How Much Auto Liability Insurance Do I Need?

Auto liability insurance may feel like just another box to tick when you purchase car coverage. But it's not just a legal requirement, it's the first layer of financial protection if you ever cause an accident. The big question is: how much do you really need?

Though most states mandate a minimum level of liability coverage, those limits can't possibly come close when disaster strikes. So let's take a look at what car liability insurance actually does, how the minimum may not be enough, and how to determine the best amount for you.

What Does Liability Insurance Actually Do?

Its essence is to pay for damage or harm you might inflict upon others when driving. Liability insurance has two primary components:

Bodily injury liability covers medical bills, lost wages, and attorney fees for other parties in the accident.

Property damage liability pays to have someone else's car or property repaired or replaced if you are responsible for damaging it whether it's a fender collision or a mailbox you bump into.

What liability insurance won't do is cover your own damages or repair your vehicle. For that, you would need collision or comprehensive coverage.

The Problem With State Minimums

Each state has specific requirements for how much liability coverage drivers must have. In most areas, that minimum would look like this:

• $25,000 for each person injured
• $50,000 total for all people injured in any one accident
• $25,000 for damage to property

On the surface, that doesn't sound so bad. But when you're talking about the cost of medical treatment and auto repair, those figures can be woefully inadequate in a hurry. An emergency room visit or an accident involving multiple vehicles could blow past those limits overnight.

And what then? You're left paying for whatever your insurance doesn't. 

Why Cutting Corners Could Cost You Plenty

Suppose you are in an accident that inflicts $100,000 in damages, but you have only $50,000 worth of coverage. That leaves a $50,000 deficiency  and it won't go away. The other party may sue you for the balance, and your wages, savings, or even your assets might be in jeopardy.

That’s why experts often suggest boosting your liability limits well beyond the state minimum. Many drivers opt for coverage like $100,000 per person, $300,000 per accident, and $100,000 for property damage  often written as 100/300/100.

This kind of protection makes more sense for people who have something to lose, whether that’s a home, a business, or a retirement fund.

Who Should Consider Higher Coverage?

You don't have to be wealthy to require additional insurance. It's actually the person with limited savings who can least manage a significant out-of-pocket expense in the event of an accident.

You might want to raise your liability limits if:

• You own assets or financial resources
• You commute a long distance or drive regularly
• You live in or travel through a city or heavily trafficked area
• You wish to lower the chances of being sued personally after a wreck
  

In short, if a lawsuit or large settlement would put your financial future at risk, it’s worth taking a closer look at your coverage.

Is There Such a Thing as Too Much Coverage?

Technically, you can't have too much liability coverage  but you can get to the point where it's more practical to add an umbrella on top of your policy. These policies provide extra coverage over your auto limits and are usually a cost-effective way to add millions in coverage if necessary.

Umbrella policies are particularly valuable for high-income earners, homeowners, or anyone with more to lose in a lawsuit.

What Does Additional Coverage Cost?

Here's some better news: raising your liability limits often doesn't cost a fortune. In most situations, switching from the state minimum to a more precautionary 100/300/100 policy could only increase your premium by $10 to $20 per month.

That tiny added monthly cost can protect you from tens of thousands of dollars in personal liability down the road. It's one of the best bargains for improving your protection.

Still Not Certain What's Best for You?

Each driver is different. What might be reasonable for a solo commuter with no assets won't be right for a family of five with a residence and two cars. That's why it makes sense to go over your choices with someone who knows both the insurance aspects and your individual risk profile.

Final Thoughts

Auto liability insurance is more than state mandated; it's your fiscal protection. Although you can get by legally with minimum limits, that doesn't necessarily mean you should. If an accident leaves you liable for tens of thousands of dollars, minimum limits won't go very far.

Increasing your coverage gives you more assurance, and oftentimes, it's less costly than you think. The secret is knowing how much you need — and ensuring that your policy is robust enough to secure your future.

Need assistance determining how much liability insurance is best for you? Talk to a Savvital advisor for a fast, no-pressure check-in. We'll discuss your risks, walk through your options, and assist you in selecting a plan that suits your lifestyle — not just the law.