You need at least your state's minimum liability limits by law — but those minimums are rarely enough. Most insurance experts recommend 100/300/100 liability limits for adequate protection. Here is how to decide what coverage you actually need.
State Minimum vs What You Should Actually Carry
State minimums like 25/50/25 mean $25,000 bodily injury per person, $50,000 per accident, and $25,000 property damage. A single serious accident easily generates $100,000+ in medical bills for one person and $80,000+ in vehicle and property damage. If your liability coverage maxes out at $50,000 and a court awards $200,000, you pay the remaining $150,000 out of pocket. Insurance experts universally recommend at least 100/300/100 limits.
Full Coverage vs Minimum Coverage — When to Choose Each
Full coverage (liability plus collision plus comprehensive) is recommended for any vehicle worth more than $10,000 or any vehicle that is financed or leased. Minimum liability only is appropriate for older vehicles worth less than $4,000 that you own outright. The simple test: if your annual collision and comprehensive premium exceeds 10 percent of your vehicle's actual cash value, dropping these coverages may make financial sense.
Uninsured Motorist Coverage — Often Overlooked
Uninsured and underinsured motorist coverage protects you when an at-fault driver has no insurance or not enough insurance to cover your damages. One in eight US drivers is currently uninsured, and in some states like Florida and Michigan, the uninsured rate exceeds 20 percent. UM and UIM coverage typically costs $50–$100 per year to add — one of the best values in auto insurance.
Gap Insurance — When You Need It
If you financed or leased your vehicle, gap insurance covers the difference between what your car is worth and what you owe on the loan after a total loss. Vehicles depreciate rapidly — a car purchased for $35,000 may be worth only $28,000 one year later while you still owe $32,000 on the loan. Gap insurance covers the $4,000 difference. Gap insurance is most valuable in the first 3 years of financing and can be purchased from your insurer for $20–$40 per year.