Choosing how much car insurance to buy might not be thrilling, but it’s one of the most important financial decisions you’ll make. The right coverage protects your savings, your future earnings, and your peace of mind.
The right amount of car insurance depends on your assets, your household income, where you live, and how much risk you can tolerate.
This guide walks through the coverages, how to size them for your life, and practical steps to protect yourself without overpaying.
Start by Knowing What Each Coverage Does
Before choosing limits, make sure you understand the pieces of a typical auto policy. Most policies include several coverages; a few are required by the state, but others are optional and often essential:
Bodily Injury Liability (BI): Pays medical bills, lost wages, and legal costs when you are at fault and someone else is injured.
Property Damage Liability (PD): Pays for damage to other people’s property (cars, fences, buildings) when you’re responsible.
Collision: Pays to repair your car after an accident, regardless of fault (minus your deductible).
Comprehensive: Covers non-collision, theft, fire, vandalism, hail, animal strikes and similar non-collision losses.
Uninsured/Underinsured Motorist (UM/UIM): Pays your medical bills (and sometimes repair costs) when the other driver has no insurance or inadequate limits.
Personal Injury Protection (PIP) / Medical Payments (MedPay): Pays medical bills for you and passengers, regardless of who caused the crash (required in some states).
State Minimums are a Floor, Not a Safety net
State minimums vary, and they’re usually expressed as three numbers (example, 25/50/25) meaning: $25,000 bodily injury per person / $50,000 bodily injury per accident / $25,000 property damage. Those minimums keep you legal, they’re not designed to protect you from catastrophic losses. Serious injuries, long hospital stays, and property damage can easily exceed those amounts. Industry and consumer groups commonly recommend carrying limits far above the legal minimum, typically beginning at $100,000 per person / $300,000 per accident — to better protect your assets and future earnings.
How to think about liability limits (a short framework)
Answer these questions first they’ll point you to the right coverage:
1. What are your assets? If you have a home, retirement accounts, or savings, those are at risk if you’re successfully sued. Higher liability limits shield those assets.
2. What are your future earnings? Lawsuits can seek judgments against future income. Higher earners should carry more protection.
3. How litigious is your area? Some regions see larger jury awards than others, premiums and recommended limits vary by state.
4. Do you rent or own? Homeowners benefit from layering umbrella policies on top of their home and auto insurance, renters may still need robust auto liability.
A common, conservative baseline is $100k/$300k/$100k (per person/per accident/property damage). Many financially prudent households opt for $250k/$500k/$100k. If you own a home or have significant assets, add a $1 million umbrella policy for an inexpensive layer of protection.
The Rising Insurance Costs and Uninsured Drivers
Two trends matter when sizing coverage right now: premiums have been increasing, and the share of uninsured or underinsured drivers is substantial.
1. Average full-coverage premiums climbed substantially in recent years; national averages for full coverage sit in the low-to-mid thousands per year, with minimum policies costing a few hundred on average but your state and driving record are the decisive factors. Recent analyses show full-coverage averages around $2,638 annually in 2025.
2. Meanwhile, the share of drivers who are uninsured or underinsured remains material. Studies from the Insurance Research Council (IRC) show that roughly one in seven drivers was uninsured in recent years and when you include underinsured drivers, the combined exposure is even higher. That’s why UM/UIM coverage is not optional for many risk-aware drivers.
Because of these trends, a policy that looked conservative a few years ago may feel inadequate today.
Why UM/UIM Coverage Should be a Priority
If the other driver has no insurance (or too little), your liability limits on their policy aren’t going to protect you, yours will. UM/UIM covers medical bills, lost wages, and often vehicle damage when the other party can’t pay. Given the non-trivial share of uninsured drivers, carrying UM/UIM limits that match your liability limits is a sensible practice for most drivers. Check your state rules, in many places, UM coverage is inexpensive relative to the protection it provides.
Collision, Comprehensive, and Deductibles (when to keep them)
Collision and comprehensive cover your car. Keep them if replacing the vehicle out of pocket would be painful. If your car’s market value is less than the likely repair costs or less than your deductible plus the monthly premium, dropping collision may make sense.
- High deductible ($1,000) reduces premiums but requires you to be able to cover repairs.
- Low deductible ($250–$500) increases premiums but lowers your out-of-pocket cost after a claim.
If you carry a loan or lease, your lender will usually require collision and comprehensive until the loan is paid off. Also consider gap insurance if you owe more than the car’s value; it covers the difference between the loan balance and what your insurer pays.
Umbrella Insurance
An umbrella policy is one of the most cost-effective ways to expand liability protection. For many households, $1 million of umbrella coverage is $200-$300 dollars per year and can protect against judgments that would otherwise put retirement accounts or home equity at risk. If you have assets, own rental property, host frequent guests, or drive often, an umbrella policy is worth a close look. Typical costs start around $150–$400 per year depending on your underlying coverage and risk profile.
Why Higher Limits can Save You Money
For example, you’re at fault in a crash that causes $200,000 of bodily injury claims and $30,000 of property damage.
If you carry 25/50/25 (state minimum), your insurer pays up to $25,000 per person (max $50,000 total), you and your family are on the hook for the remaining $150,000+ potentially leading to wage garnishment or asset seizure.
With 250/500/100, your policy covers the $200,000 injury claims, your insurer handles the legal defense, and your personal assets remain protected.
The monthly premium difference between these limits is often modest compared with the financial disaster they can prevent. This is the math behind paying a little more now for much greater peace of mind later.
How to Tailor Coverage to Your Situation (actionable steps)
1. Inventory your assets and future earnings. Add home equity, savings, investments and expected future income. If the total is substantial, lean toward higher liability limits.
2. Match UM/UIM to your liability limits. It’s a low-cost layer that protects you from the increasing number of uninsured/underinsured drivers.
3. Decide on collision/comprehensive based on vehicle value. If replacement costs are close to or less than your deductible, consider dropping collision.
4. Shop for an umbrella if you have assets. A $1M umbrella often starts around a few hundred dollars annually and is cheaper than you think.
5. Compare quotes from multiple insurers. The same limits can cost very different amounts with different carriers; check independent agents and comparison sites.
6. Bundle policies and ask about discounts. Bundling auto and home, maintaining a clean driving record, and installing safety features can meaningfully lower premiums.
7. Reassess annually. Life changes (buying a house, having kids, paying off loans) should trigger an insurance review.
State rules and edge cases you must consider
No-fault or PIP states require different thinking — PIP covers your medical regardless of fault. Check your state rules.
Commercial or rideshare use may require specialized endorsements, personal policies often exclude business use.
Young drivers and high-risk areas: If you live in a place with high uninsured-driver rates or high repair costs, consider higher UM/UIM and liability.
Your state insurance department website has specifics about minimums and required coverages — use it to confirm local rules.
Extra Tips to Keep Premiums Reasonable
1. Increase your deductible if you have emergency savings to cover it.
2. Maintain a clean driving record, accidents and violations raise premiums for years.
3. Consider telematics or usage-based programs if you’re a safe, low-mileage driver.
4. Choose safe, repairable vehicles when buying a car — model and repair costs matter for premiums.
We believe the information in this material is reliable, but we cannot guarantee its accuracy or completeness. The opinions, estimates, and strategies shared reflect the author’s judgment based on current market conditions and may change without notice.
The views and strategies shared in this material represent the author’s personal judgment and may differ from those of other contributors at IntriguePages. This content does not constitute official IntriguePages research and should not be interpreted as such. Before making any financial decisions, carefully consider your personal goals and circumstances. For personalized guidance, please consult a qualified financial advisor.
