Car Insurance - How Much Is It? How Much Do I Need?
When it comes to liability coverage for your auto insurance, it is recommended that you purchase the most you can afford. Liability coverage on your car insurance policy pays for damage you cause in an accident to other people or other property.
How Much Is Auto Insurance?
Scroll through the table below to find the cost of car insurance in your state or use the form to find a cheaper quote for auto insurance:
State
Monthly Car Insurance Rate Annual Car Insurance Rate
Alabama $128 $1,536
Alaska $135 $1,620
Arizona $103 $1,236
Arkansas $118 $1,416
California $165 $1,980
Colorado $131 $1,572
Connecticut $138 $1,656
Delaware $133 $1,596
Florida $154 $1,848
Georgia $184 $2,208
Hawaii $118 $1,416
Idaho $89 $1,068
Illinois $115 $1,380
Indiana $101 $1,212
We looked at data from states' Departments of Insurance data and saw that annual premiums are on the rise in most US states. The average cost of insurance for automobile owners has generally risen, Arkansas, Georgia, North Carolina, and Virginia being the exceptions. These quotes for car insurance in select states in the US will give you a good estimate for the annual average cost of car insurance.
Is the minimum liability coverage in a standard auto policy enough?
The minimum coverage required by law varies depending on the state you live in. It’s not all you should have, however. The overall cost of an accident can exceed the liability limits on a driver’s policy. When that happens, the driver’s personal assets are exposed, and can be seized in a lawsuit to pay for the rest of the claim.
Patti Clement, First Vice President of HUB International in New York, NY, said, “Make sure that you purchase the appropriate liability coverage, not the minimum available. If there is an accident, and you have split limits and do not have good coverage, you will be out of pocket, whatever the damages are, over and above those limits for bodily injury and property damage.”
How much liability coverage do I need on my car insurance policy?
“I urge prospective clients to buy as much liability coverage as they can reasonably afford, preferably in excess of your total assets and then some,” advised Kristofer Kirchen, President of First Florida Insurance Network of Central Florida. “The reason is that regardless of what your assets are, you have no control over who gets injured or the extent of that injury.”
Is there additional room in your budget to accommodate more coverage? It is rather impossible to foresee what accidents may happen, and how much exposure you’ll have. It is however, straightforward to cap that exposure at the total value of your assets with some room for growth. Tally the value of your house, automobiles, investments, retirement accounts, banking accounts, and other property with a buffer.
At the very least, motorists are required by law to carry the statutory liability protection or proof of financial responsibility (in certain states). “If pressed by someone who cannot afford more, I would say that they should get at least 25/50/25, but I reiterate that people should buy as much as they can afford,” recommends Kirchen.
If you're interested in looking up what the minimum coverage requirements are in your particular state, look no further. In the table below you'll see three numbers listed in the "Coverage Requirements" section. The first two numbers represent the bodily injury liability requirements and the third number references property damage. For example, in Alabama $25,000/50,000/25,000 means that the insurance company will cover each person involved in an accident up to $25,000 each or $50,000 per accident. Additionally, the insurer will cover up to $25,000 (the third number) for any property damage you cause.
State
Coverage Requirements
Alabama $25,000/50,000/25,000
Alaska $50,000/100,000/25,000
Arizona $15,000/30,000/10,000
Arkansas $25,000/50,000/25,000
California $15,000/30,000/5,000
Colorado
$25,000/50,000/15,000
Connecticut $25,000/50,000/25,000
Delaware $25,000/50,000/10,000
District of Columbia $25,000/50,000/10,000
Florida $10,000/20,000/10,000
Georgia $25,000/50,000/25,000
Hawaii $20,000/40,000/10,000
Idaho $25,000/50,000/15,000
Illinois $20,000/40,000/15,000
Example of Insurance Payouts for Liability Claims
To illustrate the concept of sufficient liability coverage, let’s use a hypothetical example of an accident in New Jersey. The minimum liability coverage in the Garden State is 15/30/5: $15,000 per person for bodily injury, $30,000 max payout for the accident, and $5,000 of payout for property damaged by the accident.
Let’s say a driver crashes into another vehicle with two passengers on a busy intersection. The driver and passenger in the second car are seriously injured, and their car is heavily damaged. Third party claims are submitted for:
$25,000 for the driver, $10,000 for the passenger for the ambulance, emergency care, and other medical costs
$6,000 to fix structural damage to the body of the car
Your insurer pays the maximum out under your standard policy for $15,000 in bodily injury liability for the driver, $10,000 for the passenger’s medical expenses, and $5,000 under the property damage portion of your policy. The excess costs not covered by your policy are:
$10,000 for additional medical care for the driver, and
$1,000 for the vehicle repair
The other party has recourse to go after the rest of your assets to pay for the leftover balance. “If you do not have the appropriate limits, the balance from your coverage is deducted and you will have to pay that out of pocket - even garnishing your wages or income for the rest of your life,” cautioned Clement.
How Property Damage and Bodily Injury Liability Work
Property Damage from an insurance company such as Allstate will cover the repair and parts replacement costs of damage to homes, storefronts, vehicles, and other stationary objects. As you can imagine, the cost of repairing or getting original equipment manufacturer parts can be very different depending on whether it’s a $10,000 car or a $100,000 car.
Bodily Injury liability will pay out for medical care, emergency services, compensation of lost income, and even funeral expenses. Claims made under this liability are affected by a number of variable factors, which as Kirchen explains, can range widely:
The skill level of the injured third party:
Is the other driver a minimum wage employee or a highly skilled neurosurgeon? Bodily Injury Liability compensates the other party for lost income.
The type of injury sustained by the other driver:
Were there minor bruises and scratches, a debilitating head injury, or a loss of limb or nerve damage? An accident can potentially impact someone’s livelihood and earning power. “There is a big difference between bumps and bruises and a head injury or loss of limb or nerve damage in a hand,” explains Kirchen, “all of which can severely hinder the aforementioned neurosurgeon’s practice.”
The age of the injured person:
A young professional still has many years of significant earning power ahead that the accident impacted, while an older person may be getting ready to retire, and therefore won't experience much loss of income.
What’s an Umbrella policy, and should I add it to my car insurance?
A personal umbrella policy pays for damages above and beyond the maximum payouts on your auto insurance policy. Excess liability protection is usually in the form of combined single limits, which doesn’t set aside a set amount for bodily injury or property damage that the standard auto policy does. Coverage starts at $1MM, and can be augmented in increments of a million.
The best part about an umbrella policy is its return on incremental premium. Adding an umbrella premium can cost a few hundred dollars a year – a dollar a day, estimates Allstate – but you’ll get a $1MM shield for your assets. If you can afford it, and you have the assets to protect, an umbrella policy is recommended.
In order to qualify, you are typically required to have the maximum under the split limit policies. For example, at GEICO, your auto insurance has to max out at $300,000 for bodily injury, and $100,000 of property damage. Other insurers may have different requirements.
Examples of the coverage under an Umbrella policy
Pile-ups:
The primary auto policy can only do so much in a multiple vehicle collision. “Most people do not realize that if they get into an accident and hit multiple cars or injure multiple people there is a cap on the primary auto policy. That is why is recommended to have an umbrella policy that sits over and above these limits,” says Clement.
Loss of Income:
If an accident causes a neurosurgeon to be out of commission for six months, you may be at risk for her loss of income. According to the 2012 MGMA Physician Compensation Report, a surgeon makes on average $775,968 a year. For those six months she spent recuperating, her foregone salary totaled $387,984. The foregone salary alone would have cleared out your maximum policy with $88,000 out-of-pocket, assuming you had the highest level of protection from GEICO, and without factoring in the cost of medical care.
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