This article has been reviewed by licensed insurance industry expert Moshe Fishman on 6/8/2023
Owning a vehicle requires the purchase of car insurance in almost all states within the U.S. Each state sets its own rules and regulations. These state insurance requirements establish the least amount of insurance to cover your vehicle in case of an accident. These lowest possible policy requirements cover liability to pay for damages or injuries you cause to other drivers and their property.
The bare minimum set by each state also varies widely from one to the next. So, it’s important to determine what your state requires before purchasing an auto policy. But purchasing the bare minimum is not recommended so it’s wise to understand the basics, before you answer the question "how much car insurance do I need?"
It’s also a good idea to ask yourself some deciding questions. For example, do you own or lease a car? How many miles do you drive per year? Where do you frequently park?
What type of car will you be driving? Will someone else also drive your car? This will ensure that you are purchasing an automobile insurance policy based on your needs and not just where you live.
What’s covered in this article:
Minimum car insurance requirements are laws and limits that are set by the states. These requirements are regulations that dictate what minimum amount of insurance coverage(s) is required of drivers who reside and legally drive in their respective state.
The regulations and amounts involving these mandatory insurance laws vary from one state to the next. Following these rules are the responsibility of vehicle owners according to their state residence. Some not only require certain limits but also require other types of coverages.
So, each state has its own regulations, rules, types, and forms of coverage to follow related to auto insurance. For more information on a particular state, visit the Department of Motor Vehicles for the state where you reside.
The purpose of states’ required coverages is to ensure that drivers have enough coverage to pay for claims involving injury and property damages when they’re at fault in an accident.
Unfortunately, without these requirements in place, some drivers may choose to drive without insurance. Without having coverage on their vehicle, these drivers likely wouldn’t be able to pay for damages or injuries they cause while driving. Without insurance, many would not be reimbursed and suffer financial and other hardships as a result.
Not all states require minimum coverage. Currently, there is one state, New Hampshire, where car insurance is not mandatory. But as expected, this doesn’t mean that drivers get off Scot free or that they do not bear responsibility should they cause an accident.
Most vehicle owners in this state are encouraged to purchase a policy and most do for their financial protection. Other alternatives to buying car insurance in the state include verification of financial responsibility or a self-insurance certificate or post a cash bond.
To waive car insurance coverage in this state, you must be approved by the DMV. Having a history of certain convictions, DWI’s, habitual offenders, and being at fault in an accident without insurance would be examples of grounds for denial.
However, in New Hampshire, the Department of Motor Vehicles “may require that persons have insurance (SR-22).” Should you fall under this insurance filing requirement, you will be notified by the DMV in writing.
Although buying car insurance in New Hampshire is not mandatory, drivers filing an SR-22 are required to verify compliance with New Hampshire’s minimum vehicle insurance limits: $25,000 bodily injury liability (per person), $50,000 bodily injury liability (per accident), $25,000 property damage (per accident), $1,000 MedPay (per person), and uninsured motorist coverage equal to liability coverage.
According to Virginia’s Code § 46.2-706, an uninsured motorist fee of $500.00 per year will be required if you do not carry car insurance on your vehicle. This fee does not provide any insurance coverage and must be paid to the Department of Motor Vehicles in Virginia. More importantly, by paying this fee, you are basically given permission to drive without insurance but at your own risk.
If insurance is purchased in Virginia, the minimum coverages are $25,000 bodily injury liability insurance (per person), $50,000 bodily injury liability (per accident), $20,000 property damage liability (per accident), and uninsured motorist bodily injury at $25,000 per person and $50,000 per accident.
|Min. liability coverage requirements (in thousands)
Other coverages may be required.
Auto liability limits include two main coverage areas:
These liability coverages do not cover damages to your own car or your injuries. Liability pays for other people’s damages and injuries for which you are liable.
Another concern is that these minimums do not guarantee all costs incurred by you in an accident will be covered. In many cases, these limits represent coverage that is inadequate. The medical and vehicle costs can easily skyrocket.
To read the liability minimum limits on the chart, let’s look at Alabama’s numbers of 25/50/25.
So, living in Alabama, you would need to carry 25/50/25 minimum liability limits. That means your required base coverages would be $25,000 for bodily injury liability for one individual; $50,000 for all injuries; and $25,000 for property damage in an accident.
In addition to liability insurance, some states require other types and minimums of coverages. These types of insurance may include:
Although having the mandatory limits of coverage for your vehicle is all that is required by most states, many experts in the field advise otherwise. The minimums laid out by each state may not be enough if you find yourself in an accident. Auto insurance coverages help to protect you and your finances in this type of situation.
In the worst possible type of accident, you could find yourself being sued for your assets. This could cause serious financial hardship that can be avoidable with the right auto insurance coverage.
Many factors may determine what your individual needs may be and should be taken into consideration. Where you live and the value of your car are key factors in determining your auto insurance needs.
Of course, the big deal breaker in this decision is choosing what you can afford. And although the majority of states have minimums, you might consider what’s at stake if you were to lose in court. A lawsuit against you could devastate your finances if you lose.
So, it may be wiser to go beyond any minimum requirements and consider purchasing enough liability insurance to protect you. Another option would be to buy additional coverage through the purchase of an umbrella policy, which offers quite a bit more coverage at a reasonable cost.
Other coverages to consider include collision and comprehensive insurance, also known as comp and collision. These are not included in state limits but covers repair costs for your vehicle in a covered collision or if you hit an animal, something falls on your car and a host of other things that can go wrong. If you are leasing a vehicle or don’t own your car outright and are making payments on a loan, collision insurance may be required by the financing institution.
Uninsured motorist and underinsured motorist insurance are other types of insurance not required in all states. These types of insurance will pay your medical bills if another driver hits you and has no or little insurance.
Two other types that are not always part of minimum insurance mandates are personal injury and MedPay. Personal injury protection, also known as (PIP), is sometimes required in “no-fault” states.
It covers medical bills for you and your passengers regardless of who was at fault in causing the accident. MedPay is the familiar name for medical payments coverage and like PIP pays medical bills for you and your occupants. Again, it doesn’t matter who caused the accident.
You may want to take a closer look at your personal situation to decide what coverages are right for you and what you can afford. Or contact an agent to help you review the options.
Basic auto insurance policies go beyond the minimum required coverages and limits. Although not required by states, a basic policy usually includes Bodily Injury Liability (BI), Property Damage Liability (PD), Medical Payments (MedPay) or Personal Injury Protection (PIP), Collision, Comprehensive and Uninsured (UM), or Underinsured Motorist (UIM) coverage.
Having enough car insurance depends on your particular needs. And although there are requirements laid out by almost every state, these coverage limits will not likely be adequate when you look at rising medical and auto repair costs.
According to CNN Money, “State minimum-coverage limits are too low to protect the assets of most motorists.” It’s therefore recommended that you purchase at least $100,000 per person, $300,000 per accident.
If you can afford more coverage, consider the better protection of higher liability limits to protect your finances, your home, etc. Greater protection will better cover damages and injuries and help against potential lawsuits.
Affordability is important for many vehicle owners. The cost (your payment) for insurance coverage is called a premium, which can be paid all at once or on a payment plan depending on the insurance company. These premiums are determined by a process called underwriting and by rating.
Underwriting takes into consideration the applicant’s risk. Rating looks at the probability of a claim and projected cost by looking at various rating factors. The rating factors can also vary from state to state.
Premiums (your cost for insurance) can be higher or lower based on your coverage amounts and the optional policy deductible, which represents the portion you would pay in case of a claim.
The answer will be obvious to most. The fact is that driving without insurance to cover your vehicle is against the law in nearly all of the states.
Just as the states’ requirements vary, so do the consequences for driving without auto insurance. You may be fined, lose your driver’s license, suspend your driving privileges, lose your vehicle registration, and/or possibly serve time in jail.
Being a safe and responsible driver includes carrying insurance for your vehicle. For answers to insurance questions, visit https://www.5minuteinsure.com/faq.