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If there were one right answer to the question “How much liability coverage do I need when I get car insurance?” life would be a lot easier. But as with any important financial decision, the right amount of liability coverage depends on your specific circumstances — and your desire for peace of mind.

Here’s how to nail down the “right” amount of liability insurance for yourself.

Understand liability coverage

Liability coverage pays for the treatment of injuries and the repair of damage you cause to others in a car accident. It won’t pay for repairs to your vehicle or treatment of injuries that you or your passengers suffer. But it’s crucial because it protects your assets from a lawsuit — assuming you have enough coverage.

Liability insurance limits are generally expressed as three numbers, referring to the amounts your coverage will pay for bodily injury and property damage if you cause an accident. If you have 100/300/50 liability coverage, that means your policy will pay up to:

  • $100,000 for injuries to one person
  • $300,000 for injuries to multiple people
  • $50,000 for property damage

Know that state requirements probably aren’t enough

Georgia requires drivers to buy coverage for $25,000 in injuries per person and $50,000 per accident, plus $25,000 in property damage. But state requirements aren’t coverage recommendations — they’re just the minimum you must buy to drive legally.

Judge how much liability insurance to buy

In 2013, less than 1% of drivers with liability insurance had a bodily claim against them, and 3.6% had a property damage claim against them. Among those claims, the bodily injury claims averaged $15,443 and property damage claims averaged $3,231, according to ISO, a company that provides information about insurance risk.

Sounds like your chances of needing liability coverage are small, right? But the point of car insurance is to protect you against an unlikely event that could devastate you financially.

You might not need much liability protection if you’re young and have no assets to protect — in other words, if suing you would be pointless. But if you own a home and have savings, you need a policy that covers their value.

Injuries and property damage from a car accident can easily eclipse state minimums. Imagine how much liability you’d need if you caused a multi-car pileup with major injuries.

So how much liability coverage should you buy?

Middle-income families often buy $100,000 worth of bodily injury coverage per person and $300,000 per accident, plus $100,000 in property damage coverage.

Insurance companies and state regulators generally provide some variation on this advice from the National Association of Insurance Commissioners: “You should purchase the most coverage you can reasonably afford to protect your financial security.”

First, decide how much auto insurance you can afford. Then decide how much you stand to lose in a lawsuit. Put simply, how much are your savings, investments, car and home worth?

Farmers offers a maximum amount of liability at $500,000 per accident. If your assets require more protection, you could also consider umbrella coverage, which covers liability above the limits of your auto or homeowners insurance policies.

Increasing liability limits when you get car insurance may cost less than you think.


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