How to Pick Auto Insurance Coverage Amounts

Choose liability, collision, and comprehensive coverage amounts that protect your assets without overpaying for unnecessary protection.

  1. Calculate your liability coverage floor. Add up your net worth (assets minus debts) plus two years of your income. This number represents what you could lose in a lawsuit, so your liability coverage should meet or exceed it. Most states require minimums around $25,000-$50,000, but that won't protect someone with $100,000 in assets and a $60,000 salary.
  2. Choose bodily injury and property damage limits. Pick bodily injury coverage of at least $100,000 per person and $300,000 per accident if your calculation from Step 1 suggests it. Property damage should be at least $50,000 since luxury cars and commercial vehicles cost more to replace. Going from state minimums to $100,000/$300,000/$50,000 typically costs $200-$400 more per year.
  3. Decide on collision and comprehensive coverage. Skip these if your car is worth less than $3,000 or if the annual premium plus deductible exceeds 10% of the car's value. For a car worth $8,000, paying $1,200 per year with a $1,000 deductible means you're paying $2,200 to protect $7,000 — often not worth it.
  4. Set your deductible amounts. Choose the highest deductible you can pay out-of-pocket without financial stress. Moving from a $500 to $1,000 deductible typically saves 15-30% on collision and comprehensive premiums. A $1,000 deductible that saves you $300 per year pays for itself in about three years even if you file one claim.
  5. Consider uninsured motorist coverage. Buy uninsured/underinsured motorist coverage equal to your liability limits, especially if you live in a state where many drivers carry only minimum coverage. This protects you when someone hits you but can't pay for your medical bills or car repairs. It typically costs 5-15% of your total premium.
  6. Skip the expensive add-ons. Avoid rental car coverage if you have other transportation options or credit cards that include rental coverage. Gap insurance only makes sense if you owe more than your car is worth. Extended warranties and roadside assistance often duplicate coverage you get elsewhere and rarely pay for themselves.