Nearly every state requires drivers to carry liability insurance, expressed as three numbers, such as 25/50/25. They are limits in thousands of dollars.
| Figure | Covers |
|---|---|
| First number | Bodily injury liability per person |
| Second number | Bodily injury liability per accident, all people combined |
| Third number | Property damage liability per accident |
Why the minimum is often inadequate
The property damage figure is the easiest to illustrate. A minimum of $25,000 sounds substantial until you consider that many new vehicles cost more than that, and a single accident can involve more than one. Exceed your limit and the balance is your personal liability, recoverable from your assets and future income.
Bodily injury limits run out faster still. A single serious injury can generate medical costs well beyond a $25,000 or $50,000 limit, and those claims do not stop at your policy limit.
The economics of raising limits
Liability coverage is comparatively cheap to increase, because severe claims are rare. Moving from state minimums to substantially higher limits typically costs far less than doubling the premium, and it is usually the best value in the entire policy.
An umbrella policy sits above your auto and home liability limits and adds coverage in the millions for a modest annual premium. It generally requires you to carry higher-than-minimum underlying limits first.
Uninsured and underinsured motorist
If minimum limits are inadequate, the natural question is what happens when the driver who hits you carries them, or carries nothing at all. That is what uninsured and underinsured motorist coverage is for, and it is the coverage most often skipped by people trying to economize.
Some states require it, some require insurers to offer it and let you decline in writing, and some leave it optional. It is usually inexpensive.
State regulators publish the current minimums and explain how the figures work. The Texas Department of Insurance's auto insurance guide is a clear example of the format most states use.
No-fault states
A dozen or so states operate no-fault systems, where your own personal injury protection pays your medical costs regardless of who caused the accident, and your ability to sue the other driver is limited unless injuries exceed a threshold. In those states, PIP is mandatory and the coverage structure differs meaningfully from the rest of the country.
Requirements are set state by state and change; your state insurance department publishes the current minimums, and the NAIC directory links to each one.