Car insurance provides a financial safeguard if you’re in an accident or your vehicle gets stolen. Your auto coverage limits are the maximum amounts your insurance company will pay out for a claim. If the amount of a claim exceeds your coverage limits, you could be on the hook for the remaining amount.

Most states set minimum auto insurance coverage limits. But choosing the minimum coverage amounts won’t provide enough financial protection if you’re in a severe crash. We’ll walk you through how auto insurance coverage limits work and how to choose the appropriate policy limits for your situation.

Car insurance limits explained

Your car insurance limits are the maximum amounts your insurance policy will pay out for a covered loss. Most auto insurance policies are actually several types of coverages bundled together, each with their own limit. So if you look at your car insurance policy, you’ll probably discover it has multiple coverage limits.

Liability coverage limits

Auto liability insurance covers you when you’re at fault in a car accident. Most states require drivers to carry a minimum amount of liability coverage. There are two types of auto liability coverage:

• Bodily injury liability coverage: Helps pay for medical bills and other expenses if you injure someone else in an accident you’re at fault for. This usually consists of two separate limits: One is the maximum the policy will pay out to any individual, and the second is the maximum amount the policy will pay for all bodily injury claims if multiple people are hurt in a single accident.

• Property damage liability coverage: Helps pay the costs if you damage another person’s vehicle or other property in an auto accident.

You’ll often see liability coverage limits expressed as three different numbers. For example, if you have 100/300/50 coverage limits, this typically means you have:

• $100,000 of coverage per person for each bodily injury claim. In other words, the maximum amount each injured person could get from your insurance company would be $100,000.

• $300,000 of total bodily injury coverage for any accident. If you cause a crash that results in multiple injuries, your insurance company wouldn’t pay out more than $300,000 total for all bodily injury claims.

• $50,000 in property damage coverage. If you damage someone else’s vehicle or property while driving, the maximum amount your automobile insurance will pay is $50,000.

The most common state minimum car insurance coverage limits are 25/50/25. However, carrying coverage only up to the minimum limits could leave you vulnerable if you’re involved in a serious accident. There’s no set-in-stone rule for how much liability coverage you should carry. But you should probably aim for more than the minimum liability limits set by your state in case you’re personally sued — particularly if you own a home or other major assets.

Read more: Minimum car insurance requirements in all 50 U.S. states

Personal injury protection coverage

Twelve states are considered no-fault states, which means you file a claim with your own insurance company if you or your passengers are injured in an accident, regardless of who’s responsible. In these states, drivers are generally required to carry personal injury protection (PIP) coverage, which provides coverage for medical expenses and lost wages for you and your passengers.

Minimum coverage limits vary in states where PIP insurance is required. For example, the minimum PIP requirement in New York is $50,000, while Utah requires just $3,000 in PIP coverage.

Uninsured motorist coverage

Roughly 1 in 7 drivers were uninsured in 2022, according to a study by the Insurance Research Council. Uninsured/underinsured motorist coverage protects you from having to pay out of pocket for your injuries or damage to your vehicle if you’re in a crash with an uninsured driver or one who lacks sufficient coverage.

As with liability coverage, uninsured motorist coverage/underinsured motorist coverage has separate policy limits for bodily injury and property damage claims. Coverage limits are often listed as three separate numbers. For instance, if you have 25/50/25 uninsured/underinsured motorist limits, the maximum amount this insurance pays is $25,000 per person for bodily injury, $50,000 total for bodily injury, and $25,000 for property damage.

Collision insurance

Collision insurance helps cover the costs of repairing or replacing your vehicle if it’s damaged in an accident with another driver or you strike an object, like a pole or tree. It’s typically required by your lender if you’re financing your vehicle. Otherwise, it's optional coverage.

Your collision insurance limit is usually your vehicle’s actual cash value, i.e., the value of your car after you account for car depreciation. Even if you’re not required to carry collision coverage, it’s usually recommended that you carry the coverage if you couldn’t afford to replace or repair your vehicle.

Comprehensive insurance

Comprehensive insurance provides coverage in case your vehicle is damaged from an event other than a collision, like a fire, falling object, natural disaster, or an act of vandalism. It also helps you pay to replace your car if it’s stolen.

As with collision insurance, comprehensive coverage is usually mandatory if you’ve financed or leased your vehicle but optional if you don’t have a car payment. Your coverage limit is typically the vehicle’s actual cash value.

Pro tip: With comprehensive and collision insurance, you can’t buy higher limits for these coverage types. Your coverage will be limited to your car’s actual cash value.

State minimum requirements

Most state motor vehicle departments require that you have both bodily injury liability coverage and property damage liability coverage. You could face penalties like fines and suspension of your driver’s license and vehicle registration if you drive without car insurance.

Drivers in New Hampshire aren’t required to carry auto insurance, but they need to show that they have enough money to meet the state’s financial responsibility requirements in case they’re at fault in an accident. If you buy car insurance in New Hampshire, the minimum liability coverage limits are 25/50/25, or $25,000 per person for bodily injury, $50,000 maximum for bodily injury, and $25,000 for property damage.

Virginia vehicle owners can register an uninsured car if they pay a $500 uninsured motorist fee at the DMV — but that’s about to change. As of July 1, 2024, Virginia motorists will no longer have the option to pay the fee and waive coverage. Drivers will be required to carry Virginia’s minimum liability 30/50/20 coverage limits, i.e., $30,000 per person for bodily injury, $50,000 maximum for bodily injury, and $25,000 for property damage. Virginia also requires 25/50/20 limits for uninsured/underinsured motorist coverage.

Finally, Florida doesn’t require drivers to carry bodily injury liability insurance. But it does mandate drivers have at least $10,000 of property damage liability insurance, plus $10,000 in PIP coverage.

Pro tip: If you’ve financed your vehicle and don’t maintain the required coverage, your lender can buy force-placed insurance on your behalf and add it to your monthly payments.

Read more: How to find cheap car insurance in 2024

How to set the right coverage limits

Coverage limits are an important factor to consider with auto insurance — whether you're updating and renewing your existing policy or switching car insurers. Here are some tips for determining how much car insurance you need.

• Aim for liability coverage that’s at least equal to your net worth. Your net worth is the combined value of your assets, minus your debts. Maintaining liability coverage that matches your net worth protects your home and savings if you’re sued. If you have a high net worth, you may also want an umbrella policy, which can offer both higher coverage limits than a standard policy and additional types of coverage.

• Consider increasing both your deductibles and coverage limits. You may be hesitant to increase your coverage limits given the soaring costs of car insurance. One option for minimizing the effect on your insurance premiums is to choose higher deductibles. You’ll pay more out of pocket when you file a claim, but the trade-off may be worth it for more protection from a catastrophe.

• Consider uninsured motorist bodily injury coverage limits at the same level of your liability bodily injury coverage limit. You’ll have the same coverage level whether you or an uninsured or underinsured driver causes an accident. In fact, some states require you to choose identical coverage limits.

• Think twice before canceling your collision and comprehensive coverage. If you don’t have a car loan or lease, you won’t be required to keep these coverages. But you should only do so if you can afford to pay out of pocket to repair or replace your vehicle.

FAQs

What are coverage limits on an insurance policy?

Coverage limits are the maximum dollar amount an insurance company will pay out for a particular type of coverage. Most car insurance policies have multiple coverage limits.

What does 50/100/50 mean in insurance?

In car insurance, 50/100/50 usually means that you have coverage limits of $50,000 per person for bodily injury liability, $100,000 total per accident for bodily injury liability, and $50,000 for property damage liability.

How do you decide how much insurance coverage you need?

To decide how much auto insurance you need, aim for liability limits that are equal to the value of your home and other assets, such as savings, minus your debt. Even if you don’t have much property or savings, you’ll need enough insurance to meet your state minimums, as well as any lender requirements.