What car insurance coverage do I really need?

The car insurance coverage you really need is liability auto insurance. Liability insurance will cover damages and injuries sustained by the other driver. Start comparing insurance rates here with our online tool.

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Zaneta Wood, Ed.S. has over 15 years of experience in research and technical writing bringing a keen understanding of data analysis and information synthesis to reach a wide variety of audiences. She studied adult education and instructional technology at Appalachian State University as well as technical and professional communication at East Carolina University. Zaneta has prepared technical p...

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Joel Ohman is the CEO of a private equity backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Jo...

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Reviewed by Joel Ohman
Founder & CFP®

UPDATED: Jan 25, 2021

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Here's what you need to know...

  • Each state sets a minimum required amount of car insurance coverage
  • The minimum required by a state is a fixed amount of public liability
  • Shop around online to find the best rate

What car insurance coverage do you really need? The answer to that question lies largely on a variety of factors.

Not everyone in every state needs the same car insurance coverage. Not every type of car needs the same coverage. Not every driver needs the same amount of coverage.

Understanding car insurance coverage will help you decipher just what type of car insurance coverage you need.

Use our free comparison tool above to start comparing quotes for car insurance today!

The Basic Car Insurance Coverage Needs According to the State

United States of America map-1600x1600

Every state throughout the country sets a minimum required amount of car insurance coverage that must be carried by car owners with vehicles registered there.

Some states dictate that financial responsibility must be proven, which provides an out for some individuals, but overall most car owners will opt for car insurance as their method of financial responsibility.

Typically the minimum required by a state is a fixed amount of public liability, which is composed of bodily injury, with an individual and a per accident limit, as well as a property damage limit.

These minimums are set very low, and while they do provide the basic coverage as required by law, they tend to be very inadequate.

If you were to be involved in a serious car accident, where someone was badly hurt or even killed, the expenses would quickly surpass the minimum amounts of coverage in any state. Therefore, while minimums are given, it is much wiser to insure your vehicle for higher amounts of liability coverage.

Other types of mandatory state coverage include Personal Injury Protection (PIP) and Uninsured Motorist/Underinsured Motorist (UM). Your state may or may not require these. PIP is typically required in no-fault states.

It provides for medical costs and even lost wages you or your passengers may incur if hurt in an accident, up to the limit of your policy.

UM provides for medical expenses if you or your passengers were to be hurt in an accident with an uninsured motorist or an underinsured motorist.

Since there are a significant number of drivers on the road in any state without insurance coverage, this is a very important type of coverage to carry, regardless of if you live in a state that requires it or not.

Free Car Insurance Comparison

Enter your ZIP code below to view companies that have cheap car insurance rates.

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Free Car Insurance Comparison

Enter your ZIP code below to view companies that have cheap car insurance rates.

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The Type of Car Insurance Coverage Your Car Needs

The type of car you have will also help to dictate the car insurance coverage that you need to carry. If you have a relatively new car, which is financed, your finance company will require you to insure the vehicle against property damage, so their investment is protected.

Therefore you will need to carry comprehensive and collision coverage. These are the two types of coverage that pay for the repairs or replacement of your car if it is damaged or destroyed due to an at-fault car accident or as a result of other perils.

Even if your vehicle is not financed, it is wise to carry collision and comprehensive coverage on newer vehicles which have a relatively high value.

If replacing your vehicle would cause you financial hardship, you need to carry these types of coverage.

When the value of your car drops to a certain level, and it is no longer financed, you should consider not carrying these types of coverage. Every comprehensive and collision coverage will have a deductible that you pay.

If you have a $1000 deductible and pay $500 yearly for just collision and comprehensive coverage, but your vehicle is only worth $1500, you are wasting your money, as essentially you have no coverage.

Therefore, with older vehicles make sure you do the math to see if it is worth carrying these types of coverage.

The Car Insurance Coverage Your Net Worth Needs


If you have a higher than average net worth you may need to consider carrying higher car insurance liability coverage. Often when people are involved in car accidents with people who are wealthy, their injuries seem to get much worse, much more quickly.

Certain people are targets for fraud, just because of their worth, and unfortunately, fraud is not always detected.

Also, people from certain professions, like doctors, who are involved in car accidents may be held to a higher level of responsibility than others and therefore may be required to pay out more if at fault.

If you have more assets, you will want to protect them with extra car insurance coverage.

When you have determined the amount of car insurance coverage that you need, the best place to start is by getting a quote for that coverage using an online quote tool. Such tools help you find the best car insurance deal from insurers serving your area.

Get started now comparing quotes by entering your ZIP below in our free comparison tool.

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Average Monthly Car Insurance Rates by State