The Cheapest Policy Is Cheap Because It Covers Almost Nothing

Most drivers carry their state minimum, and most of them chose it the same way. It was the number the agent quoted when they bought their first car, and nobody revisited it afterward.

Here is the problem with that number. State minimums were set decades ago and have not kept pace with medical costs or vehicle prices.

The typical minimum is written 25/50/25. The average bodily injury claim already exceeds twenty five thousand dollars, which means the most common minimum in the country is below the average claim before anything unusual happens.

And the gap does not stop at the policy limit. Whatever a claim exceeds your coverage by is yours, collectable from savings, home equity, and future wages.

Reading The Three Numbers

Liability limits are written as three figures and each one caps something different.

The first number. Bodily injury coverage per person. On a 100/300/100 policy, that is one hundred thousand dollars for any single injured person.

The second number. Bodily injury coverage per accident, across everyone hurt. Three hundred thousand on the same policy, regardless of how many people are involved.

The third number. Property damage per accident. One hundred thousand for every vehicle, fence, storefront, or utility pole involved.

Two things follow from that structure. A multi vehicle accident tests the second number rather than the first. And a single expensive vehicle can exhaust the third number on its own.

Why 25/50/25 Fails In Practice

Run the minimum against real figures rather than hypotheticals.

Medical costs. The average bodily injury claim sits above twenty five thousand dollars, and the average cost of a hospitalization has been put around eighty one thousand. A single MRI runs into thousands, and disc surgery into tens of thousands.

Vehicle costs. The average new car price is roughly double the twenty five thousand dollar property damage limit typical of minimum coverage. Totaling one modern SUV can exhaust that limit by itself.

Which means the minimum is sufficient only for the mildest accidents. Anything involving an ambulance or a newer vehicle passes it.

The Number That Follows You

This is the consequence people do not picture until it happens.

If a claim exceeds your limits, you are personally responsible for the difference. The injured party can pursue you, and a judgment can reach savings, home equity, and future earnings through wage garnishment.

One worked example makes it concrete. A driver carrying 25/50/25 causes an accident with seventy five thousand dollars in injuries and thirty thousand in property damage, a one hundred five thousand dollar claim. The policy pays fifty thousand. The driver owes fifty five thousand personally.

That figure does not disappear because it is inconvenient. It becomes a debt attached to someone who was one bad afternoon away from an ordinary life.

What Higher Limits Actually Cost

The part that makes this decision easy, and the reason the minimum is so hard to defend.

The premium difference between 25/50/25 and 100/300/100 is commonly cited at fifty to one hundred fifty dollars a year, for four times the protection.

Broader analyses put the move from state minimum to 250/500/100 at roughly two hundred to four hundred dollars a year, increasing protection by five to ten times on the largest financial risk most households carry.

Liability is among the cheapest coverage on an auto policy. Collision and comprehensive cost more and protect a depreciating car. Liability costs less and protects everything you own.

That is the whole argument, and it is why raising liability while trimming elsewhere is frequently the best trade available on a policy.

Match The Limits To What You Own

The cleanest way to choose a number rather than guessing at one.

Add up your assets, including home equity, retirement accounts, savings, and investments. Subtract your debts. Buy enough coverage to protect what remains from a judgment.

Guidelines commonly offered look like this.

A refinement worth knowing. Liability limits should equal or exceed your liquid and semi liquid net worth, because that is the amount actually exposed to a judgment.

Minimums Are Moving, Slowly

Several states have raised their floors recently, which tells you something about how outdated the old ones were.

• California raised its minimum from 15/30/5 to 30/60/15 effective January, the first increase since 1967.

• Massachusetts moved from 20/40/5 to 25/50/30 effective July, the first change since 1988.

• North Carolina increased from 30/60/25 to 50/100/50 effective July.

• New Jersey increased to 35/70/25 in January 2026.

Six decades between increases in one case. That is the clearest evidence available that a state minimum reflects legislative history rather than current costs.

Some states already sit closer to sensible. Alaska, Maine, Michigan, North Carolina, and Virginia require fifty thousand per person and one hundred thousand per accident.

Florida remains the outlier, requiring no bodily injury coverage at all and only ten thousand each in personal injury protection and property damage.

Uninsured Motorist Coverage Belongs In The Same Conversation

A related decision that costs very little and gets skipped.

Roughly one in three drivers were uninsured or underinsured according to research covering 2023, which means the driver who hits you is meaningfully likely to be unable to pay for what they did.

Uninsured and underinsured motorist coverage is what responds in that situation, and it uses the same three number format as liability.

Set it at least equal to your liability limits. The logic is symmetrical. Your liability limits reflect how much harm you could cause. Your uninsured motorist limits reflect how much harm someone could do to you.

Most carriers will not write uninsured motorist coverage above your liability limits, which is another reason to raise liability first.

Where An Umbrella Policy Fits

For households above a certain asset level, higher auto limits stop being enough on their own.

An umbrella policy sits above your auto and home or renters coverage and pays after those limits are exhausted, typically starting at one million dollars.

Two practical points.

It requires underlying limits. Carriers commonly require 250/500/100 on auto, or similar, before they will attach an umbrella. Raising auto liability is therefore the first step rather than an alternative.

You must maintain those limits. Dropping your auto liability later can void umbrella claims, because the policy assumes a layer beneath it that no longer exists.

For most middle income households, 250/500/100 paired with an umbrella is the structure frequently recommended, and the combined cost is modest relative to what it protects.

A Combined Single Limit Is Another Route

An option some carriers offer that simplifies the arithmetic.

Rather than three separate caps, a combined single limit provides one pool covering both bodily injury and property damage for an accident.

The advantage is flexibility. A five hundred thousand dollar combined limit can absorb a four hundred thousand dollar injury claim and a one hundred thousand dollar property claim without either sublimit constraining the payout.

Ask whether your carrier offers it and how the pricing compares. For drivers whose exposure is uneven, it can be a better structure than split limits at the same total.

What To Do In Fifteen Minutes

Find your current limits. They are on your declarations page, written as three numbers. If you cannot recall them, that is itself an answer.

Add up your exposed assets. Home equity, savings, retirement accounts, investments, minus debts.

Get a quote at higher limits. Ask specifically what 100/300/100 and 250/500/100 would cost against your current figure. The gap is usually smaller than expected.

Match your uninsured motorist coverage. Set it equal to your new liability limits.

Ask about an umbrella if your assets pass a few hundred thousand dollars, and confirm what underlying limits it requires.