You need enough liability insurance to cover your net worth. Having coverage equal to the value of the assets you own and all the money you have, minus your debt, protects you financially in case of a serious car accident.
When to Carry Only the Minimum Liability Coverage
Although almost every state requires drivers to carry liability insurance, the minimum coverage is not always enough to cover the cost of an accident. It’s always best to carry as much liability coverage as you can afford, especially if you have a high net worth. You can generally get away with a lower property damage liability limit if you want to save, however, since property damage liability claims are usually less expensive than bodily injury liability claims.... read full answer
If you don’t have many assets or think the risk is worth it, you might be comfortable with carrying only the minimum coverage. But no matter what, make sure you’re carrying enough insurance to comply with state law and avoid paying fines for driving uninsured.
Liability Limits on Auto Insurance
Liability limits on auto insurance are the maximum amount that your insurance company will pay for injuries and property damage in accidents that you cause. Liability limits are typically written as three numbers divided by slashes.
For example, Arizona’s liability coverage requirements are 50/30/10. That means drivers need to carry $50,000 in bodily injury liability coverage per person, $30,000 in bodily injury liability coverage per accident, and $10,000 in property damage liability coverage overall.
Why You Need More Liability Insurance Than the State Minimum
Your insurance company will never pay for anything beyond the limits of your policy. Using the Arizona example, if you cause an accident that leads to $70,000 in medical bills for the other driver, you will have to pay for $40,000 if you are only carrying the minimum insurance required. And if you can’t afford to pay the full amount, the other driver can sue, and you can have your assets seized or wages garnished to cover the remainder.show less