How Much Car Insurance Do I Really Need? Coverage Limits Explained (2026)

Look, I get it. You’re staring at that insurance quote, seeing all these numbers and acronyms, and your brain is pretty much shut down right now. You just want to know: What’s the minimum I have to get or How Much Car Insurance Do I Really Need, and what’s the smart thing to actually buy?

Real talk: Most people are under-insured without even realizing it.

I’ve been helping people navigate car insurance for years, and the number-one mistake I see? Drivers picking the bare minimum coverage because it’s cheap. Then, when something happens—and in the insurance world, something always happens eventually—they’re absolutely screwed.

Last month, someone messaged me saying they got hit at a red light by a drunk driver. The other person’s damages alone came to $45,000. The person who hit them had the absolute minimum liability insurance. You can probably guess how this story ends, and it’s not pretty.

So let’s break this down the way I’d explain it to my own family.

When your insurance agent or that confusing quote says something like 100/300/100, they’re not speaking in code to annoy you. Let me decode it:

The first number is liability coverage per person—so if you hit someone and they get injured, your insurance covers up to $100,000 for that one person. The second number is the total per accident. So if you hit a car with three people in it and they’re all injured, your insurance covers up to $300,000 for all of them combined. The third number is property damage—how much your insurance pays if you wreck someone else’s car or property.

Think of it like a bucket. Once it’s empty, you’re paying out of pocket. Literally from your bank account. For medical bills, lost wages, vehicle repair, everything.

And here’s the thing nobody wants to talk about: Most states’ minimum requirements are really, truly inadequate.

What’s Your State Minimum? And Why It’s Probably Not Enough

Every state has a minimum you must carry. Most states sit around $25,000 per person, $50,000 per accident, and $25,000 for property damage. Some are lower—California’s is just $15,000/$30,000/$5,000. Others are higher, like Michigan at $50,000/$100,000/$10,000.​

But here’s the hard truth: State minimums exist mainly because states have to draw a line somewhere. They don’t exist because they’re enough to actually protect you.

Why? Because a moderate car accident costs way more than you think. According to data analyzed by the National Safety Council, even a non-fatal injury accident averages around $40,000 in total costs. That includes medical bills, lost wages, repair costs, and all the other stuff that piles up. Hit someone with serious injuries? You’re looking at $100,000+ pretty easily.​

If you have your state’s minimum and you’re responsible for a $100,000 accident, congratulations—you’re personally liable for the remaining $75,000 (or however much is left after your coverage maxes out). They can sue you. They can garnish your wages. They can take your assets.

What Coverage Should You Actually Get? (The Smart Approach)

Okay, so state minimum bad. What’s good? Here’s what insurance professionals actually recommend:

For most people: $100,000/$300,000/$100,000

This is called “100/300/100” coverage. It’s a solid balance between protection and reasonable premiums. It covers the vast majority of realistic accident scenarios without pricing you out of insurance altogether.​

If you have significant assets or a higher income: $250,000/$500,000/$250,000

This level of coverage protects your bank account, your house, your future paycheck—basically, your life. If you own a home, have retirement savings, or expect to make decent money in the future, this is where I’d lean.​

You might be thinking, “But that sounds expensive!” Honestly? It often isn’t as bad as you think. The jump from $25,000/$50,000/$25,000 to $100,000/$300,000/$100,000 usually adds only $20–$40 per month to your premium. That’s less than a decent coffee subscription. And the jump to $250k/$500k/$250k might be another $15–$25 monthly.​

Let’s flip it: That extra $30 a month costs you $360 a year. A single moderate accident liability claim could cost you $50,000 or more. You do the math.

🔥 Young Driver Insurance 2026 Guide

Two Key Things Everyone Forgets (But Really Shouldn’t)

1. Uninsured/Under-insured Motorist Coverage

Here’s something that keeps me up at night: About 1 in 8 drivers on the road doesn’t have insurance. That’s roughly 29 million uninsured drivers in the United States.​

So let’s say an uninsured driver plows into you. Now what? Your liability coverage? That’s for people you hurt. This is when you need uninsured motorist coverage (UM coverage).

This is the coverage that makes your insurance pay your medical bills and car damage when someone else’s negligence hits you and they don’t have insurance (or don’t have enough). It’s honestly one of the smartest, cheapest add-ons you can get—usually only $3–6 per month.​

And here’s the thing: Nearly half of all U.S. states require it anyway. So you might already have it and just not realize.​

Bottom line: Get it. The cost is tiny. The protection is huge.

2. Comprehensive and Collision Coverage

Okay, so liability covers other people. But what about your own car?

That’s where collision (covers accidents) and comprehensive (covers theft, weather, vandalism, falling trees—basically everything else) come in.

Now, if you own your car outright, this is optional. But here’s the thing: My cousin in Florida had a car worth $8,000. A tree fell on it during a storm. He didn’t have comprehensive. Guess who got stuck with an $8,000 repair bill? Yep.

If you’re financing or leasing, you have no choice anyway. Your lender will require full coverage (collision + comprehensive) to protect their investment. If you try to drop it, they can technically force-place insurance on your vehicle, which is usually way more expensive.​

If you own your car outright, ask yourself: Could I afford to replace it if it got totaled tomorrow? If the answer is no, keep comprehensive and collision. If you can shrug off the loss, you have more wiggle room.

Here’s a helpful rule: If your annual collision premium is more than 10% of your car’s value, you might want to drop it. So if your car’s worth $3,000 and collision costs $350/year, it might not be worth it anymore.​

Real-World Scenarios (So You Know What You’re Actually Risking)

Scenario 1: You Hit Someone and It’s Your Fault

You rear-end someone at a stoplight. The driver’s fine but dizzy. They go to the hospital for tests—$5,000. Their car needs $8,000 in repairs. Their medical bills total $12,000 by the time it’s all done.

Your liability coverage kicks in: $25,000.

With state minimum (25/50/25): You’re covered. Close call though.

With 100/300/100: You’re covered comfortably, and you’re still protected if someone sues you for additional damages.

Scenario 2: A Drunk Driver Hits You

You’re completely stopped at a red light. A drunk driver doing 45 mph hits you from behind. You’ve got whiplash, a fractured rib, and your car is totaled.

The drunk driver’s car insurance: $25,000 liability (state minimum).

The actual costs: $15,000 medical bills, $10,000 lost wages during recovery, $12,000 car repair (or replacement).

That’s $37,000 total. They only have $25,000 coverage.

If you have uninsured/underinsured motorist coverage: Your insurance pays the difference (up to your UM limit). You’re protected.

If you don’t have UM coverage: You’re stuck trying to sue the drunk driver personally for the remaining $12,000. Good luck collecting from someone who just got a DUI.

Scenario 3: Your Car Gets Stolen

Your car disappears from your apartment parking lot on a Tuesday night. The police find nothing.

With only liability coverage: Your car is gone. You’re out the full value of the vehicle. You’re also stuck taking the bus or buying another car out of pocket.

With comprehensive coverage: Your insurance covers the loss (minus your deductible). You get money to buy a replacement.

See the pattern?

Quick Comparison: What Different Coverage Levels Look Like

Coverage Level	Liability	Uninsured Motorist	Collision	Comprehensive	Best For
Bare Minimum	State minimum (varies)	Not included	Not included	Not included	Owned cars with little value; low-risk drivers
Good Protection	$100/$300/$100	Yes ($100/$300/$100)	Yes ($500 ded.)	Yes ($500 ded.)	Most drivers; financed cars; anyone with assets
Excellent Protection	$250/$500/$250	Yes ($250/$500/$250)	Yes ($250 ded.)	Yes ($250 ded.)	Higher income; significant assets; frequent drivers

How to Decide Your Sweet Spot (Three Simple Questions)

The Financed Car Situation (You Don’t Actually Have a Choice)

If you financed your car through a bank or dealership, your lender included a little clause in your loan agreement: You must carry full coverage (collision + comprehensive) at all times.

They didn’t do this to be mean. They did it because they legally own part of your car until you pay it off. If it gets totaled and you only have liability coverage, they get nothing. That’s not acceptable to them.

Try to drop comprehensive or collision without permission? They can:

• Technically declare your loan in default
• Force you into their own insurance (which costs way more)
• Repossess your vehicle

So basically, you don’t have a choice. You’re getting full coverage whether you like it or not. The good news? At least you’re protected.​

Once your car is paid off, you have options again. At that point, you can drop collision and comprehensive if you want (though I’d still recommend at least keeping comprehensive).

Why People Make Terrible Coverage Decisions (And How to Avoid It)

Mistake #1: Choosing Minimum Coverage to Save $20/Month

Someone saves $240 a year by choosing the cheapest coverage. Then one accident happens, and they’re suddenly $50,000 in debt. Folks, that’s not saving money. That’s gambling with your future.

Mistake #2: Not Getting Uninsured Motorist Coverage

This is optional in many states, so people skip it to save $5 a month. Then they get hit by an uninsured driver, and suddenly they’re wishing they’d spent $60 a year on protection.

Mistake #3: Dropping Comprehensive Because “It Seems Unlikely”

Sure, your car probably won’t get stolen or hit by a falling branch. But your car also probably won’t be in an accident either. But you’re still getting liability, right? Same logic applies.

Mistake #4: Not Reviewing Coverage When Life Changes

You got married. You bought a house. You got promoted. Your insurance needs changed, but you’re still rocking a policy from 2018 with minimums that made sense when you had zero assets.

Real talk: Revisit your coverage whenever something big happens in your life.

Your Action Plan Right Now

Step 1: Find Your State’s Minimum

Google “car insurance minimum [your state].” You need to know the baseline.

Step 2: Assess Your Assets

Write down: house value (if any), savings, investments, annual income. The bigger these numbers, the higher your liability limits should be.

Step 3: Check Your Current Policy

Pull up your current insurance declaration page. What are you actually carrying right now? Is it matching your needs, or are you underinsured?

Step 4: Get Quotes with Better Coverage

Contact your current insurer and ask for a quote at $100/$300/$100 (or higher, if you have significant assets). Then shop around—get quotes from 2–3 other companies. The difference can be substantial.

Step 5: Make Sure You Have UM Coverage

Specifically ask your agent: “Do I have uninsured motorist coverage?” If you don’t, add it. It’s cheap and essential.

Step 6: Review Every Two Years

Your life changes. Your coverage should too.

Choosing car insurance coverage isn’t about finding the absolute cheapest option. It’s about finding the right balance between what protects you and what you can actually afford to pay.

Your state’s minimum? That’s the legal floor. It’s not a target to aim for—it’s the bare minimum to avoid a ticket.

The sweet spot for most people sits around $100,000 per person in liability coverage. Add in uninsured motorist protection, and you’ve got a solid safety net for most real-world accidents. If you’ve got a house or significant savings, go higher.

And remember: Insurance is boring until you need it. Then it’s the best money you ever spent.