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Your car insurance liability limits determine the maximum amount your insurance company will pay for a covered claim. While most states set minimum car insurance requirements, the required amounts usually aren't enough to adequately protect your finances after a serious accident. When selecting the right coverage limits, it's important to consider several factors, including your assets, income, vehicle, and risk tolerance.
Choosing the right car insurance coverage limits isn't always straightforward. This guide explains how the different types of coverage work and what to consider when deciding how much car insurance coverage you may need.
Learn more: How does car insurance work? The basics explained.
How much car insurance coverage do you need?
Almost every state requires drivers to carry a minimum amount of car insurance so they can help pay for injuries or property damage caused by an accident they are responsible for. However, meeting your state's minimum requirements doesn't necessarily mean you'll have enough coverage to pay for all related costs or adequately protect your finances. Because insurance requirements vary by state, it's important to know whether the minimum car insurance coverage limits are right for your situation.
For most drivers, liability insurance is the foundational coverage in an auto insurance policy and typically the first place to start when deciding how much coverage you need.
How much liability insurance should you have?
Auto liability insurance helps pay for injuries and property damage you cause to others when you're at fault in a car accident. There are two types of auto liability coverage:
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Bodily injury liability coverage: This helps pay for another person's medical bills, lost wages, and other covered expenses if you injure them in an accident you're at fault for. This coverage typically includes two separate limits: the maximum the policy will pay for injuries to one person and the maximum it will pay for all bodily injury claims if multiple people are injured in the same accident.
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Property damage liability coverage: This helps pay for damage you cause to another person's vehicle or other property in an accident you're at fault for.
Most states require drivers to carry bodily injury liability coverage and property damage liability coverage. Driving without your state's required auto insurance could result in penalties, such as fines or the suspension of your driver's license and vehicle registration.
How to read car liability coverage limits
Car liability coverage limits are often expressed as three different numbers. For example, if you have 100/300/50 coverage limits, this typically means you have:
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$100,000 in bodily injury liability coverage per person.
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$300,000 in total bodily injury liability coverage per accident if more than one person is injured.
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$50,000 in property damage liability coverage per accident.
Recommended car insurance liability limits
There's no one-size-fits-all answer for how much liability coverage you should carry. While meeting your state's minimum car insurance requirements allows you to drive legally, you may want to consider higher liability limits to help protect your finances if you're sued after a serious accident, especially if you own a home or other valuable assets.
Some insurance professionals recommend car insurance liability limits of at least 100/300/100 (or an equivalent combined single limit) to provide greater financial protection. However, if you have few assets to protect, lower coverage limits may make sense depending on your situation.
Another common rule of thumb is to choose bodily injury liability limits that are at least equal to your net worth (your assets minus your debts). For example, if you own a home outright that's worth $425,000 with $50,000 in savings, you have a $475,000 net worth (assuming you have no outstanding debt). You may want to choose a policy with 250/500/250 limits, which provides $500,000 in bodily injury coverage per accident.
As your assets grow, if you have significant future earning potential or if you already have substantial assets to protect, you may want to consider higher liability limits. An umbrella insurance policy can provide an additional layer of liability protection after you've exhausted the liability limits on your auto policy.
Common coverage starting points
*varies based on your unique needs, assets, and budget
How much uninsured motorist coverage should you buy?
Uninsured/underinsured motorist coverage helps protect you from having to pay out of pocket for your injuries and, in some states, damage to your vehicle if you're in a crash with an uninsured driver or one who doesn't have enough insurance.
Like liability coverage, uninsured motorist coverage/underinsured motorist coverage limits are often listed as three separate numbers. For example, if you have uninsured/underinsured motorist limits of 25/50/25, the policy typically provides:
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$50,000 per accident for bodily injury if more than one person is injured
Why uninsured/underinsured motorist coverage matters
Some states mandate uninsured/underinsured motorist coverage. But even if it's not required in your state, uninsured motorist insurance is worth considering, given that roughly 1 in 3 drivers were uninsured or underinsured in 2023, according to a study by the Insurance Research Council.
Uninsured motorist coverage helps pay medical bills for you and your passengers if you're in a car accident with someone who is uninsured or doesn't have enough coverage. If uninsured motorist property damage coverage is available where you live, it may also help pay for damage to your vehicle. You may also be able to file an uninsured motorist claim with your insurer if you're in an accident with a hit-and-run driver. However, in some states, uninsured motorist coverage only applies to bodily injury claims and doesn't cover vehicle damage.
Getting uninsured motorist coverage could be especially worthwhile if you don't have health insurance or have a high deductible. If you do have health insurance, check to see how it covers injuries from car accidents. Some insurers, including Medicare and Medicaid, require you to exhaust the limits of other insurance before they'll pay out.
Learn more: Does health insurance cover car accidents?
How much uninsured/underinsured motorist coverage do you need?
You should generally select uninsured motorist bodily injury coverage limits that match your liability coverage limits. For example, if you have bodily injury liability limits of $100,000 per person and $300,000 per accident, you'd choose the same uninsured/underinsured motorist limits. Some states require you to choose the same limits.
You can usually choose uninsured motorist property damage limits that are in line with your car's value. If your vehicle is worth $15,000 and you don't have collision insurance, you'd want roughly $15,000 in uninsured motorist property damage coverage.
Do you need personal injury protection (PIP)?
Several states require drivers to carry personal injury protection (PIP) coverage, which helps pay for medical expenses, including ambulance services and rehabilitation care, as well as lost wages for you and your passengers, regardless of who's at fault in an accident. Other states and Washington, D.C., have optional PIP coverage, with some requiring drivers to opt out in writing. Most states that require PIP are no-fault states, meaning drivers generally file injury claims with their own insurance first, regardless of who caused the accident.
Minimum coverage limits vary in states where PIP insurance is required. For example, the minimum PIP requirement in New York is $50,000, while Utah requires just $3,000 in PIP coverage. You can opt for higher coverage limits in most states that mandate PIP.
If PIP is optional where you live and you have comprehensive health insurance, you may decide not to purchase additional PIP coverage. However, keep in mind that PIP may help cover expenses, such as lost wages, that health insurance typically doesn't. But if you have health insurance with high out-of-pocket costs, you may want to opt for enough PIP insurance to cover your deductible. If you don't have health insurance, you may want to choose the highest PIP coverage that's available, since it will help pay your medical bills if you're in an accident.
How much collision and comprehensive coverage can you buy?
Collision insurance helps cover the costs of repairing or replacing your vehicle if it's damaged in an accident with another driver or if you strike an object, like a pole or tree. Comprehensive insurance covers damage from non-collision events, such as a fire, a falling object, a natural disaster, or vandalism. It also helps you pay to replace your car if it's stolen.
You don't select car coverage limits for collision or comprehensive insurance. Instead, your maximum payout is usually capped at your vehicle's actual cash value, i.e., the value of your vehicle after you account for car depreciation, minus your deductible.
Both are typically required by your lender or leasing company if you're financing or leasing your vehicle. Otherwise, these coverages are optional. Even when they're optional, carrying collision and comprehensive coverage may make sense if you couldn't comfortably afford to repair or replace your vehicle after a covered loss.
Keep in mind that if you've financed your vehicle and don't maintain the required coverage, your lender may purchase force-placed insurance to protect its financial interest and add the cost to your monthly payments.
Car insurance liability limits FAQs
What does 50/100/50 mean in insurance?
In car insurance, 50/100/50 means that you have coverage limits of:
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$50,000 per person for bodily injury liability
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$100,000 total per accident for bodily injury liability, and
What happens when a covered car accident claim exceeds insurance limits?
If a car accident claim exceeds your auto policy limits, you could be responsible for paying the remaining costs out of pocket. If you're at fault for the accident, the other party may also decide to take legal action to recover the remaining damages. Depending on the outcome, you could be responsible for paying those costs from your personal assets or future income.
That's one reason why it's important to carry enough liability coverage to help protect your personal finances if an accident results in costs that go beyond your policy limits.
What is limited tort car insurance?
Limited tort car insurance is a coverage option that restricts your ability to seek monetary damages if you're involved in an accident. Limited tort insurance allows you to seek compensation for costs like medical bills, lost wages, and property damage, but it's usually difficult to seek compensation for things like pain and suffering. The premiums are usually lower than full-tort insurance, but the protection is limited.
Limited tort auto insurance is only available in three states: Kentucky, New Jersey, and Pennsylvania.