offering you the cheapest rates to get a formal quote.
Getting car insurance should be quick, simple, and stress-free, and you deserve to get the best insurance rates possible.
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