Recommended Coverage: How Much Car Insurance Do I Need?

By Justin Yoshizawa and the Mercury Team

The right amount of car insurance isn’t always the cheapest policy or the state-required minimum. It’s the coverage that helps protect your car, your budget, and your peace of mind. The right amount of coverage will depend on where you live, what you drive, and how much financial risk you’re willing to take on.

We’re here to help you evaluate your needs, understand your options, and choose recommended car insurance coverage that fits your life and not just the minimum required by law.

Start With the Coverage Your State Requires

Every state sets minimum car insurance requirements that drivers must carry to legally operate a vehicle. These requirements typically focus on liability coverage, which helps pay for injuries or damage you cause to others. For instance:

Oklahoma requires a minimum bodily injury liability of $25,000 per person and $50,000 per accident, along with $25,000 per accident of property damage liability.
California’s minimums are $30,000 per person/$60,000 per accident of bodily injury and $15,000 in property damage liability.

Consider state minimums as a starting point, though. “Minimums are just that,” says Justin Yoshizawa, Director, Product Management. “They’re not a recommendation for full protection, and they may not be enough to cover the total cost of a serious accident. If that’s the case, you may be responsible for paying the difference out of pocket.”

Understand What Each Type of Car Insurance Covers

Car insurance isn’t one-size-fits-all because each type of coverage serves a different purpose:

Liability coverage pays for injuries and property damage you cause to others in an accident.
Collision coverage helps pay to repair or replace your vehicle after a collision, regardless of fault.
Comprehensive covers non-collision events like theft, vandalism, fire, or weather damage.
Uninsured/underinsured motorist coverage protects you if you’re hit by a driver with too little or no insurance.
Medical payments help cover medical expenses for you and your passengers after an accident.
Personal injury protection (PIP) covers medical expenses and, in some states, lost wages or other related costs after an accident.

Think About What You Need to Protect

The right amount of car insurance depends on what’s at stake for you personally. Consider the following when determining your overall financial exposure:

The value of your vehicle and how costly it would be to repair or replace it
Your savings, assets, and future income you want to protect
Whether you have multiple drivers in your household
How often and how far you drive
Your risk tolerance for out-of-pocket expenses after an accident

How to Choose Car Insurance Coverage Limits

Your car insurance coverage limits determine the maximum amount your insurer will pay for a covered claim. For liability coverage, this is especially important because it directly affects your financial responsibility after an accident. Choosing higher limits can help protect your savings and assets if you’re involved in a serious accident with high costs. While higher limits may increase your premium, they can also reduce the risk of paying large expenses out of pocket.

Decide Whether Collision and Comprehensive Coverage Make Sense

Collision and comprehensive coverage are optional, but they can be valuable if:

Your vehicle is newer or has a high market value.
You have a loan or lease that requires full coverage.
Repair or replacement costs would be difficult to afford on your own.

On the other hand, if you drive an older vehicle with relatively low value, the cost of these coverages may outweigh the potential benefit. In those cases, it may make sense to reevaluate whether collision or comprehensive coverage is still necessary.

Choose a Deductible You Can Actually Afford

Your deductible is the amount you’ll pay out of pocket before your insurance coverage kicks in for a claim. If you want to balance your protection with your budget, take a realistic look at what you could comfortably afford out of pocket after a covered claim. A higher deductible can lower your monthly premium, for instance, but it also means you’ll pay more upfront if you have an accident.

Balance Coverage and Cost

It’s all about balance, especially when you’re trying to decide how best to find a policy that fits your needs and aligns with your budget. One actionable step is to look for savings that can knock a bit off your premium, whether by asking about discounts such as good driver, bundling or multi-car discounts, and policy adjustments (such as getting rid of the rental car insurance you never use) without reducing insurance protection.

Review Your Policy When Life Changes

You have a million tasks to do when you experience a big move or buy a new vehicle. But these life changes are the perfect time to review your auto insurance coverage and switch up providers or get new quotes as needed. While you should be reviewing at least annually, you’ll also want to take a look if you’re:

Moving to a new location
Buying or replacing a vehicle
Adding or removing a driver
Paying off your car loan
Changing your commute or driving habits
Experiencing significant financial changes

Why Mercury Can Help You Find the Right Coverage

Mercury works with all drivers to help find coverage that fits their unique situation, not just the minimum required by law. Mercury can help you balance affordability with meaningful protection by offering a range of coverage options and personalized guidance. Whether you’re comparing policies, adjusting coverage, or looking for ways to save, having a knowledgeable partner with local expertise can make the process easier while meeting your real-world needs.

Conclusion

The right amount of car insurance is never one-size-fits-all, but your policy needs to reflect certain legal requirements, your budget, the type of vehicle you drive, and your financial risk tolerance. Mercury is here to help you find car insurance coverage limits you’re comfortable with and provide ongoing support as your life situation changes.

FAQs

Is minimum car insurance enough for most drivers?

Minimum car insurance coverage may meet your state’s legal requirements, but it often falls short of covering the full cost of a serious accident. Many drivers choose higher limits to better protect their finances and avoid out-of-pocket expenses.

How do I know if my coverage limits are too low?

Your car insurance coverage limits may be too low if the cost of an accident could exceed what your policy would pay. In that case, you could be responsible for covering the remaining expenses yourself.

Should I lower coverage to save money?

Lowering coverage can reduce your premium, but it also increases your financial risk if something goes wrong. Before making changes, consider whether the potential savings outweigh the level of protection you’re giving up.

Justin Yoshizawa

Director of Product Management at Mercury Insurance

Justin Yoshizawa is Director of Product Management for Mercury Insurance, overseeing California’s personal lines, including auto, homeowners, landlord, and umbrella. He has led major initiatives such as the rollout of the aligned umbrella product across all Mercury territories and serves as a company spokesperson on auto-related topics. Yoshizawa holds dual Bachelor of Science degrees in Applied Mathematics and Applied Statistics from UC Santa Barbara.