How Much Liability Insurance Do I Need?

Determine the right auto coverage for your situation

A driver accepts keys from someone standing outside the car.

DjelicS / Getty Images

Carrying auto liability insurance is mandated by law in most states. However, state-required liability coverage levels likely won’t provide all the protection you need. Carrying too little liability insurance can be a recipe for financial disaster if you’re at fault for a traffic accident.

Liability insurance is intended to protect your assets. When you’re liable for property damages and injuries in an accident, your liability coverage can help pay the costs. Insurance companies allow you to increase liability coverages above state-required levels, and they offer additional liability insurance products that can beef up your asset protection.

Key Takeaways

  • Liability auto insurance pays the medical expenses and auto repair costs of another driver when you’re at fault for an accident.
  • Most states require all motorists to buy liability car insurance.
  • State-mandated coverage levels usually do not provide enough asset protection for most drivers’ needs.
  • Coupling an auto policy with umbrella insurance can maximize your protection.

What Is Auto Liability Insurance? 

Auto liability coverage helps protect your assets when you cause an accident. Car insurance policies include two types of liability coverage:

  • Bodily injury liability: If you’re at fault for an accident that causes injuries to the other driver or their passengers, bodily injury liability coverage will help pay their medical expenses.
  • Property damage liability: This type of coverage helps pay to repair or replace another person’s property when you’re at fault for an accident. Property damage liability covers a wide range of property, from another driver’s automobile to a homeowner’s fence.

Suppose you rear-end another car at an intersection, damaging the other vehicle’s bumper and shattering its back window. Your property damage liability coverage will help pay to replace the mangled bumper and broken window. If the other driver or their passengers sustain injuries, your bodily injury liability coverage will help pay their medical bills.

State Liability Requirements

Most states require all drivers to carry minimum levels of bodily injury liability and property damage liability coverages. You’ll likely notice your liability coverages expressed as three numbers, separated by forward slashes, such as 30/60/25. This example indicates the following coverages:

  • $30,000 in bodily injury coverage per person
  • $60,000 in bodily injury coverage per accident
  • $25,000 in property damage coverage per accident

The amount you’re required to purchase will depend on where you live. For example, California requires motorists to carry a minimum of 15/30/5 in liability coverage, while Texas requires 30/60/25.

Liability coverage only pays up to the limits of coverage you purchase. If costs exceed your policy’s limits, you could face unexpected out-of-pocket costs. For example, if another driver racks up $20,000 in medical bills due to an accident you caused and you only carry $15,000 in bodily injury coverage, you’re on the hook for the remaining $5,000.

It’s important to know your state’s minimum auto insurance requirements. If you’re unsure, ask an insurance agent.


Your state may also require you to purchase other types of auto insurance, which may include medical payments, personal injury protection (PIP), or uninsured and underinsured motorist coverages.

The Costs of Being Underinsured

State minimum liability insurance requirements might not adequately protect your assets. According to the U.S. Centers for Medicare and Medicaid Services, a one-week hospital stay costs an average of $70,000. If more than one person sustains an injury, medical costs can skyrocket.

When someone sustains a serious injury in an auto accident, the economic costs can exceed medical bills and may include administrative expenses and lost wages. The average economic cost of a fatality ran more than $1.7 million in 2019, and the impact of a disabling accident cost nearly $100,000, according to the National Safety Council.


Automobile owners who don’t buy enough property damage liability may also face detrimental out-of-pocket costs.

For example, a 2022 Honda CR-V, one of the most popular vehicles on the road, starts at around $25,750. Many other popular makes and models come with even higher sticker prices.

Consider the economic impact a California driver would face if they only carried the state-required 15/30/5 liability coverage. If they totaled another motorist’s 2022 Honda CR-V, their policy’s $5,000 in personal property liability coverage would fall far short of the replacement cost. If the other driver sustains serious injuries, the underinsured car owner could face asset losses in the tens of thousands of dollars.

How To Determine How Much Coverage You Need

An auto accident can lead to more than just injuries and property losses. If you’re at fault for a crash, the other driver might sue you for damages or pain and suffering. Financial and insurance experts recommend that you carry at least:

  • $100,000 in bodily injury liability coverage per person
  • $300,000 in bodily injury liability coverage per accident
  • $100,000 in property damage liability per accident

These coverage levels should provide adequate protection for many drivers. However, you should carry enough liability insurance to protect all your assets. If you have a net worth of around $250,000, 100/300/100 in liability coverage is probably all you need. However, folks with a high net worth might need greater protection.

A single umbrella insurance policy can provide liability protection for your car, home, and recreational vehicles. Umbrella policies kick in when you exhaust the coverage of a primary policy, such as auto liability insurance.

For example, if you cause a traffic accident that causes $50,000 in property damage, and only carry $10,000 in property damage liability, your car insurance will pay the first $10,000 and your umbrella insurance would pick up the remaining $40,000.


Umbrella policies typically start at $1 million of liability coverage and some insurers offer coverage as high as $100 million.

The Bottom Line

Skimping on auto liability coverage may save you a few dollars on your insurance premium, but it could lead to financial disaster if you’re at fault for an accident.

When shopping for car insurance, determine the amount of liability coverage you’ll need to protect all your assets. If you decide to buy only state-required liability coverage levels, consider purchasing an affordable umbrella insurance policy, which can provide protections for your automobile and home.

Frequently Asked Questions (FAQs)

What other types of car insurance should I have?

Uninsured/underinsured motorist coverages, required in some states, can help pay your medical expenses and auto repair costs if an uninsured or underinsured driver causes an accident with your vehicle. Some states also require medical payments or PIP coverage, which helps pay the medical expenses of you and your passengers following a covered accident. PIP coverage also pays some nonmedical costs, such as lost wages. 

What type of car insurance does the bank require you to have?

If you finance your car, the lender will require you to purchase collision and comprehensive coverages. Collision coverage can help cover the cost of auto repairs after a crash, regardless of who was at fault. Comprehensive coverage pays for non-collision losses, such as auto theft, damages caused by a falling object or storm, or contact with an animal. Collision and comprehensive coverages are subject to deductibles.

Was this page helpful?
The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. National Association of Insurance Commissioners. "A Shopping Tool for Automobile Insurance."

  2. Progressive. "What Are the Minimum California Auto Insurance Requirements?"

  3. Progressive. "What Are the Minimum Texas Car Insurance Requirements?"

  4. U.S. Centers for Medicare & Medicaid Services. "Protection From High Medical Costs."

  5. National Safety Council. "Guide to Calculating Costs."

Related Articles