How Much Liability Insurance Do You Need?

The declarations page of every auto policy lists three numbers like 25/50/25 or 100/300/100. Those are your liability limits, and they cap how much your insurer will pay if you cause an accident that injures someone or damages their property. Pick the wrong numbers and a single bad afternoon can wipe out your savings.

Auto liability is only one of three coverage types tied to those limits. Uninsured motorist and underinsured motorist coverage protect you when the at-fault driver can’t. The rules vary by state, and so do the consequences of getting the limits wrong.

Liability Limits

Liability insurance pays for the damage you cause to other people. It splits into bodily injury (medical bills, lost wages, pain and suffering for people you injure) and property damage (their car, their fence, their mailbox). A 100/300/100 policy means the insurer will pay up to $100,000 per injured person, up to $300,000 in total bodily injury per accident, and up to $100,000 in property damage.

State minimums vary widely and several have moved up recently. California raised its minimum to 30/60/15 in 2025, the first change in 56 years. North Carolina jumped to 50/100/50 effective July 1, 2025. Utah moved to 30/65/25 and Virginia to 50/100/25 on January 1, 2025. New Jersey raised its minimum to 35/70/25 effective January 1, 2026.

Even after these increases, state minimums are usually nowhere near enough for a serious accident. A two-car crash with two injured occupants can hit $300,000 in medical bills alone, and if your liability limit runs out and the injured party wins a judgment for the rest, your personal assets are on the hook.

Uninsured Limits

Uninsured motorist (UM) coverage pays your medical bills and other losses when you’re hit by a driver who has no insurance at all. According to the Insurance Research Council, 15.4% of US drivers were uninsured in 2023, with rates as high as 28.2% in Mississippi and 24.1% in New Mexico. Even in the lowest states like Maine (5.7%) and Utah (6.2%), the uninsured driver pool is still meaningful.

UM coverage is required in 22 jurisdictions including New York, New Jersey, Connecticut, Maryland, Massachusetts, Illinois, Virginia, North Carolina, and the District of Columbia. The rest of the states make it optional, though many auto insurers must offer it and require you to reject it in writing.

UM limits do not automatically equal your liability limits. In most states you can choose UM limits separately, though some states (and some carriers as a matter of policy) require UM and liability limits to match. California and North Carolina recently increased their UM/UIM minimums alongside their liability minimum increases.

Underinsured Limits

Underinsured motorist (UIM) coverage kicks in when the at-fault driver has insurance but not enough of it. If you’re hit by a driver carrying their state’s 25/50/25 minimum and your medical bills are $200,000, that driver’s policy maxes out at $25,000 per person and you’re short by $175,000.

Your own UIM coverage fills the gap, up to your UIM limit. If you have a 300/300 UIM policy, you can recover the $25,000 from the other driver’s insurer plus up to $275,000 from your own carrier (300 minus the 25 you already collected). The exact arithmetic depends on whether your state uses an offset model or an excess model. Some states subtract the at-fault driver’s policy from your UIM limit, while others stack them.

UIM is required in 14 states including Connecticut, Maryland, Massachusetts, Minnesota, New Jersey, North Carolina, Oregon, Vermont, Virginia, and Wisconsin. Where it’s optional, it’s almost always worth buying. Roughly one in three drivers nationally is either uninsured or underinsured, according to the same IRC report.

How Much Is Enough?

Your liability limits should be high enough to cover your assets and your future earnings. If you’re sued and the verdict exceeds your insurance, the plaintiff can come after savings, brokerage accounts, home equity above your state’s homestead exemption, and (in many states) a slice of your future wages.

Picture a worst-case scenario. You rear-end a stopped vehicle on the highway. The other driver has a back injury that requires surgery, six months of physical therapy, and time off from a job that pays $90,000. The medical bills are $250,000. The lost income is $45,000. A jury awards another $400,000 for pain and suffering. Your 25/50/25 policy pays $25,000 toward injuries and you’re personally liable for the remaining $670,000.

The starting point for most drivers should be 100/300/100. Step up to 250/500/250 if you own a home, have $100,000+ in savings or retirement assets, or earn enough that future wages would be a meaningful target in a judgment. Higher-asset households should layer a personal umbrella policy on top, which extends both auto and home liability coverage by $1 million or more.

UM and UIM limits should generally match your liability limits, even where state law allows you to set them lower. If you’ve decided 250/500 is the right number for your protection, the same logic applies to coverage that pays you when an uninsured or underinsured driver causes the harm.

How Much Does It Cost?

The biggest jump in your premium is the move from no insurance to the state minimum. After that, raising your liability limits is one of the cheapest upgrades in personal insurance. Going from 25/50/25 to 100/300/100 typically adds $100 to $300 per year. Going from 100/300 to 250/500 adds another $80 to $200. The actual numbers depend on your state, your driving record, and your carrier.

Here’s a rough idea of what different limit levels cost a good-driver household:

Numbers above are illustrative and vary widely by state and carrier. A driver in Florida or Michigan will pay considerably more than the same driver in Iowa or Maine for identical limits.

Talk to your agent honestly about whether they have any experience with car-accident litigation. Some auto insurance agents focus on the cheapest policy that meets state law and don’t walk customers through what happens when limits are exhausted. Independent agents who work with multiple carriers, and brokers who deal with personal injury claims, are usually a better source of advice on coverage levels.

Summary

State minimum auto liability limits exist for political reasons, not financial ones. They’re the floor that legislators could pass, not the amount that protects the average driver from a serious accident.

100/300/100 is the modern starting point for someone with normal income and modest assets. 250/500/250 is the better fit for homeowners and households with $100,000+ in savings. Higher net worth or higher-litigation states call for a personal umbrella policy on top.

Match your UM and UIM limits to your liability limits where state law and your carrier allow. Roughly one in three drivers on the road is either uninsured or underinsured, and your own policy is what protects you when you’re hit by one of them.

The cost difference between minimum coverage and meaningful coverage is usually a few hundred dollars per year. The cost difference between meaningful coverage and a six-figure judgment with no insurance to pay it is everything you’ve worked to build.