You need to know how much insurance your state requires before you buy a new car, switch insurers, or move to a different state. Most states have minimum insurance requirements, but you should also consider what coverage you realistically need when buying insurance.

If you’re wondering how much car insurance you should buy this year, here’s what you need to know before purchasing a policy.

Is car insurance required?

Insurance laws in most states require drivers to have car insurance, but “two have loopholes,” says Ben Guttman, an insurance broker at North Central Insurance Agency.

New Hampshire law doesn’t require insurance, but you must prove you have sufficient funds to cover the costs of an accident if you cause one.^[1] In Virginia, you can pay a $500 fee to avoid buying insurance.^[2]

How you acquire your car also plays a role in insurance requirements. If you lease or finance your vehicle, your lender or leasing company will often require you to purchase comprehensive or collision coverage in addition to liability coverage.

You risk violating your lease, loan agreement, or state law by not having insurance. Depending on the state you live in, you could face hefty fines, license suspension, community service, or vehicle impoundment for driving uninsured.

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Minimum car insurance requirements by state

Your state’s required liability insurance covers the costs of injuries or damage that you or another driver cause while using your car. Some states also require you to purchase personal injury protection (PIP) or medical payments coverage as well as uninsured motorist coverage — which protects you in the event of a wreck with an uninsured driver.^[3]

New Hampshire and Virginia laws allow drivers to opt out of the minimum insurance requirements by proving financial responsibility in another way. See below to learn about your state’s minimum car insurance requirements.

What auto insurance coverages should you consider?

If your state requires car insurance, you need at least the minimum liability coverage, but you should consider purchasing coverage beyond that to receive more protection.

You can choose from a number of possible coverages. Here’s what you should know and when you might want to purchase them.

Liability insurance

Liability insurance typically includes bodily injury and property damage coverage. Bodily injury pays for the costs of any injury or death you cause, while property damage liability pays for damage you caused to other vehicles and physical property — like fences or buildings.

Common liability coverage options include 50/100/50 and 100/300/100. In these, the first number refers to bodily injury liability per person — so $50,000 or $100,000 for each person injured. The second number represents the total limit for all people injured in an accident ($100,000 or $300,000), and the third depicts the property damage limit ($50,000 or $100,000).

“When choosing limits for liability, you should consider your total personal net worth,” says Holly Carter, an insurance agent with COUNTRY Financial. “What do you have to protect if you were at fault in an accident? State minimum limits are rarely adequate.”

Learn More: What is a No-Fault State in Auto Insurance?

Collision insurance

Collision insurance covers damage to your car from an accident — either from colliding with another vehicle or some type of property. It will help pay for the costs to repair your vehicle if you have a car accident, hit a tree or guardrail, or face damage from a pothole. This insurance typically makes sense to purchase with comprehensive insurance.

“If you lease or finance your vehicle, it will be required by the lender,” Guttman says. Even if it’s not, he says, “You should usually get it yourself because those are the coverages that protect you — not the other [driver].”

Comprehensive coverage

Comprehensive coverage also protects your vehicle. It covers the costs to repair or replace your car if it’s stolen or damaged in a fire, flood, hailstorm, other weather event, or act of vandalism.

States don’t require this coverage, but it protects you if you don’t have the cash to cover repairing or replacing your vehicle following damage.

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Uninsured/underinsured motorist coverage

Uninsured/underinsured motorist coverage protects you if you have an accident with a driver without insurance — or at least without enough insurance to cover the damage. It can also cover you if you’re the victim of a hit-and-run incident.

The following states require this type of coverage: Connecticut, Illinois, Kansas, Maine, Maryland, Massachusetts, Minnesota, Missouri, Nebraska, New York, North Carolina, North Dakota, Oregon, South Dakota, Vermont, West Virginia, Wisconsin, and Washington, D.C. This requirement can make carrying the minimum amount of insurance more expensive in these states.

Personal injury protection

Personal injury protection (PIP) coverage reimburses you for medical expenses if you or one of your passengers are injured in an accident. It can also reimburse you for lost wages if the injuries prevent you or your passengers from temporarily returning to work.

Several states require this type of coverage: Delaware, Florida, Hawaii, Kansas, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Dakota, and Utah.

Medical expenses (MedPay)

Medical expenses coverage — also called MedPay — resembles personal injury protection coverage, though it won’t cover the indirect costs of injuries, like lost wages. MedPay strictly covers the medical and funeral costs of people injured in a wreck. It’s only required in Kansas and Pennsylvania.

This coverage can vary quite a bit from one insurer to the next. Some, for example, may only reimburse your health insurance, while others limit coverage to medical expenses within the first year of the accident.

Gap insurance

Gap insurance applies when you total or badly damage your car. It covers the difference between what an insurance policy covers — the depreciated value of your car — and the remaining amount on your auto loan.

No states require this insurance, but the Insurance Information Institute recommends getting it if you made a small down payment on your car (less than 20%), have a loan of five years or longer, or are leasing your car.^[4]

Keep Reading: What is Gap Insurance and Do You Need It?

Do you need full-coverage car insurance?

Full-coverage insurance typically includes liability, comprehensive, and collision insurance — coverages that protect both you and your vehicle in the event of an accident.

Selecting full coverage will result in higher premiums than your state’s minimum liability insurance, but it can also save you money in the event of injury or vehicle damage. If you injure someone else or damage another vehicle, it can help you cover those costs as well.

You’ll typically want full coverage if you lease or finance a vehicle or if you wouldn’t have the funds to repair or replace your car out of pocket if you have an accident.

What deductible should you choose?

When you make a claim, you need to pay your deductible before your insurance company covers any costs. Most drivers choose deductibles of $500 or $1,000, according to Guttman — meaning you’d need to pay for $500 or $1,000 of the repairs or medical bills. Your insurance would then cover the rest, up to your policy limits.

Lower deductibles typically come with higher premium costs, while higher deductibles result in lower premiums. You’ll want to look at your budget (and how much you have saved for an emergency) when choosing your deductible.^[5]

“Don’t make it something you can’t afford in the event of a claim,” Guttman warns.

What level of car insurance should you buy?

You’ll generally want to have coverage that correlates with your risk of having an accident.^[6] Whether you should purchase coverage beyond your state’s minimum requirements depends on a number of factors, including:

• Your financial situation: You should think about how much money you have to cover the costs of car repairs, medical bills, and other expenses that could come from an accident.

• How much and how far you drive: If you frequently drive your car long distances, you have a greater likelihood of getting in an accident simply due to the amount of time spent on the road.

• Your vehicle type: Sports cars and pricier vehicles cost more to repair than cheaper models. These cars may also face greater risks as targets of theft.

• Where you live and park: Some locations come with greater risks than others in regard to traffic, weather, and crime rates.

• Your lender or leasing company: If you don’t own your car outright, your lender or leasing company will probably require additional insurance.

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Car insurance requirements FAQs