How Much Car Insurance Do I Really Need?

Ask an insurance company how much coverage you need and you may hear “it depends”. That is true, but it is not very helpful when you are trying to choose a number from a drop-down menu. A better approach is to work out what you have to lose, and then decide how much protection that deserves.

Start with the legal minimum

Almost every state sets a minimum amount of liability coverage you must carry. The limits are usually written as three numbers, such as 25/50/25. They stand for the most the insurer will pay for one person’s injuries, the most for all injuries in one accident and the most for property damage. Minimums differ widely across states, and some states change them from time to time. California, for example, raised its minimums in 2025.

The legal minimum is the least you can carry and still drive legally. It is not a recommendation, and it is often not enough.

Why the minimum can fall short

Consider what a serious accident can cost. A hospital stay, surgery and rehabilitation can easily exceed $50,000. A modern car can cost more than $25,000 to replace, and a crash involving two or three vehicles adds up quickly. If the damage is more than your limits, the injured party can pursue you personally for the rest. That can mean wage garnishment, liens on your property or a lawsuit that follows you for years.

A way to think about liability limits

One rule of thumb is that your liability limits should be high enough to protect the assets and income you would hate to lose. These include savings, a home, retirement accounts and your future earnings.

• If you have few assets and a tight budget, the state minimum may be what you can afford. But ask for a quote at the next level up, since the extra cost is often smaller than people expect.
• If you own a home, have savings or earn a steady income, higher limits make more sense. Many consumer advisers suggest at least 100/300/100.
• If you have significant assets, consider an umbrella policy, which adds extra liability protection above your auto and home limits, often at a modest cost.

This is general information and not advice for your situation. An independent agent or a licensed professional can help you decide.

Coverage for your own car

Liability only pays for harm to other people. To protect your own vehicle, you need collision and comprehensive. These are required if you have a loan or lease, and they can be optional if you own the car outright. Our article on whether full coverage is worth it explains how to decide.

Uninsured and underinsured motorist coverage

With roughly one in seven drivers estimated to be uninsured, according to the Insurance Research Council, this coverage is worth serious thought. It pays for your injuries, and in some states your car repairs, if you are hit by a driver with no insurance or too little. It is required in some states, and available in most. It is usually inexpensive for the protection it gives.

Medical coverage for you and your passengers

Medical payments coverage or personal injury protection helps pay medical bills after an accident, regardless of who is at fault. Some states require PIP, and it often covers lost income. If you have good health insurance, you may need less, but check your deductible and whether your plan covers car accident injuries.

Optional extras that can be worth it

• Rental reimbursement, if you depend on your car every day.
• Roadside assistance, unless you already have it through a credit card or motor club.
• Gap insurance, if you owe more on your car than it is worth.

Balance protection with your budget

More coverage costs more, but not always as much as you might think. Moving from minimum limits to higher ones is often a small increase compared with the extra protection you gain. You can balance the cost by raising your deductible on collision and comprehensive, since that does not affect your liability protection. See our guide to choosing a deductible, and read about ways to lower your premium without cutting the coverage that matters most.

Review it when life changes

The right amount of coverage today may be wrong in two years. Buying a house, getting a raise, adding a teen driver or paying off a car loan are all good moments to look at your policy again. As your assets grow, your liability limits should grow with them.

A short checklist

• Find your state’s minimum limits on your department of insurance website.
• List your assets and income that a lawsuit could put at risk.
• Get quotes at the minimum and at a higher level, with the same deductibles.
• Ask about uninsured motorist and medical coverage.
• Review your coverage every year, and whenever your life changes.

There is no single right amount, but there is a sensible process: know the minimum, understand what you could lose and pick the highest protection you can comfortably afford. When you are ready to see real numbers, compare quotes at different coverage levels.

Written by the StateCarInsuranceUSA editorial team. Last updated October 19, 2026.

This article is for general information only and is not insurance, legal or financial advice. Coverage, rules and prices vary by insurer and state.