2026-04-04 · auto, coverage

Updated: 2026-08-31

By InsuraFAQ Editorial Team · Reviewed for accuracy

Adult at a kitchen table reviewing an auto insurance declarations page and a printed liability-limit worksheet with split-limit notation like 100/300/100

How Much Auto Insurance Do I Need?

At a glance

Buy enough auto liability coverage to protect the assets an injured party could go after in a serious crash — that usually means going well above state minimum limits. A common middle-tier limit like 100/300/100 works for renters with modest savings, while homeowners with meaningful equity typically need higher limits or an umbrella policy on top. Match your UM/UIM limits to your liability limits, keep collision and comprehensive only while the yearly cost stays under about ten percent of the car’s market value, and pick a deductible you can comfortably pay on short notice.

Key takeaways

Set liability limits high enough to cover your home equity, non-retirement savings, and other attachable assets.
Split-limit notation like 100/300/100 means per-person bodily injury / per-accident bodily injury / property damage — in thousands of dollars.
Consider dropping collision and comprehensive when annual premium plus deductible approaches roughly 10% of the car’s market value, but only on cars you own outright.
Match uninsured/underinsured motorist limits to your liability limits rather than leaving them at the state minimum.
If the right coverage stretches the budget, raise deductibles or shop discounts before cutting liability — never cut liability first.
Revisit coverage after buying a new car, taking a loan, adding a teen driver, moving, or starting to drive for rideshare or delivery.

Overview

Auto coverage should protect your income, savings, and future earnings. State minimum limits are rarely enough for serious accidents.

Choosing liability limits

Match limits to your assets and future income.
Consider an umbrella policy if your net worth is higher.

Choosing deductibles

Higher deductibles lower premiums but increase out-of-pocket costs. See our breakdown of auto insurance cost per month for typical rate ranges.
Pick a deductible you can comfortably pay on short notice.

When to adjust coverage

Buying a new car or taking out a loan.
Adding a teen driver or moving to a busier area.
Starting to drive for a rideshare or delivery app, which typically triggers the commercial-use exclusion on a personal auto policy. See our rideshare and delivery insurance guide for the endorsement and commercial-policy options carriers offer.

Next steps

Review your current policy limits and price higher options to see the real premium difference.

Match liability limits to your actual exposure

Liability limits exist to protect the assets an injured party could come after if you cause a serious crash. A simple framework is to add up your home equity, non-retirement savings, and any other attachable assets, then set your liability limit at or above that total. A common middle-tier limit like 100/300/100 is often adequate for renters with modest savings, while homeowners with meaningful equity typically need higher limits.

Those three numbers in a split limit are not random. They represent:

Per-person bodily injury (the most the policy pays for any one injured person).
Per-accident bodily injury (the total the policy pays for all injured people in one crash).
Property damage (the most the policy pays for damage to the other driver’s car or other property).

If your assets exceed what a standard auto policy can reasonably cover, an umbrella policy can sit on top of your auto liability and extend protection into the millions without rewriting the underlying policy.

When to keep or drop collision and comprehensive

Collision and comprehensive pay for damage to your own vehicle, so their value is tied directly to what the car is worth. A widely cited industry rule of thumb (attributed to the Insurance Information Institute) is to compare the annual premium for collision and comprehensive, plus the deductible you would pay in a claim, against the current market value of the vehicle. If that cost approaches or exceeds roughly ten percent of the car’s market value, many drivers choose to drop physical damage coverage.

Two things to remember before dropping either coverage:

A lender or lessor will require physical damage coverage for as long as the vehicle is financed or leased, so this decision only applies to cars you own outright.
Once you drop these coverages, any loss from a crash, theft, hail, or fire comes out of your own pocket, so it helps to know what your coverage for totaled cars would have paid if you were still carrying it.

Why UM/UIM is often the underrated line

Uninsured and underinsured motorist coverage (UM/UIM) pays for your own injuries when the at-fault driver has no insurance or carries limits too low to cover your medical bills and lost wages. In many states a meaningful share of drivers on the road are uninsured, and even insured drivers often carry only the state minimum, which can be exhausted quickly after a serious injury.

A practical rule is to match your UM/UIM limits to the liability limits you chose in the first section rather than leaving them at the state minimum. If you felt comfortable buying 100/300 in liability to protect others, you should feel equally comfortable carrying 100/300 to protect yourself. See our full explainer on uninsured motorist coverage for how this coverage is triggered and what it pays.

What to do if the “right” coverage is not affordable

If the limits you actually need push the premium past your budget, the answer is almost never to cut liability. Cut somewhere else first:

Raise deductibles on collision and comprehensive before cutting liability limits.
Ask about telematics or usage-based programs that reward safe driving with a short-term discount.
Ask about low-mileage discounts if your annual miles are below the carrier’s threshold.
Re-quote with at least three carriers using the same limits, since the same driver profile can price very differently from one insurer to the next.

For a fuller list of levers, see our guide on how to lower insurance premiums.

Frequently asked questions

How much car insurance do I really need?

Enough to cover the assets an injured party could come after in a serious crash. Add up home equity, non-retirement savings, and other attachable assets, then set your liability limit at or above that total. A common middle-tier limit like 100/300/100 is often adequate for renters with modest savings, while homeowners with meaningful equity typically need higher limits or an umbrella policy on top.

What do the three numbers in a split limit mean?

The first number is per-person bodily injury (the most the policy pays for any one injured person), the second is per-accident bodily injury (the total the policy pays for all injured people in one crash), and the third is property damage (the most the policy pays for damage to the other driver’s car or property).

Should I drop collision and comprehensive coverage on an older car?

A widely cited rule of thumb: compare the annual premium for collision and comprehensive, plus the deductible you would pay in a claim, against the current market value of the vehicle. If that cost approaches or exceeds roughly 10% of the car’s market value, many drivers choose to drop physical damage coverage — but only on cars you own outright, since lenders and lessors require physical damage coverage for as long as the vehicle is financed or leased.

Do I need uninsured motorist coverage if my state does not require it?

Yes for most drivers. Uninsured and underinsured motorist coverage pays for your own injuries when the at-fault driver has no insurance or carries limits too low to cover your medical bills and lost wages. Match your UM/UIM limits to the liability limits you chose rather than leaving them at the state minimum.

When should I raise or lower my auto insurance coverage?

Raise coverage when you buy a new car or take out a loan, add a teen driver, move to a busier area, or start driving for a rideshare or delivery app. Consider dropping physical damage coverage once you own an older, lower-value car outright and your emergency fund can cover replacing it.

What if the right coverage is not affordable?

Cut somewhere else before you cut liability. Raise deductibles on collision and comprehensive first, ask about telematics or usage-based discounts, ask about low-mileage discounts, and re-quote with at least three carriers using the same limits — the same driver profile can price very differently from one insurer to the next. See our full guide on how to lower insurance premiums.

Sources

Insurance Information Institute (III), iii.org — How much auto coverage do I need? — consumer guidance on setting liability limits to protect assets and the collision/comprehensive drop-coverage rule of thumb referenced in the article body.
Insurance Information Institute (III), iii.org — Uninsured motorist coverage — background on how UM/UIM works and why matching UM/UIM to liability limits matters.
National Association of Insurance Commissioners (NAIC), naic.org — Auto Insurance Consumer Guide — regulator-authored overview of split-limit notation, deductibles, and comparing quotes.
Consumer Financial Protection Bureau (CFPB), consumerfinance.gov — Auto loans and required insurance — guidance on lender-required physical damage coverage while a vehicle is financed or leased.