Basic Car Insurance: How Does It Work?
A basic car insurance policy has the minimum coverage that's legally required in your state.
This usually means having a liability policy to pay for the other driver's car repairs or medical bills, when you caused the accident. It may also include personal injury protection (PIP) if it's required where you live.
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What is basic car insurance?
Basic car insurance plans give you the minimum insurance you need to drive.
In nearly every state, drivers must carry basic liability coverage to pay for the damage and injuries they cause. Depending on where you live, you may also be required to have other types of car insurance coverage such as personal injury protection (PIP) coverage or uninsured motorist coverage.
Basic insurance is also called minimum coverage or liability insurance. This type of policy is cheaper and has fewer benefits than a full coverage policy.
Coverage | Basic insurance | Full coverage |
|---|---|---|
| Liability: Bodily injury | ||
| Liability: Property damage | ||
| Personal injury protection (PIP) | Sometimes | Sometimes |
| Uninsured or underinsured motorist | Sometimes | Sometimes |
| Collision | ||
| Comprehensive |
You won't be able to buy coverage that doesn't meet your state's requirements, so the cheapest plan offered by a company will give you the basic required coverage.
Your car insurance policy is based on two things:
This can be liability coverage, uninsured motorist coverage or something else.
For example, if you rear-end a car, liability coverage would pay to repair or replace the other person's car. This would be included in most basic insurance plans.
However, repairs to your car would only be covered if you have collision insurance. This is not included in a basic insurance plan, and instead, it's a part of full coverage car insurance.
This determines how much the insurance company will pay after a car accident or claim.
For example, if you rear-ended someone, a basic insurance plan with a $15,000 limit for property damage liability would pay up to $15,000 to repair the car you hit.
That would be enough to cover a fender-bender with a Honda Civic. However, if you rear-ended a Ferrari or were in a more serious crash, you would have to pay for any repairs that are beyond the policy's $15,000 limit.
That's why many people choose to get higher liability limits beyond what a basic insurance policy has.
What does a basic car insurance plan include in your state?
The minimum car insurance required in your state determines what your basic car insurance policy includes.
State | Bodily injury | Property damage | Uninsured motorist |
|---|---|---|---|
| Alabama | $25,000 per person / $50,000 per accident | $25,000 per accident | No |
| Alaska | $50,000 per person / $100,000 per accident | $25,000 per accident | No |
| Arizona | $25,000 per person / $50,000 per accident | $15,000 per accident | No |
| Arkansas | $25,000 per person / $50,000 per accident | $25,000 per accident | No |
| California | $15,000 per person / $30,000 per accident | $5,000 per accident | No |
Car insurance isn't required in New Hampshire and Virginia.
Residents of New Hampshire can avoid buying insurance by showing they are financially able to pay for damage after a car accident. In Virginia, residents can avoid buying insurance by paying a $500 per year "uninsured motorist fee."
How much does a basic car insurance plan cost?
A basic car insurance plan costs $58 per month for minimum coverage, on average, nationwide.
However, the average cost of car insurance varies widely by state. Basic insurance rates average $28 per month in South Dakota and $196 per month in Michigan.
A full coverage policy is nearly triple the price of basic car insurance. It costs an average of $148 per month for full coverage.
Liability coverage: Usually included with basic insurance
In most states, liability insurance is included in basic auto coverage. When you cause a car accident, liability coverage will pay to cover other people's injuries or property damage.
- Bodily injury liability coverage: Pays for the medical care of other people when you injure them with your car.
- Property damage liability coverage: Pays for damage you cause to other people's property, such as other cars, mailboxes or buildings.
Liability insurance limits are often written in a shorthand format like 20/40/20.
The first number is how much bodily injury coverage you have per person, and the second number is how much bodily injury coverage you have per accident. The third number is your limit for property damage.
For example, if you have limits of 20/40/20, then you have $20,000 in bodily injury liability coverage per person, $40,000 per accident and $20,000 in property damage liability.
PIP and uninsured motorist coverage: Sometimes required with basic insurance
In about half of states, a basic car insurance plan would also include coverage for injuries or uninsured motorists. These coverages are optional in states where they are not required.
- Personal injury protection (PIP) or medical payments coverage: Pays for medical bills (and lost wages in the case of PIP) if you or your passengers are injured in an accident, regardless of who was at fault.
- Uninsured and underinsured motorist coverage: Pays for your car repairs when the driver who hit you is uninsured or doesn't have enough insurance to cover the damage.
Collision and comprehensive coverage: Included in full coverage policies
Full coverage car insurance gives you more coverage than a basic insurance plan.
Full coverage usually has higher liability limits, and if you cause a car accident, the insurance company will pay for your car's repairs.
If you lease or finance your car, you usually can't get a basic car insurance policy. You are usually required by the company to get a more robust full coverage car insurance policy.
- Collision insurance: Pays for your car repairs if you cause the accident or if it's not clear who is at fault.
- Comprehensive insurance: Pays for your car repairs after an event that's not a car accident, such as a tree falling on your car, theft or vandalism.
Do you need more than basic car insurance?
There are a few reasons to get more insurance than the minimum requirements in your state:
- You loan or lease your car: You're usually required to get a full coverage policy that includes comprehensive and collision.
- Your car is worth more than a few thousand dollars: If your car is worth more than $5,000, it's usually a better deal to get comprehensive and collision coverage to pay for any damage to it, rather than paying for the repairs yourself.
- You drive long distances or commute: Driving more miles means you're more likely to get into a car accident. Having more car insurance coverage can protect you from sudden or expensive bills.
- You want to avoid unexpected bills: You'll have to pay for anything that your insurance policy doesn't cover, so having more than basic coverage will give you more protection.
Frequently asked questions
What is the most basic insurance for a car?
A basic car insurance policy covers the minimum that's required in your state. That's usually liability coverage for bodily injury and property damage.
Is basic car insurance good?
Basic car insurance can be good enough if you have an older car that's not worth much, you're comfortable having minimal coverage, you don't drive much or you're a young driver with high rates. Most people get a full coverage policy, which costs more but helps you avoid large bills after a car accident.
How do you get the cheapest car insurance plan?
Compare price quotes from the cheapest car insurance companies to learn which company gives you the best rates. Every insurer has its own formula for setting prices, and your personal details will determine which is the cheapest. On average, State Farm has the cheapest basic car insurance plans, costing $41 per month.
Methodology
Average rates are based on minimum coverage car insurance quotes for all 50 states and the District of Columbia for 37 insurance companies. Quotes are for a 30-year-old man who drives a 2015 Honda Civic EX with good credit.
ValuePenguin's analysis used insurance rate data from Quadrant Information Services. These rates were publicly sourced from insurer filings and should be used for comparative purposes only. Your own quotes may be different.
Editorial Note: The content of this article is based on the author's opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.
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