Our car accident lawyers are acutely familiar with the relevant tort law in our licensed jurisdictions, but also with the relevant insurance law. And just as importantly, we see every day how carrying auto insurance in the event of a car accident plays out in real time. But when you are purchasing a vehicle, whether a sedan or a large truck, the options for insurance can feel deceiving. On the one hand, you are making a large purchase, so protecting that purchase sounds like it makes sense. But on the other hand, you are already spending a lot of money on a down payment and on monthly payments. Does it really make sense to double down and add that much more to your monthly payments by way of auto insurance? This begs the question: How much car insurance do you need?
The reality is that how much car insurance you need depends on a variety of factors. Your needs depend on your income, assets, driving habits, risk tolerance, and much more. Thus, every situation is different. On this page, we will arm you with the information you need to make the most informed decision, away from the insurance company salesmen who likely get a commission on their sales. In the Washington, DC, Maryland, Virginia area, traffic is dense and medical costs are higher. But the information on this page is educational and applies wherever you are in the United States. Understanding which policy is best for you starts with knowing what car insurance covers, what it protects you from, and which options we recommend if you are in a car accident, and which are unnecessary.
Our personal injury lawyers have over 70 years of experience. If you are in one, give us a call today for a free case consultation.
What Does Car Insurance Actually Cover?
Adequate car insurance will protect you from the financial consequences of a car accident. But not every policy protects you from the same things. Moreover, different states have different mandatory minimum coverages. In this section, we discuss the more common mandatory minimums under local state requirements.
Of course, the more you pay, the more you should get. And of course, some insurers offer more competitive prices for the same coverage than others. Thus, it is best to shop around and compare prices. But what should you expect in your policy?
Liability Coverage
Liability coverage is the foundation of every auto insurance policy and is mandatory in nearly every state. There are two pots of liability coverage within a policy. The first is the bodily injury pot. The second is the property damage pot. If you cause an accident and injure them, liability coverage will pay for their medical bills, lost wages, and pain and suffering. Then, the property damage pot will pay for the damage to their vehicle and items in the vehicle that were damaged. However, it does not pay for your own injuries or damage to your own car. An example of liability coverage is 10/300/50. This means up to $100,000 per person for bodily injury, $300,000 per accident for physical injuries, and up to $50,000 for property damage.
For example, if you cause an accident and six people in the other car are injured, they can recover up to $300,000 in damages from your policy. However, no one person can get more than $100,000. Moreover, only $50,000 can go to their property damage.
Uninsured and Underinsured Motorist Coverage (UM/UIM)
If you have liability coverage, you likely have uninsured motorist coverage (UM). Unfortunately, many drivers on the road have no auto insurance. When this happens, you may choose to make a UM claim. This protects you if you suffer serious injuries and are not at fault in the accident. To make this claim, you must first prove that the person and vehicle responsible for the accident carry no insurance. Then, you negotiate with your insurer just as you would a normal claim. As you are not at fault for the accident, your rates should not increase.
The second component here is underinsured motorist coverage (UIM). You can only make a UIM claim when the other driver does carry auto insurance, but that insurance is not enough to cover your medical bills, lost wages, and pain and suffering. Additionally, your policy generally must be larger than the adverse policy. So, if your policy is the same size or smaller than the adverse policy, you cannot make a UIM claim despite your case being worth more than what the adverse policy can afford.
Comprehensive Coverage
Comprehensive coverage is not one that applies to car accident cases. Nonetheless, it is worth briefly touching on. Comprehensive coverage refers to non-collision incidents like theft, vandalism, fire, flooding, or damage from an object striking your vehicle while not in an accident. It gets the name “comprehensive” because it refers to “everything else” that could go wrong with your vehicle.
Minimum Mandatory Coverage by State
| State | Minimum Liability Limits (Bodily Injury / Property Damage) |
|---|---|
| Alabama | 25/50/25 |
| Alaska | 50/100/25 |
| Arizona | 15/30/10 |
| Arkansas | 25/50/25 |
| California | 15/30/5 |
| Colorado | 25/50/15 |
| Connecticut | 25/50/25 |
| Delaware | 25/50/10 |
| District of Columbia | 25/50/10 |
| Florida | 10,000 property damage only |
| Georgia | 25/50/25 |
| Hawaii | 20/40/10 |
| Idaho | 25/50/15 |
| Illinois | 25/50/20 |
| Indiana | 25/50/25 |
| Iowa | 20/40/15 |
| Kansas | 25/50/25 |
| Kentucky | 25/50/25 |
| Louisiana | 15/30/25 |
| Maine | 50/100/25 |
| Maryland | 30/60/15 |
| Massachusetts | 20/40/5 |
| Michigan | 50/100/10 |
| Minnesota | 30/60/10 |
| Mississippi | 25/50/25 |
| Missouri | 25/50/25 |
| Montana | 25/50/20 |
| Nebraska | 25/50/25 |
| Nevada | 25/50/20 |
| New Hampshire | 25/50/25 (or proof of financial responsibility) |
| New Jersey | 25/50/25 |
| New Mexico | 25/50/10 |
| New York | 25/50/10 |
| North Carolina | 30/60/25 |
| North Dakota | 25/50/25 |
| Ohio | 25/50/25 |
| Oklahoma | 25/50/25 |
| Oregon | 25/50/20 |
| Pennsylvania | 15/30/5 |
| Rhode Island | 25/50/25 |
| South Carolina | 25/50/25 |
| South Dakota | 25/50/25 |
| Tennessee | 25/50/15 |
| Texas | 30/60/25 |
| Utah | 25/65/15 |
| Vermont | 25/50/10 |
| Virginia | 50/100/25 |
| Washington | 25/50/10 |
| West Virginia | 25/50/25 |
| Wisconsin | 25/50/10 |
| Wyoming | 25/50/20 |
Recommended Liability Limits for Most Drivers
Contrary to what you may expect, we do not necessarily recommend buying the largest policy possible. Of course, just about every state requires that you have some liability coverage, with the exception of Florida. But the most important thing to know is that your coverage will only pay the suing the party for up to your limits. It is very rare for them to pay beyond those limits, though it does happen if the insurer mishandles the case. Accordingly, you may be personally liable for a judgment in excess of the policy limits. If you have any assets, the court may demand that you liquidate those assets to pay off the judgment. A larger insurance policy can protect you from any personal liability. Therefore, the recommended liability limits should match or exceed your assets in most instances.
On the other hand, is there any benefit to getting a large liability policy if you do not have any assets? There actually is. Just because you do not have assets does not mean the plaintiff is out of options. They can garnish your wages for years to come if they secure a judgment against you. A larger insurance policy can also protect you against stress from the overall risk. Of course, having liability coverage also entitles you to legal representation provided by your insurance company if you are sued for negligence arising from a motor vehicle accident. In other words, your insurer has a duty to defend you in a civil lawsuit stemming from a covered accident. This is why we recommend purchasing a policy above the mandatory minimum limits if you can afford it. If possible, you should aim for at least a 100/300/100 policy.
This can safeguard your home, savings, and personal investments.
How Much Car Insurance Do You Need if You Own Significant Assets?
If you have significant assets, you may choose a policy that is even larger. The insurance policy acts as a shield against your assets. When you get to this level, not only will your auto insurance carrier provide you a defense for up to their limits, but you may choose to hire independent counsel to advise you in your defense. Of course, this is a good idea at any financial level, but we understand that it is not always feasible. Regarding liability limits, we recommend at least a 250/500/100 policy. This means $250,000 per person, $500,000 per accident, and $100,000 for property damage. These higher limits place your insurer on the hook and not your personal assets. If your net worth greatly exceeds these limits, you may consider a personal umbrella policy. These policies are surprisingly affordable, probably because they are secondary to your auto insurance after a car accident.
In other words, even after a car accident, the likelihood that your umbrella policy will be used is low. Even if your insurance policy is larger or your assets are significant, this does not mean that the plaintiff’s case is worth what your coverage is. On the other hand, if you have a 250/500/100 policy, there are two plaintiffs in the other car, and their cases total $800,000, you will be personally liable for the remaining $300,000. A personal umbrella policy can cover that remaining $300,000. As you can see, the umbrella policy will not need to pay the full $800,000, as your auto insurance should cover that. In part, this is why umbrella policies are relatively affordable despite offering so much protection. The amount you purchase from an umbrella policy will range depending on your needs.
How Much Car Insurance Do You Need for New Cars or Leases?
When you purchase a new car or truck, your needs depend on a variety of factors. The first factor to consider is what the mandatory minimum limits are in the state where you are. As you can see from the table above, seemingly almost every state requires something slightly different. But there are additional elements to consider when buying a new car. As many know, when you drive a new car off the lot, it instantly loses a good chunk of its value. What if you get in an accident on your way home? Or two weeks later? Suddenly, the amount you owe on the car is more than what your car is worth. Accordingly, if you are given a total loss payment by the adverse insurer, you may still be left paying a car note. How do you combat this? We discuss this answer under GAP coverage.
Moreover, new cars cost far more to repair than many older cars. A new car is a significant investment, often costing $30,000 or more. If an old car is totaled, you probably cannot buy a new car with the money you are given out of the recovery, even with assistance from an experienced personal injury law firm. Accordingly, you should insure your car based on your needs. For an older car, you may need less coverage relative to a brand-new car. This is because when you have a newer car, you have more to lose. Meanwhile, older cars can safely be insured with smaller policies. But of course, the calculus again changes if you have personal assets you wish to protect.
Add-Ons Worth Considering
When you purchase auto insurance, it is natural to be skeptical. The insurance carrier presents you with salesmen who work on commission. This makes what they say inherently less trustworthy on its face. This is when price shopping and, where appropriate, seeking legal counsel can be vital. Below, we discuss some of the most common options for your auto insurance. Again, please note that these options vary by state. In some jurisdictions, they are mandatory, and in some jurisdictions, these options are not advisable, while they are in others.
Accordingly, it is always best to consult with a local law firm that practices in your jurisdiction for the best advice. At Gelb & Gelb, our attorneys represent clients in Washington, DC, Maryland, and South Carolina. Contact us today for a free case consultation at (202) 331-7227.
UM/UIM
UM and UIM coverage can protect you if you are hurt by a driver who has no insurance or not enough insurance to cover your damages. This coverage can pay for medical bills, lost wages, and even pain and suffering. In theory, a UM claim is valued exactly the same way as a personal injury lawsuit against an adverse driver. Meanwhile, a UIM claim is generally only possible if you have more coverage on your policy than the adverse policy, and your case is worth more than what is available on the adverse policy. And again, please remember that this guidance varies by state. In many states, this coverage is already available as part of your liability coverage.
PIP/MedPay
Again, this coverage is jurisdiction-specific. In places like Washington, DC, you almost never want to use your PIP coverage, as it will bar your right to make a bodily injury claim against the adverse party in most cases. In other jurisdictions like Maryland, PIP is an excellent way to end up with more money in your pocket, and is generally an add-on you should absolutely purchase. Medical payment coverage, or MedPay, is similar to PIP in some jurisdictions and may be worth purchasing.
Both of these forms of coverage are part of a no-fault system. In other words, you may make a claim for PIP or MedPay regardless of whether you are at fault. The benefit here is that you can receive these benefits before you are done with your medical treatment to help out with bills where appropriate.
Collision Coverage
This coverage is exceptionally beneficial. Collision coverage pays for damage to your own vehicle caused by an accident. Whether you hit another car, a tree, or a guardrail, it applies regardless of fault, minus your deductible. When you do pay your deductible, you have the chance of getting it back through a process known as subrogation. Subrogation involves your insurer’s right to pursue the party and their insurer responsible for the loss after they have paid damages arising out of an accident that you were not responsible for. Essentially, your insurer steps into your shoes to recover what it paid on your behalf. Fortunately, this includes your deductible. If your insurer is successful, you should get your deductible back. But why would your insurer bother? Because they paid money too. They have the right to get their money back, so they will fight to make that happen.
The downside to this path is that subrogation can be slow, although not as slow as litigation. But the benefit is clear. Whereas a lawsuit filed by us may get your car repaired after a year of waiting to get to trial, subrogation allows your car to get repaired immediately for the price of a relatively cheap deductible, and it may net out to zero if your insurer is successful in their subrogation.
GAP Coverage
GAP coverage, or guaranteed asset protection, bridges the gap between your car’s actual cash value and the balance you still owe on your loan or lease when your car is totaled. Consider the following scenario. For the purposes of explaining, we will use simple numbers. You purchase a new car for $40,000. You put 20% down, so you still owe $32,000 on the car. Unfortunately, you are in a car accident where the car is totaled. Despite you having just bought the car for $40,000, it was worth $27,000 at the time of the accident. At that point, the car has been used and has more mileage than when you bought it. However, you still owe $32,000. So when you are paid out $27,000 for the total loss, you still owe $5,000. This does not sound fair. And without GAP coverage, you would be responsible for it.
While the money from your personal injury case may ultimately help you pay off this note, it is best to have insurance so you never have to worry about it when you are not at fault in an accident.
Contact Gelb & Gelb Today
Gelb & Gelb is a personal injury law firm in Washington, DC, and Maryland. Our firm has over 70 years of experience and has won over $400 million for our clients. This experience provides us with special insight into car insurance laws pertaining to car accidents and personal injuries. If you are wondering how much car insurance you need, please do not hesitate to give us a call at (202) 331-7227.
