Meet the state minimum for car insurance and you are legal to drive. Whether you are well protected is another thing.
Required coverage is designed to cover the damage you might inflict on other people. For example, an injury to a person, or damage to their car or property. Repairing your own car and, in many states, covering your own injuries are separate choices layered on top.
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1. Liability coverage
Liability is the required core in nearly every state, and it comes in two parts. Bodily injury liability pays the medical costs of people a driver hurts. Property damage liability pays for the cars, fences and storefronts a driver hits. It also generally includes a legal defense if someone sues over a covered accident.
Liability never repairs the policyholder’s own car or treats their own injuries. New Hampshire is currently the only state with no general requirement to carry it, though drivers there remain responsible for the damage they cause.
Everywhere else, the state minimum is a legal floor, not a measure of what a bad accident costs, and carrying only that minimum can leave substantial personal assets exposed to a judgment. It is one of the more common and costly mistakes drivers make.
2. Collision coverage
Collision is more of a spending decision than a coverage question. It pays to repair or replace a driver’s own car after hitting an object or another vehicle, or rolling it, no matter who was at fault. No state requires it, but a lender or leasing company usually will while there is a balance on the car.
The judgment call is the car’s value against what the coverage costs. On a car worth a few thousand dollars, a year of premiums plus the deductible can eat up a meaningful share of what the insurer would pay if the car were totaled, because insurers often settle claims on older cars at cash value rather than repair.
Weigh the car’s worth, the deductible and whether losing the car outright is a hit the household could absorb.
3. Comprehensive coverage
Comprehensive covers damage that does not come from a collision: theft, fire, hail and other severe weather, flooding, vandalism, a cracked windshield or hitting an animal. It is optional everywhere and usually costs less than collision, which is why drivers who buy one often buy both.
The pair is commonly called full coverage, but that is an informal label rather than a specific type of insurance.
4. Uninsured and underinsured motorist coverage
One in three drivers on the road in 2023 was uninsured or underinsured, according to an Insurance Research Council report. More than one in seven carried no insurance at all.
That is the risk this coverage addresses. Uninsured motorist coverage pays when an at-fault driver has no insurance or cannot be identified, as in a hit-and-run. Underinsured motorist coverage also applies when the at-fault driver has some coverage, but not enough to cover the damage.
Depending on the state and what a driver buys, it can cover injuries, property damage or both. Several states require some form of it, and where it is optional it may be relatively inexpensive.
5. Personal injury protection
How a driver’s own injuries get paid depends heavily on the state. No-fault states, including Florida, Michigan and New York, require personal injury protection, which covers the policyholder’s medical costs and sometimes lost wages regardless of who caused the crash. The details vary widely from one no-fault state to the next.
In other states, personal injury protection may be optional or unavailable, and drivers may instead have access to medical payments coverage, a separate first-party medical add-on with its own limits, sold in many at-fault states. Either can help cover accident-related costs that health insurance doesn’t fully absorb, especially for a driver whose health plan has a high deductible.
6. Gap coverage
Financing a car with little money down can leave a driver owing more than the car is worth, especially in the first couple of years. If the car is totaled during that stretch, a standard policy pays the car’s value, not the loan balance, and the borrower covers the difference.
Gap coverage pays that difference. It may be worth carrying while the loan balance clearly exceeds what the car would sell for, though some loans and leases already include it, so check before paying for it twice.
Deciding what is worth paying for
State minimums mean a driver is legal to drive. Coverage beyond that is mostly optional. You have to decide what gives you the best coverage at a price you can afford.
When the renewal notice arrives, read past the total. Collision and comprehensive may no longer make sense on a car cheap enough to replace outright. Higher liability limits may make sense for a household with substantial assets.
If your state does not require uninsured motorist coverage, add it to the list to price it out. Then ask several insurers to price the same coverage and compare the quotes
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