Everyone who owns a car needs a minimum level of car insurance. The amount you need depends on a number of factors, including what kind of car you have, whether you have a loan on the car and how much the car is worth.
Just about every state requires liability auto insurance, and even those that don’t require you to prove financial worth or post a bond, making it almost easier to carry liability insurance. Liability insurance is just what is sounds like: It covers your liability for causing an accident. If you are at fault, it will pay for damages for the other driver’s car, but not yours.
Full insurance describes a set of different coverages that include collision, comprehensive and medical coverage. Collision insurance pays for your car’s damage in an accident that’s your fault, while comprehensive covers damage to your car from something other than a collision, such as vandalism or bad weather. Medical coverage pays for medical bills for people injured in an accident.
What coverage you need
You need liability coverage regardless of your situation — that’s a given. But there may be situations where you need more than liability. For example, if you took out a loan to buy your car or you are leasing, the financing company will require you to carry full coverage to make sure its investment is safe.
There will also be situations where you don’t technically “need” a certain type of car insurance but it still makes sense. For example, if you have to park your car outside on the street, it makes a lot of sense to carry comprehensive insurance. If your car is worth a lot of money, you may want full coverage even though you don’t have a loan that requires it.