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How to Choose What Auto Insurance Coverage Levels You Need

Samantha Kostaras

Insurance Writer

8 min. read

Choosing the right auto insurance coverage levels is important not only to keep you legal on the road, but to keep your personal assets protected in the event of an accident. This guide will help you balance cost with coverage.

First, it’s important to understand three of the key components of an auto insurance policy:

  • (BI) Bodily Injury Liability Per Person: Coverage limit, per person, for the expenses, like medical bills and lost wages, due to injuries you cause to others in an accident.
  • (BI) Bodily Injury Liability Per Accident: Coverage limit for the expenses due to injuries you cause to others, in total for the accident.
  • (PD) Property Damage Liability Per Accident: Coverage limit for damages you cause to other people’s property in an accident, which could include cars, fences, etc.

When you compare coverages, policies will often be written like this: 25/50/25.

Which means your liability coverage is:

Bodily Injury (BI)Bodily Injury (BI)Property Damage (PD)
Per PersonPer AccidentPer Accident

State Minimum Auto Insurance Requirements

Every state determines its own laws regarding what types of coverage it requires its drivers to hold, and what level it requires of each. No matter how much insurance you decide is appropriate for your circumstances, it’s important to make sure you meet at least the minimum requirements for your state where your car is registered.

States with the highest minimum coverage levels

StateBI (per person)BI (per accident)PDUM/UIMMedPayPIP

States with the lowest minimum coverage levels

StateBI (per person)BI (per accident)PDUM/UIMMedPayPIP
New Jersey$15,000$30,000$5,000NoneNone$15,000

New Hampshire and Virginia do not require car insurance coverage.

Do you need more than the minimum coverage?


When it comes to car insurance, you’re paying for protection, so don’t assume the minimum coverage required by law is the same thing as the level of coverage to feel adequately protected. Think about it this way: If you get into an accident, you’re not going to be asking if you have the state’s legally required minimum coverage. You’re going to want to know whether you will have to pay out of pocket for the damage you unintentionally caused. In many cases, state minimum coverage simply isn’t enough. 

Overall, as you choose your coverage levels in each category, it is important to cover all of the financial assets you have that would be at risk from a large insurance claim by protecting your net worth. You may also want to consider whether you want to extra coverage in case an accident extends to a civil lawsuit.

How much bodily injury liability coverage should you have?

Injuries caused by accidents have a wide range of potential costs. In a fender bender, there could be little to no expense, while a more serious accident could result in a claim demanding hundreds of thousands of dollars for someone like a surgeon or other highly paid professional who suffered an injury that put them out of work. This is why it’s helpful to reframe the question of how much coverage to get as a question of how much you personally have to protect.

Arriving at a number for this coverage involves tallying up the financial assets you currently have, such as a house, car, savings accounts, and (in some cases) retirement savings. And if you don’t have many assets yet, but are at the beginning of a lucrative career path, it may make sense to consider the earning potential you’d like to protect in case you are involved in a serious accident where wage garnishment could be possible.

The good news is, if you’re looking for higher bodily injury liability coverage, you can typically increase your limits significantly without paying too much more in your premiums.

How much property damage liability coverage should you have?

Depending on the vehicles (or other property) involved, property damage resulting from an accident can vary widely, but the potential for a catastrophic loss is smaller than it is for bodily injury. For example, luxury cars may be worth more than typical minimum property damage limits, but even a fancy car can’t sue for lost wages or pain and suffering. In this category, you’ll want to make sure you’re comfortable with your level of product liability coverage for both your assets and your circumstances. Do you mainly drive in a smaller, rural town where older vehicles are more commonplace? Or do you commute regularly in a city or affluent suburb, surrounded by newer BMWs and other luxury vehicles?

Average Liability Claims Paid

YearAverage BI Liability ClaimAverage PD Liability Claim
Source: Insurance Information Institute

Do you need personal injury protection (PIP)?

It mostly depends where you live.

Personal injury protection, or PIP, is mainly used, and required, in “no-fault” states, although it may be possible to get protection in other states. In these states, your own insurance will pay for your injuries up to your PIP limit, and then you may be able to sue the other party if you meet a certain threshold. This type of coverage will pay for your medical costs and those of your passengers as well as lost income related to the accident, regardless of whose fault it was. 

Even if you don’t live in a state where this coverage is a requirement, this could be useful protection if you don’t have great health insurance to rely on, which would normally cover many of the same costs.

Do you need medical payments coverage (aka MedPay)?

It depends mostly on your other insurance coverages.

MedPay is coverage that specifically covers any medical expenses you and your passengers have after an accident, regardless of whose fault the accident was. This is useful because it is coverage that kicks in right away while your insurance companies work things out, and usually has a lower limit around $1,000 to $5,000. It can help pay for health insurance deductibles and even your PIP co-pay. Unlike PIP, however, MedPay will not cover the replacement of any lost wages. 

It is possible that your health insurance may not cover costs related to a car accident, and in that case MedPay would be very valuable protection. Even if your insurance will kick in, MedPay may also be worthwhile if you have a relatively high deductible.

Do you need comprehensive and collision coverage?

It mainly depends on the value of your car.

Comprehensive and collision coverage are coverages that protect the value of your own car. 

  • Collision coverage will pay to repair or replace your car if you are at fault in an accident.
  • Comprehensive coverage will pay to repair or replace your car if it is damaged outside of an accident or stolen. 

If you lease or finance your car, you’re most likely going to be required to hold these coverages. If you own your car outright, it’s up to you whether you want to add these protections and this will depend on the value of your car, the cost of coverage, and your comfort level taking the chance of paying out of pocket for these expenses, or having no coverage in the event of certain types of accidents or damage to your vehicle. According to III analysis of NAIC data, 77% of consumers purchased comprehensive and 73% purchased collision coverage in 2016.

Industry experts have their own rules of thumb for this decision:

“When 6 months of collision coverage exceeds 25 percent of the vehicle’s value, it’s no longer worth it because two years of collision coverage would cost more than replacing the car.”

Chane Steiner, CEO of Crediful

“A general rule of thumb is your vehicle needs to be older than 10 years or worth less than $4,000 to drop comprehensive or collision.”

Ava Lynch, Resident property insurance expert for The Zebra

Adding this type of coverage is usually costly, and in some cases could even double your premium. But as with any insurance, for those who end up needing it, it is money well spent.

Do you need uninsured/underinsured motorist coverage (UM/UIM)?

We highly recommend it. 

Nearly every insurance expert we consulted stressed the importance of this protection for people in all situations. Not only does this coverage protect you if the driver at fault in an accident doesn’t have enough insurance to cover your expenses, but it can also provide coverage after a hit-and-run. Personal injury attorney Gabriel Levin describes UM/UIM this way: ”It insures that you get properly compensated for your harm regardless of the amount of insurance the defendant has.”

“The one tip I would give consumers when deciding coverage limits is to make sure their UIM/UM limits, at a minimum, match the coverage limits they have purchased for their liability insurance. It insures that you get properly compensated for your harm regardless of the amount of insurance the defendant has.”

Gabriel Levin, Attorney, The Levin Firm

Do you need umbrella liability insurance?

If you have a large net worth, probably.

Umbrella liability insurance is not coverage that is specific to auto insurance, instead it’s a separate insurance policy that sits on top of your other coverages (home and auto) and protects your assets from claims above those policy limits. Because policies are usually issued in million-dollar increments, this coverage is typically appropriate for people with substantial assets to protect or with a higher risk of attracting a lawsuit, like owning a pool or being a landlord.

“[S]ince these policies don’t begin to pay out until after the liability limits of the related homeowners or automobile policy are exhausted, the rates for umbrella policies are generally quite reasonable.”

Timothy G. Wiedman, Personal Finance Professor, Retired, Doane University

Keep in mind that although rates for umbrella insurance are typically low, you may be required to increase your liability coverage on your auto insurance policy in order for the umbrella coverage to apply, which will add to the cost.

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