- State minimums are legal floors. They’re often too low to cover a serious accident.
- A common rule of thumb is liability of at least 100/300/100, with higher limits or an umbrella if you have significant assets.
- Choose a deductible you could pay tomorrow without borrowing.
- Uninsured/underinsured motorist coverage protects you from other drivers’ low limits.
Picking coverage is about balancing two risks: paying too much for insurance you don’t need, and being underinsured when something serious happens. The second risk is usually the more expensive one. Here’s how to set each part of your policy.
Step 1: Understand the numbers
Liability limits are written as three numbers, such as 100/300/100:
- 100 = $100,000 bodily injury liability per person
- 300 = $300,000 bodily injury liability per accident
- 100 = $100,000 property damage liability per accident
If you cause an accident and damages exceed these limits, you can be personally responsible for the rest, potentially through a lawsuit, wage garnishment or claims against your assets.
Step 2: Choose liability limits
| Your situation | Consider |
|---|---|
| Few assets, tight budget | More than the state minimum if at all possible; for example 50/100/50 |
| Typical homeowner or saver | 100/300/100 is a common rule of thumb |
| Significant savings, home equity or high income | 250/500/100 or more, plus an umbrella policy |
Why minimums fall short: a multi-car crash with injuries can involve hospital bills, lost wages and vehicle replacement for several people. Property damage alone can exceed a low limit if you hit a newer vehicle or damage public property. Raising limits often costs less than people expect. Ask for quotes at several levels.
Step 3: Protect yourself from other drivers
Uninsured/underinsured motorist (UM/UIM) coverage pays for your injuries, and in some states your vehicle damage, when the at-fault driver has no insurance or too little. Many advisors suggest matching your UM/UIM limits to your liability limits. Some states require it; in others you must reject it in writing.
Step 4: Decide on collision and comprehensive
These cover damage to your own car. They’re required if you finance or lease. For an older, paid-off car, compare the premium with the car’s value; see full coverage vs liability.
Step 5: Pick your deductible
The deductible is what you pay before collision or comprehensive kicks in. A higher deductible lowers your premium.
- Choose an amount you could pay from savings immediately.
- Compare the premium savings with the extra risk. If raising from $500 to $1,000 saves a small amount per year, it may take many claim-free years to come out ahead.
- Some lenders cap deductibles on financed cars.
Step 6: Consider add-ons
| Add-on | Worth considering if… |
|---|---|
| Gap insurance | You owe more on your loan or lease than the car is worth |
| Rental reimbursement | You’d need a rental car while yours is repaired |
| Roadside assistance | You don’t already have it through a car warranty, credit card or auto club |
| Medical payments / PIP | Required in no-fault states; otherwise consider your health insurance deductibles |
| Accident forgiveness | You want protection from a first-accident surcharge. See insurance after an accident |
| Umbrella policy | Your assets or income exceed your liability limits |
Review your coverage when life changes
Buying a home, getting a raise, adding a teen driver, paying off a car or retiring are all good times to revisit limits and deductibles. Then compare quotes for the same coverage set: see how to find the cheapest car insurance.
Frequently asked questions
What does 100/300/100 mean?
$100,000 bodily injury liability per person, $300,000 bodily injury per accident, and $100,000 property damage liability per accident.
Is state minimum car insurance enough?
For most drivers, no. Minimum limits can be used up quickly in a serious accident, leaving you personally responsible for the rest.
Do I need an umbrella policy?
If your assets or future income exceed your auto liability limits, an umbrella policy adds extra liability protection, typically in $1 million increments, often at a relatively modest cost.