Guide
Choosing coverage limits is a decision, not a formula. The state minimum answers one question, "what is the least amount of coverage I can legally buy?", and no more. The right limits for your household answer a different question about how much risk you can absorb yourself, what you are protecting, and what higher tiers actually cost. This guide separates those two questions, walks through the coverages in order, and gives you a way to test the incremental price of each tier without adopting anyone else's rule of thumb.
Every state that requires auto insurance publishes a minimum liability limit. Texas, as a worked example, requires 30/60/25 under Texas Transportation Code § 601.072 (effective January 1, 2011): $30,000 per injured person / $60,000 per accident for bodily injury, and $25,000 per accident for property damage[3]. Other states publish different numbers. State minimums vary and change; your state's current rule lives with your state insurance department, and our state guides collect them by state.
The state minimum answers one question directly: what is the least amount of coverage the state will accept? It does not answer whether that amount is enough for your household. The 2024 average auto-liability claim for bodily injury, per Triple-I, was $28,278, and the average for property damage was $6,770[2]. Those are averages, not ceilings. A single severe injury or a multi-vehicle crash can exhaust a state-minimum policy on its own, and amounts above the policy limit are generally the consumer's personal responsibility.
The reasoning framework below (called out again inside the Playbook) is deliberately structured so the two questions never merge. Answer the legal floor first, then work the personal risk question on its own.
Method
Work through these eight steps in order. Each step names the specific limit you are choosing, points to the frozen Coverage guide that owns that coverage's mechanics, and tells you how to test the incremental cost of the next tier. Do the whole sequence once when you first structure a policy, and re-check the highest- stake limits (liability, UM/UIM) at every renewal.
1. Look up your state legal floor.
Use your state insurance department or DMV; state minimums vary and change. Texas, as an example, requires 30/60/25 under Texas Transportation Code § 601.072[3]. Confirm the format (split limits vs combined single limit) and any additional required coverages your state adds (PIP, UM/UIM). The state minimum is a compliance answer, not a planning answer.
Treating the state minimum as a recommendation is the single most common way households under-insure the driver-liability side of the policy. It is a floor.
2. Choose bodily injury liability limits.
Bodily injury liability pays other people when you are at fault, up to the policy limit. Consider what the highest realistic bodily injury claim against your household could be, and whether an amount above your limit could reach your assets and future income. Coverage mechanics live in our liability coverage guide, which uses the same legal-floor vs personal-risk frame.
3. Choose property damage liability limits.
Property damage liability pays for damage you cause to other people's property (their vehicle, fences, walls, buildings). The Triple-I 2024 average was $6,770[2], but a totaled newer vehicle plus damage to nearby property can substantially exceed the average. Test whether moving from the state minimum to a higher property-damage tier meaningfully changes the premium in your quotes; the incremental cost is often smaller than shoppers expect.
4. Choose UM/UIM limits.
Uninsured and underinsured motorist coverage pay you when the at-fault driver has no insurance or not enough. In many states you can pick your UM/UIM limits independently of your liability limits; some states default UM/UIM to your liability tier and require a written rejection or election otherwise. Availability and structure are state- specific; see our UM/UIM coverage guide for the mechanics.
If a large share of drivers around you carry state minimums (or drive uninsured), UM/UIM is doing a bigger job for you than the liability side. Do not set UM/UIM lower than your liability without a reason.
5. Choose PIP or MedPay where applicable.
In states that require or offer personal injury protection (PIP), pick a limit that fits your medical exposure alongside your health insurance; in states that offer medical payments (MedPay), weigh the smaller MedPay ceiling against your household's coordination-of-benefits with health coverage. The mechanics live in our PIP coverage guide. State availability and required amounts vary; the guide tells you where to look.
6. Set deductibles for collision and comprehensive.
Deductibles are not limits; they are what you pay before the insurer pays, on your own first-party physical-damage claims. A higher deductible usually lowers the premium and raises your out-of-pocket cost on a claim. Coverage mechanics live in the collision coverage guide and the comprehensive coverage guide. Match the deductible to what you could comfortably pay out of pocket on a claim tomorrow, not what looks best on the quote page.
7. Check contract-imposed floors (lender, lessor, umbrella).
Contract minimums can override your personal reasoning. If your vehicle is financed or leased, the loan or lease contract typically requires collision and comprehensive and can specify a minimum liability tier. If you carry (or plan to carry) a personal umbrella policy, the umbrella carrier publishes a written schedule of required underlying auto liability limits before it will issue; publisher summaries of III guidance put an industry-common minimum around $250,000 per person / $500,000 per accident bodily injury and $100,000 property damage[5], but the specific requirement is the umbrella carrier's to publish.
A personal decision to carry the state minimum can be blocked by a lender contract or by an umbrella underlying-limit schedule. Read the contract before you commit to a limit tier you plan to keep.
8. Test the incremental cost at identical inputs.
Get quotes at more than one limit tier from more than one insurer, holding every other input constant. NAIC states directly that when asking for price quotations, it is crucial that you provide the same information to each agent or company[1]. The identical-inputs method lives in Guide #2: how to compare car insurance. The reason to do this is concrete: the incremental premium between state minimum and a higher tier is often smaller than shoppers assume, and comparing insurers at the same tier is the only way to test that concretely.
If you are shopping specifically because of an accident, DUI, license issue, or coverage lapse, this generic limit-selection framework is not the right starting point. The situation-specific view lives in the situations family; the general claims process lives in Guide #5.
The legal floor is a fixed number for a given state and year. The personal risk limit is a judgment. Rather than pick a single formula, the useful way to reason about each limit on the policy is to answer five questions and let the answers move you up or down the tier list.
Two numbers on your declarations page describe different things. Confusing them makes limit selection harder than it needs to be.
Raising a deductible generally lowers the premium and raises your out-of-pocket cost on the next claim. Raising a limit generally raises the premium and raises the ceiling on what the insurer will pay. They pull in different directions and answer different questions. For a document-level view of where these numbers actually live on the policy, see Guide #7: how to read an auto insurance policy.
A personal umbrella policy provides an extra layer of personal liability coverage on top of the underlying auto policy's liability limits and (typically) the underlying homeowners or renters policy's liability limits. Because the umbrella sits on top, the umbrella carrier requires the underlying policies to carry specific minimum liability limits before the umbrella will attach. Publisher summaries of Triple-I guidance describe an industry-common minimum around $250,000 per person / $500,000 per accident bodily injury and $100,000 property damage on the auto policy before an umbrella carrier will issue a $1 million umbrella[5].
This is directional context, not a universal rule. Umbrella carriers set their own underlying-limit schedules; some require higher underlying limits than the industry-common numbers, and some require additional coverages (for example, UM/UIM at a specific tier). If you carry an umbrella or plan to, request the specific carrier's written schedule and structure your underlying limits to match it. Umbrella coverage is a separate product with its own conditions; this guide is not a substitute for reading the umbrella policy.
Loans and leases add contract-imposed requirements on top of state law. The lender or lessor is not your insurer, but they typically require you to carry specific coverages (usually collision and comprehensive) and can specify a minimum liability tier while you owe money on or lease the vehicle. Read the contract before you set limits below what it requires.
For the interaction between the ACV settlement on a total loss and any remaining loan balance, see our gap coverage guide. Gap addresses a specific shortfall, but it does not change what limits you should carry on the underlying policy.
Limit choices are worth revisiting at every renewal and at major life events (moving to a new state, buying a new vehicle, adding a driver, adding assets you would want to protect from a large liability claim, adding or dropping an umbrella policy). The short list:
Ready to test the incremental cost of the next liability tier at identical inputs across insurers?
Compare car insurance quotesThere is no universal answer. Answer the state legal floor question first (state minimums vary and are published by your state insurance department; Texas publishes 30/60/25 under Texas Transportation Code § 601.072[3]). Then work the personal risk question separately: what losses could reach you, what could you absorb yourself, what are you protecting, what does the next tier actually cost at identical inputs, and do any contracts (umbrella, loan, lease) require higher underlying limits[5].
A specific split can be right for one household and wrong for another. Different states, different asset profiles, and different contract requirements produce different answers. Rather than adopt a specific split from a general recommendation, test the incremental cost of a few tiers at identical inputs across insurers and see what fits your household.
Only as directional evidence. Triple-I's 2024 averages for auto-liability claims were $28,278 for bodily injury and $6,770 for property damage[2]. Averages are not ceilings; individual claims can far exceed the average, and the state minimum can be exhausted by a single severe crash. Use averages to understand direction, not to set a specific tier.
UM/UIM protects you against other drivers who have inadequate coverage. In states that let you pick UM/UIM independently, setting UM/UIM below your liability tier means you are choosing to accept more risk from other drivers than from your own liability exposure. That can be a defensible choice or not; make it deliberately rather than by default. Mechanics live in our UM/UIM coverage guide.
This guide does not decide that for you. An umbrella policy is a separate product that sits on top of your underlying policies. Umbrella carriers publish written underlying-limit schedules; publisher summaries of Triple-I guidance describe an industry-common minimum around $250,000 per person / $500,000 per accident bodily injury and $100,000 property damage on the auto policy[5]. If you carry an umbrella or plan to, your underlying auto liability tier is not fully your choice; the umbrella schedule sets a floor.
No. A deductible is what you pay before the insurer pays, on a covered first-party claim; a limit is the ceiling on what the insurer will pay on a covered claim. Raising a deductible generally lowers the premium and raises your out-of-pocket cost on the next claim; raising a limit generally raises the premium and raises the ceiling on what the insurer will pay. Different levers, different questions.
Yes, on the low side. The loan or lease contract typically requires collision and comprehensive and can specify a minimum liability tier while you owe money on or lease the vehicle. Read the contract before setting limits below what it requires. See our gap coverage guide for how the ACV settlement interacts with the loan balance on a total loss.
At every renewal, and at major life events (moving to a new state, buying a vehicle, adding a driver, adding or dropping an umbrella, adding assets you would want to protect from a large liability claim). The renewal notice arrives with a new declarations page; use it as a checkpoint to test the incremental cost of one tier up at identical inputs[1].
Regulator-authored consumer guidance for auto insurance, including the identical-inputs discipline at quote time and the recommendation to verify the insurer and agent with your state insurance department.
Triple-I's most recent published averages for auto-liability claims: property damage $6,770 and bodily injury $28,278 in 2024. Cited on this page as directional evidence that even average claim sizes can exhaust a state-minimum policy.
Worked-example state statute used elsewhere on this site. Cited here to show a concrete state legal floor without implying that 30/60/25 is a national number.
Where to look up an insurer's market-share-adjusted complaint index by state. Useful once a preferred limit tier is priced across several carriers.
Publisher secondary reporting of III guidance on umbrella underlying requirements. Individual umbrella carriers publish their own written underlying-limit schedules; the $250/500/100 figure is an industry-common minimum, not a universal rule. Direct-URL access to III's umbrella page was not available during audit; treat the number as directional and request the specific umbrella carrier's own schedule before relying on it.
NAIC anchors the identical-inputs discipline at quote time; Triple-I's 2024 average auto-liability claim sizes anchor the "averages are not ceilings" framing; Texas Transportation Code § 601.072 anchors the worked state-legal-floor example. Umbrella underlying- limit context is publisher-summarised Triple-I guidance, labelled Tier 3, because direct-URL access to Triple-I's umbrella page was not available during audit; individual umbrella carriers publish their own written underlying- limit schedules and those schedules are what a consumer should request before relying on any published number. This page publishes no universal recommended split, no net-worth-based formula, and no personalized legal or financial advice. Last reviewed .