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Every state requires minimum car insurance, but state minimums are almost always insufficient to protect you financially in a serious accident. The difference between minimum coverage and adequate coverage might be $30-$60 per month. The difference in protection is potentially hundreds of thousands of dollars. Here is how to think through how much you actually need.
The Coverage Types and What They Do
Liability Coverage (Required in Most States)
Liability pays for damage you cause to other people and their property in an accident that is your fault. It has two components:
- Bodily injury liability: Covers medical bills, lost wages, and pain and suffering for people you injure
- Property damage liability: Covers damage to other people’s vehicles and property
Liability is written as three numbers: 25/50/25 means $25,000 per person bodily injury, $50,000 per accident bodily injury, $25,000 property damage. State minimums are often 15/30/10 or 25/50/25 — dangerously low given the cost of medical care and vehicle repair in 2026.
Recommended minimum: 100/300/100 ($100,000 per person, $300,000 per accident, $100,000 property damage). In a serious accident with injuries, a new vehicle, and a lawsuit, state minimums leave you personally liable for amounts above your coverage. If you have significant assets (home, savings, investments), consider 250/500/250.
Collision Coverage
Pays to repair or replace your vehicle after a collision, regardless of fault. Required if you have a car loan or lease — your lender mandates it. Optional if you own the vehicle outright.
When to keep it: If your car is worth more than $4,000-$5,000 and you could not easily pay to replace it out of pocket.
When to drop it: If your car is worth less than $3,000-$4,000 and your annual premium for collision exceeds 10% of the car’s value. See our full guide: when to drop collision coverage.
Comprehensive Coverage
Covers non-collision damage: theft, vandalism, weather (hail, flooding, fire), animal collisions (hitting a deer). Required with a car loan, optional if you own outright. Relatively cheap — typically $100-$300/year. Worth keeping on most vehicles given the range of covered events.
Uninsured/Underinsured Motorist (UM/UIM)
Covers you when the driver who hits you has no insurance or inadequate insurance. Approximately 13% of U.S. drivers are uninsured. In high-uninsured states like Florida (20%+ uninsured) and Mississippi (30%+ uninsured), this coverage is critical.
UM/UIM is relatively inexpensive and provides significant protection. Recommended on every policy.
Personal Injury Protection (PIP) / Medical Payments (MedPay)
Covers medical expenses for you and your passengers regardless of fault. Required in no-fault states (Florida, Michigan, New York, and others). Optional elsewhere. If you have good health insurance with low deductibles, the additional PIP coverage is less critical. If you have a high-deductible health plan, PIP provides a useful backup.
The Coverage Level That Makes Sense for Most People
| Coverage Type | Recommended Level | Skip If… |
|---|---|---|
| Bodily injury liability | 100/300 minimum | Never skip |
| Property damage liability | $100,000 | Never skip |
| Collision | Match car value | Car worth under $3,000-$4,000 |
| Comprehensive | Yes for most | Old car with low market value |
| UM/UIM | Match liability limits | Rarely worth skipping |
| PIP/MedPay | Required states: yes. Optional: if HDHP, consider | Strong employer health insurance |
Deductible: How to Choose
Your deductible is what you pay out of pocket before insurance pays the rest. Higher deductible = lower premium. Lower deductible = higher premium.
Common deductibles: $250, $500, $1,000. At a $500 deductible versus a $250 deductible, the premium difference is typically $100-$200/year. If you go 3-4 years without a claim, the $250 extra deductible saves you $300-$800. Choose the highest deductible you can comfortably pay out of pocket from savings.
How Your Credit Score Affects Your Premium
In most states, insurers use a credit-based insurance score to help set premiums. Poor credit can add $500-$2,000/year to your auto insurance premium compared to good credit. California, Hawaii, Massachusetts, and Michigan prohibit using credit scores for auto insurance pricing. Improving your credit score can significantly reduce your auto insurance costs in most states.
50/30/20 Budget Calculator
Sources: Insurance Information Institute coverage recommendations; FICO insurance score guidance; state minimum liability requirements. Coverage recommendations are general guidance. Your specific needs depend on assets, state laws, and risk tolerance. Consult an insurance professional. This article is for informational purposes only.
