Liability-only insurance costs about $700 per year. Full coverage costs about $1,600. That $900 annual difference is not wasted money if your car is worth $30,000—but it may be wasted if your car is worth $8,000. This guide walks through exactly what each type covers, the math for deciding when to drop collision and comprehensive, and the add-ons that are almost always worth buying regardless of which base coverage you choose.
Every state except New Hampshire requires drivers to carry minimum liability insurance. Liability coverage protects other people from financial harm caused by your driving. It covers two categories:
Bodily injury liability (BI) pays for medical bills, lost wages, pain and suffering, and legal costs for other people injured in an accident you caused. It is written as two numbers—for example, 25/50—meaning:
State minimum BI limits in 2026 are dangerously inadequate. Texas requires only 30/60. Florida requires only $10,000 per person. A single serious injury—broken bones, surgery, weeks of hospitalization—easily exceeds $100,000. If you only carry minimum limits and seriously injure someone, you can be personally sued for the difference. Your wages, bank accounts, and assets can be garnished to satisfy a judgment.
Property damage liability (PD) pays for repairs to other people's vehicles or property (fences, buildings) that you damage in an at-fault accident. The third number in a liability quote (e.g., 25/50/25) is your property damage limit per accident.
In 2026, the average new car costs over $48,000. State minimums for property damage (often $10,000–$25,000) are insufficient to cover damage to a newer vehicle. You should carry at least $100,000 in property damage liability.
The national average for liability-only car insurance is approximately $700 per year (about $58/month). Rates vary widely based on your state, driving record, age, credit score, and coverage limits. Florida and Michigan are consistently the most expensive states for auto insurance in 2026.
What liability does NOT cover: Your own vehicle damage (from any cause), your own medical bills, damage caused by uninsured drivers, theft, weather, fire, floods, or hitting an animal.
"Full coverage" is not an insurance industry term—no insurer uses it in their policy documents. It is a common shorthand for a policy that includes liability coverage plus collision coverage plus comprehensive coverage. The national average for full coverage in 2026 is approximately $1,600 per year (about $133/month).
Collision coverage pays to repair or replace your own vehicle when it is damaged in an accident—regardless of who is at fault. This includes:
Collision pays up to your car's actual cash value (ACV) at the time of the accident, minus your deductible. ACV is the market value of your car—what it would sell for—not what you paid for it and not what it would cost to replace it with a new equivalent vehicle.
Comprehensive covers damage to your vehicle from causes other than a collision—essentially, everything else that can happen to a car:
Comprehensive is usually the cheaper of the two physical damage coverages—often $100–$200 per year by itself. Because comprehensive covers total losses (theft, flood) that collision does not, it is often worth keeping even on older vehicles where you might consider dropping collision.
Here is the financial framework for deciding whether to keep or drop collision (and potentially comprehensive) coverage:
Calculate: (Current market value of your car) ÷ (Annual cost of collision + comprehensive combined)
If the result is less than 10, the insurance is arguably not worth the cost relative to the potential payout. If the result is 10 or higher, you are getting reasonable value from the coverage.
Let's look at three real-world examples for 2026:
| Vehicle | Market Value | Collision+Comp Cost | Ratio | Recommendation |
|---|---|---|---|---|
| 2022 Toyota Camry | $24,000 | $1,100/yr | 21.8x | Keep full coverage |
| 2015 Honda Civic | $10,000 | $900/yr | 11.1x | Borderline — keep if you couldn't replace without financing |
| 2011 Ford F-150 | $9,000 | $950/yr | 9.5x | Consider dropping collision only; keep comprehensive |
The ratio alone is not the only factor. Also ask yourself: if my car were totaled tomorrow, could I afford to replace it without the insurance payout? If the answer is no—if losing the car would cause serious financial hardship—you may want to keep full coverage even if the math says otherwise. The 10x rule is a starting point, not an absolute rule.
Also factor in your deductible. With a $1,000 deductible on a $9,000 car, the maximum insurance would pay is $8,000 in a total loss—making that $950/year premium look even less attractive since you would still pay $1,000 out of pocket first.
GAP insurance (Guaranteed Asset Protection) covers the difference between what your car insurance pays in a total loss and what you still owe on your auto loan. It exists because new cars depreciate rapidly—a new vehicle loses approximately 15–20% of its value in the first year and 50% or more within five years.
Example scenario: You buy a new $42,000 SUV with 10% down and finance $37,800. Eighteen months later, you are in a serious accident and the car is totaled. The actual cash value of your 18-month-old SUV is now $31,000. Your collision insurance pays $31,000 minus your $1,000 deductible = $30,000. But you still owe $34,500 on your loan. GAP insurance covers the $4,500 difference.
Without GAP, you would owe $4,500 on a car you no longer have. GAP insurance eliminates that risk.
Cost: GAP insurance costs approximately $200–$400 per year when added to your auto insurance policy. Dealers often sell GAP at the time of purchase for $700–$1,500 as a one-time fee—significantly more expensive over a typical 3-5 year loan period. Always buy GAP from your insurer, not the dealership.
When you no longer need GAP: Once your loan balance drops below your car's actual cash value (usually around years 3-4 for most vehicles), GAP insurance is no longer necessary and you can drop it.
The Insurance Research Council estimates that 12.6% of U.S. drivers are currently uninsured. In some states, the rate is much higher: Mississippi (29%), Michigan (25%), Tennessee (23%), New Mexico (21%). Even insured drivers may have minimum limits that do not cover serious injuries.
Uninsured/Underinsured Motorist (UM/UIM) coverage protects you when:
UM/UIM coverage typically adds only $100–$200 per year to your premium and can provide $100,000 or more in bodily injury coverage per person. This is one of the best values in auto insurance—a small annual cost that protects you from a scenario that affects nearly 1 in 8 drivers you share the road with. Some states require it; all states allow it.
Medical Payments coverage (MedPay) pays for medical bills—yours and your passengers'—for injuries sustained in a car accident, regardless of fault. Unlike health insurance, MedPay requires no deductible, no copay, and no network restriction. It pays first, before your health insurance, which can protect you from out-of-pocket medical costs while fault is being determined.
Coverage amounts range from $1,000 to $10,000, and the cost is typically just $30–$80 per year. MedPay is especially valuable if you have a high-deductible health plan or if you frequently have passengers in your vehicle. It is not available in all states—Personal Injury Protection (PIP) fills a similar role in no-fault states.
The right coverage level depends on your specific car's value, your current loan balance, your health insurance situation, and your financial ability to absorb a loss. Use our free insurance rate estimator to benchmark what full coverage vs liability-only would cost for your vehicle and profile before you shop.