I Pay a Lot More for Car Insurance Than I Need To. Here's Why.

A smiling parent driving a car with their two kids in the backseat.

When I bought my auto insurance policy, I could have paid somewhere around $1,000 to $1,500 annually for coverage depending on the insurer that I chose. Instead, I pay close to four times that amount.

That’s a lot of extra money. But I made the choice to pay that extra to my auto insurer voluntarily and happily. Here’s why.

There’s a very simple reason why I pay much more for auto insurance than I’d have to

The reason I’ve opted to pay a lot more than the minimum price for auto insurance is because doing so gives me much more than the minimum amount of coverage.

See, most states only mandate liability coverage, which pays for losses for others, and sometimes personal injury protection (PIP) coverage that pays for minor medical bills and lost wages for the policyholder in any accident regardless of who was to blame. Many states set pretty low limits for the amount of liability coverage, perhaps mandating only that drivers buy $20,000 per person and $40,000 per accident in liability protection.

Buying only this minimum coverage is relatively cheap. In 2023, the average auto insurance premium across the United States for minimum auto insurance came in at just $787. But a driver with only minimum coverage is on their own for most losses, such as damage to their own vehicle as well as injury-related damages above the low policy minimums.

I don’t want to potentially get stuck having to pay for almost any accident losses out of my own pocket. So, I prefer to pay a lot more for full coverage. The nationwide average for the standard coverage options is $3,296, but drivers get a lot more for their money.

Here’s why more than minimum coverage is important

For me, and for most drivers, paying for more auto insurance coverage is well worth it. A full coverage policy will include not just liability coverage but typically also:

• Collision coverage to pay for the policyholder’s own vehicle damages in the event of a crash another person’s insurance isn’t paying for.
• Comprehensive coverage to pay for other non-crash-related damages to the policyholder’s vehicle, such as from car theft or vandalism.
• Gap insurance to pay off the remaining balance on any auto loan that’s due after an insurer pays out the fair market value of a stolen or totaled car.
• Uninsured/underinsured motorist coverage to pay for a policyholder’s losses caused by a driver without any insurance or with too little insurance.

Buying these added protections could save drivers tens of thousands of dollars if their own car is damaged — especially beyond repair. With the average cost of new cars set at close to $50,000, very few people would be able to afford to just go out and replace their car after a crash without insurance help.

Setting policy limits higher — such as by getting $250,000 per person and $500,000 per accident in bodily injury liability — could also save drivers from being personally sued for extra damages insurance doesn’t cover beyond the standard low limits.

I want the added protection for my assets that comes with setting higher limits and paying more for extra coverage — even though my insurance costs are higher. The extra premiums give me peace of mind that a fender bender won’t destroy my finances for years to come.

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