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How Much Car Insurance Coverage Do I Need?
With premiums rising, the right mix of coverage can provide protection without overpaying
Not all auto insurance coverage is created equal. Knowing what to keep and what to drop could save you money.
Pete Ryan
Key takeaways
- Auto insurance premiums have climbed sharply, with the average annual premium reaching $2,924 in the second quarter of 2026, up 33 percent from June 2023.
- Liability insurance is required in nearly every state. Carrying only the minimum coverage could put you at risk of paying high out-of-pocket costs after an accident.
- Drivers who own older, lower-value vehicles may be able to save money by dropping collision and comprehensive coverage.
Owning a car has never been so expensive. In addition to paying more for gas and maintenance, you’re probably paying more for auto insurance — a lot more.
The average annual full coverage car insurance premium for the second quarter of 2026 was $2,924, up 33 percent from June of 2023, according to Experian. Premiums are significantly higher in some states — in Maryland, for example, the average annual premium is $4,181.
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Rising insurance rates reflect today’s higher costs for auto repairs and medical care for injury-related claims. In addition, new technologies that have contributed to a safer ride can be expensive to repair.
With premiums ticking up, you may be wondering if you’re paying for coverage you don’t need. That could very well be the case, but be aware that cutting back on car insurance could cost you a lot of money if you’re involved in an accident.
Liability insurance
Every state, with the exception of New Hampshire, requires drivers to obtain at least some level of liability insurance, which covers damage and injuries that you cause others in an accident where you’re found at fault. Failing to fulfill this requirement could lead to fines, impoundment of your vehicle or suspension of your license.
The amount of liability insurance you’re required to carry varies by state, but common minimums are $25,000 for bodily injury per person, $50,000 for total bodily injury per accident and $25,000 for property damage. (You may see this expressed by insurers as 25/50/25.)
Purchasing the bare minimum of liability insurance coverage can help reduce your premiums, but it can also lead to a big bill if you get into an accident. For example, if your property damage limit is $25,000 and you total another person’s car that’s worth $50,000, you could be on the hook for $25,000.
Many car insurance experts recommend purchasing liability insurance coverage of $100,000 per person, $300,000 per accident and $100,000 for property damage (100/300/100). However, you may want to obtain a higher limit if you’re covering a teen driver.
Depending on your other assets, you might also want to purchase umbrella insurance, which would cover expenses that exceed the limits of your car insurance policy. Umbrella insurance costs an average of $383 per year for $1 million in coverage.
Collision insurance and comprehensive insurance
Comprehensive insurance and collision insurance are optional coverages that protect your vehicle from different types of damage.
Comprehensive insurance covers events outside of your control, such as damage caused by theft, vandalism or severe weather. Collision insurance covers the cost of repairing or replacing your vehicle if it’s damaged in an accident with another vehicle or a collision with an object, such as a guardrail or stop sign.
While states don’t require drivers to carry comprehensive or collision coverage, lenders may require it if you finance the purchase of a vehicle. Drivers who lease a car may also be required to buy comprehensive insurance and collision insurance.
According to the Insurance Information Institute (III), the average cost of collision coverage is $290 per year, while comprehensive coverage averages $134 per year.
Here’s the rub: If you own your car and it’s worth less than $5,000, collision and comprehensive coverage may not be worth the cost of the premiums. Some insurance experts say drivers should consider dropping collision insurance and comprehensive insurance if the combined annual premium exceeds 10 percent of their vehicle’s value. (You can get an estimate of how much your car is worth at Kelley Blue Book, Edmunds or JD Power.)
How to save money
There are ways to lower your premiums. Increasing your annual deductible from $200 to $500 could reduce your collision and comprehensive coverage cost by 15 to 30 percent, while raising your deductible to $1,000 could lower your premium by 40 percent or more, according to the III. Just make sure you have enough money set aside to cover the deductible.
Moreover, it often pays to shop around. Switching auto insurers saved policyholders a median of $461 annually, a 2024 Consumer Reports survey found. Get at least three quotes, either by contacting companies directly or through a third-party marketplace such as Policygenius, Insurify or The Zebra.
Make sure you’re not missing out on discounts. Many insurers offer lower rates for low-mileage drivers, longtime customers and policyholders with clean driving records. You may also qualify for a discount if your vehicle has safety features designed to reduce the risk of injuries or theft.
Buying car and homeowner’s insurance from the same provider might save you money. Progressive, for example, says new customers who bundle their home and auto insurance save over 25 percent on average; Allstate says its customers save an average of 20 percent by bundling; and State Farm reports bundlers save $1,429 annually on average.
Finally, if you’re planning to replace a clunker with hand-cranked windows and more than 200,000 miles on the odometer, get an estimate of what the insurance rate for a new vehicle would be. That number can help you determine what kind of car you can afford.
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