Our site works better with JavaScript enabled. Learn how to turn it on in your browser.
Owning a car comes with a lot of financial responsibilities —the purchase (or lease) price, maintenance, gas — and plenty of other expenses to keep in mind. But before you hit the open road, there’s one vehicle cost you absolutely need to have buckled up: car insurance.
You probably know you need this crucial coverage, but how much is enough? The cost can vary depending on where you (and your car) call home, what kind of vehicle you drive, and how much you can afford.
In the U.S., each state has its own requirements when it comes to car insurance. As you’ll see in the table provided by NerdWallet, most require a minimum of $50,000 of bodily injury coverage as well as $25,000 in property damage liability. Bear in mind that state requirements are just one factor and some circumstances may require you purchase more than the state minimum.
To find the bare minimum coverage you need, you can start with your state’s requirements. If you have a lease or a loan, your lessor/lender may also have coverage conditions. Finally, another consideration when determining the amount of insurance coverage could be the value of your car. Newer, more expensive cars could present more risk for providers, and may require more coverage.
Not all car insurance is created equal. Different policy types provide coverage for different situations and could pay for injuries or damage to vehicles accordingly. The major types of car insurance coverage to consider include the following:
This covers damage you may do to someone else and their property. Most states require liability coverage, and it’s generally less expensive than other, more comprehensive types of car insurance.
PIP will help pay for medical expenses for you and your passengers, no matter who is at fault in an accident. Some states have no-fault insurance laws that require PIP insurance. This type of coverage may also pay for expenses such as lost wages, funeral expenses, and replacement for services lost due to injury, such as cleaning or childcare.
MedPay helps covers medical bills and other related expenses for you and your passengers, regardless of who caused the accident. MedPay is required in some states, but in other states, MedPay is optional.
UM and UIM coverage helps pay for your medical expenses when someone else who doesn’t have liability insurance (or doesn’t have enough) causes an accident. In some states, it can also pay for damage to your vehicle. This coverage is required in some states and optional in others.
As the name suggests, collision coverage pays for vehicle repairs if you’re in an accident. It’s not required by most states, so you should consider the value and age of your car when deciding if you need collision insurance.
Vehicle damage isn’t always the result of an accident, and comprehensive insurance may cover some of those instances (hail, theft, fire, flood, animals). It’s often sold along with collision coverage and your lender or leasing provider will likely require this type of coverage.
Note: In addition to your insurance policy, you could inquire about add-ons to cover specific problems you may encounter as a driver. An example would be emergency roadside assistance. If your car breaks down, emergency roadside assistance can help pay for services like tow trucks, locksmiths, jump starts, fuel delivery, and basic repairs on the side of the road.
A deductible is the amount you could pay out-of-pocket for a car insurance claim before your insurance begins to pay and can range from a few hundred dollars up to $2,500. Liability coverage often has no deductible, but for comprehensive and collision insurance, you will need to choose a deductible level.
A common deductible is $500. Bear in mind, the lower the deductible, the higher your premium will be. What’s right for you can depend on your budget and preferences. Some considerations are whether you want to save on premiums but possibly pay more if you file a claim, or whether you’re more comfortable with higher premiums in exchange for a lower out-of-pocket cost in the event of a claim.
Car insurance is required by law in most states. If you are in a state that requires insurance coverage and you are pulled over while driving without insurance, you could be fined, have your car impounded, or have your license suspended. In some rare instances, you could even face jail time if you cause an accident without insurance, you could be responsible for all of the associated costs. The other driver could also sue you for damages.
As you navigate the ever-changing landscape of car insurance, there’s a lot to consider. Finding the right type and amount of car insurance coverage for you means balancing costs, state requirements and more. It’s a lot. But by taking the time now, you can drive easy knowing you’ll be covered no matter what lies down the road.
Drive into the future with confidence.
Get a Quote Today
This icon indicates a link to a third party website not operated by Ally Bank or Ally. We are not responsible for the products, services or information you may find or provide there. Also, you should read and understand how that site’s privacy policy, level of security and terms and conditions may impact you.
Icarus on May 5, 2022 at 3:29pm
Ridiculous article conclusion. Tells you ABSOLUTELY NOTHING about the subject. Pure click bait.
Antonio A. on June 11, 2022 at 8:25pm
Ok im nered one car
A few things you should know
The information contained in this article is provided for general informational purposes, and should not be construed as investment advice, tax advice, a solicitation or offer, or a recommendation to buy or sell any security. Ally Invest does not provide tax advice and does not represent in any manner that the outcomes described herein will result in any particular tax consequence.
Prospective investors should confer with their personal tax advisors regarding the tax consequences based on their particular circumstances.
Past performance is no guarantee of future results. Any historical returns, expected returns, or probability projections may not reflect actual future performance. All securities involve risk and may result in loss. While the data Ally Invest uses from third parties is believed to be reliable, Ally Invest cannot ensure the accuracy or completeness of data provided by clients or third parties.
Options involve risk and are not suitable for all investors. Review the Characteristics and Risks of Standardized Options brochure before you begin trading options. Options investors may lose the entire amount of their investment or more in a relatively short period of time.
Trading on margin involves risk. You can lose more funds than you deposit in a margin account. Please review Margin Account Agreement and Disclosure for more information regarding margin trading.
Securities products and services are offered through Ally Invest Securities LLC, member FINRA/ SIPC. You can find background on Ally Invest Securities at FINRA’s BrokerCheck. View Securities Disclosures
Advisory services are offered through Ally Invest Advisors Inc., a registered investment adviser. View Advisory Disclosures
Ally Invest Advisors, Ally Invest Securities, and Ally Invest Forex LLC are wholly owned subsidiaries of Ally Invest Group Inc. Ally Bank and Ally Invest Group are wholly owned subsidiaries of Ally Financial Inc. Securities products are NOT FDIC INSURED, NOT BANK GUARANTEED, and MAY LOSE VALUE.
Ally Mastercard® is issued by Ally Bank, Member FDIC under license from Mastercard® International. FICO® is a registered trademark of the Fair Isaac Corporation in the United States and other countries.
Foreign exchange (Forex) products and services are offered to self-directed investors through Ally Invest Forex. NFA Member (ID #0408077), who acts as an introducing broker to GAIN Capital Group, LLC (“GAIN Capital”), a registered FCM/RFED and NFA Member (ID #0339826). Forex accounts are held and maintained at GAIN Capital. Forex accounts are NOT PROTECTED by the SIPC. View Forex Disclosures
Ally Financial Inc. (NYSE: ALLY) is a leading digital financial services company, NMLS ID 3015. Ally Bank, the company’s direct banking subsidiary, offers an array of deposit, personal lending and mortgage products and services. Ally Bank is a Member FDIC and Equal Housing Lender , NMLS ID 181005. Credit products and any applicable Mortgage credit and collateral are subject to approval and additional terms and conditions apply. Programs, rates and terms and conditions are subject to change at any time without notice.
Ally Servicing LLC, NMLS ID 212403 is a subsidiary of Ally Financial Inc.
Ally and Do It Right are registered service marks of Ally Financial Inc.
App Store is a service mark of Apple Inc. Google Play is a trademark of Google Inc.
Zelle and the Zelle related marks are wholly owned by Early Warning Services, LLC and are used herein under license.
From MONEY. © 2021 Ad Practitioners, LLC. All rights reserved. Used under license.
©2009–2022 Ally Financial Inc.
©2009–2022 Ally Financial Inc.
Options involve risk and are not suitable for all investors. Options investors may lose the entire amount of their investment in a relatively short period of time.
Prior to buying or selling options, investors must read the Characteristics and Risks of Standardized Options brochure (17.8 MB PDF), also known as the options disclosure document. It explains in more detail the characteristics and risks of exchange traded options.
November 2012 Supplement (PDF)
October 2018 Supplement (PDF)
You can also request a printed version by calling us at 1-855-880-2559.
