Car Insurance Coverage Limits: Explained Simply

Different car insurance coverage limits work by offering various amounts of protection based on the amount of car insurance you purchase. When you choose your auto insurance, you must select a specific amount of coverage for each option.

What are car insurance coverage limits? Coverage limits describe the highest amount of money your car insurance company will pay out in the event of an accident. These coverage limits are defined by the policy you’ve purchased, so understanding your car insurance policy is important.

Understanding car insurance definitions is essential when exploring various coverages, ensuring you select the right options for your specific needs and budget.

Read this article to have liability limits explained and learn more about the various auto insurance coverage limits, types of coverage available, etc.

Be sure to enter your ZIP code into our free quote tool to start comparison shopping rates so you have the right coverage type and limits for your needs.

How Car Insurance Coverage Limits Work

What are coverage limits on car insurance? The limits that you choose are the maximum amount of money per accident that your auto insurance company will pay. What is the difference in limits for insurance? The amount you pay for your coverage.

You can increase your limits by speaking to your insurance agent, which will increase your rates.

What are the recommended insurance coverage limits? Read through the next few sections to have general liability insurance limits, minimum auto insurance liability limits, and additional car insurance liability limits  explained.

What are the minimum car insurance limits I must carry?

How do you read a liability limit? What does 25K, 50K, 25K mean? Or 25/50/25? If your liability limits are for 25/50/25, this correlates to:

• $25,000 of bodily injury coverage per person injured in an accident
• $50,000 of total bodily injury coverage per accident
• $25,000 for the property damages.

Your rates will be based on the amount of coverage you select. Each state has set a minimum car coverage limit for the amount of liability auto insurance coverage you must carry. Take a look at this table (which we populated with Insurance Information Institute data) to see the minimum liability auto coverage limits in your state.

State minimum limit requirements

For convenience, we summarized and defined the acronyms and abbreviations in the previous table. Take a look.

Car Insurance Abbreviations: Minimum Liability Coverage Types

Typically, those minimum limits are too low to fully protect you. So what auto liability limits should I carry?

The real trick is choosing the right amount of coverage so that the coverage limits are enough to cover all of the costs, from medical care to auto repair, without you having to pay anything out-of-pocket (besides your deductible).

The reason this can be tricky is that there is no real consensus on how much coverage you need to have.

Some insurance agents will recommend you purchase as much coverage as you can afford, while others will suggest specific amounts based on your driving history and the cost of your vehicle.

Many industry experts recommend liability amounts of 100/300/100 to adequately protect you in the event you cause an accident that results in significant bodily harm and property damage.

In addition to liability limits, no-fault states require that you carry personal injury protection (PIP) in a specific amount to pay for your own medical costs in an accident.

Other coverage options like collision and comprehensive can also be purchased, based on your vehicle.

What types of car insurance coverage are available?

There are a number of base coverage types you can include on your policy, depending on your needs. Read through this section to have basic auto insurance coverage explained.

Liability coverage – There are two types of coverage included in liability.

• Bodily injury – If you are in an accident and do not have enough insurance to cover the other driver’s medical costs you could be sued.
•  Property damage – This coverage will pay for repairs or replacing the other car if it is damaged in the accident.

Collision coverage – This coverage is for accidents when colliding with other cars or structures like buildings or poles. It will cover your own vehicle. Take a look at this video for more.

https://www.youtube.com/watch?v=jFDl_p3gHNk&t=16s

Comprehensive coverage – Comprehensive coverage will pay if your car is damaged by things like hail, fire, or vandalism. Watch this video to learn more.

https://www.youtube.com/watch?v=d3eh4wIuNks&t=11s

Uninsured/ underinsured motorist coverage – This will kick in if you are not at fault in an accident, but the offending party does not have enough insurance to cover your damages. It also covers you in a hit and run situation. Take a minute and watch this video to find out more.

Personal injury protection coverage – Personal injury protection coverage is required by some states. This coverage pays for the medical costs of the policyholder. This is a very important coverage to have if the policyholder does not have health insurance. Want to learn more? Watch this video. (For more information, read our “Car Insurance Policyholder: Explained Simply“).

https://www.youtube.com/watch?v=Nhjaiz6wzCQ&t=23s

As you saw in the previous section, some of this coverage is mandated by law, while other coverage (like collision and comprehensive) is typically voluntary.

The exception to this is if you have a car loan. Most often, lenders require a certain amount of collision and comprehensive coverage be included on your policy under the terms of the loan, as a way to protect their investment until you own the vehicle outright.

What factors should I consider when choosing my car insurance limits?

Wondering how to choose auto insurance coverage limits and amounts? The first thing that you will want to do is to look up the statistics on the average cost in your state.

You can find this information in a number of places but it might be easiest to do a search for accident statistics with your state’s name attached (for example, you can look at accident statistics in New York by going to the New York Department of Motor Vehicles website).

Some sites will break down the costs for different types of accidents, such as accidents with minor injuries, accidents involving multiple vehicles, accidents with serious injuries, and so on.

Once you have found the statistics for your state, choose a level of coverage that will cover the average cost of a serious accident in your area. This will be sufficient for most types of accidents.

If you live in a city with a lot of accidents with serious injuries, you may want to consider increasing your liability coverage.

Read more: Understanding Car Accidents

For collision and comprehensive coverage limits, you want to ensure that you purchase enough coverage limits to cover the full cost of your vehicle.

Collision coverage is the insurance that pays for damages to your vehicle when you cause an accident. Your insurance company will not pay more than the Kelly Blue Book value of your vehicle, so there is no point in carrying more insurance than necessary.

Your comprehensive coverage protects you from costs incurred by damage from natural disasters, vandalism, theft, etc. and the same policy applies, you don’t need any more than the blue book value of your vehicle.

Another thing to consider is your personal financial situation. When you cause an accident, if you live in a tort or at-fault state you can be sued for losses that are incurred in an accident.

There are those individuals who will tell you that if you don’t have a lot of assets to worry about that you shouldn’t be concerned about getting sued.

The truth is that if you are sued and you lose your case (and if you caused the accident, you probably will lose), your future assets could be in jeopardy as well.

If you eventually purchase a house, for example, the people who sued you can petition the court for your home, as well as your car, money you have in the bank, and so on.

You don’t want to risk this; purchase enough liability coverage to cover a serious accident (again, refer to your state’s statistics).

How do I save money on my coverage?

Purchasing higher levels of coverage means that your insurance rate is going to increase. If you purchase comprehensive and/or collision insurance, then you can save money by increasing your deductible amount.

The key to choosing your deductible is selecting one that you can afford. There are several levels to choose from, but to have a real effect on your premium, you should have at least a $1,000 deductible.

If you are cash poor and can’t afford the $1,000 deductible, it is better to pay a higher rate and keep the lower deductible.

In order to save money on your other liability insurance, you are going to have to depend on discounts offered by your insurance carrier.

The discounts offered vary and some insurance companies offer a myriad of discounts while others only offer a couple of different discount options. Take a look at this table to see what we mean.

Car Insurance Discount Availability by Provider

Discount Name
Adaptive Cruise Control	NA	NA	10%	10%	5%	3%	NA	7%	10%	NA
Adaptive Headlights	15%	15%	10%	5%	5%	10%	15%	5%	5%	15%
Anti-lock Brakes	10%	10%	10%	5%	5%	5%	10%	5%	NA	NA
Anti-Theft	10%	NA	NA	23%	20%	25%	20%	15%	NA	NA
Claim Free	35%	10%	15%	26%	15%	10%	15%	15%	23%	12%
Continuous Coverage	NA	10%	10%	NA	15%	15%	10%	10%	15%	5%
Daytime Running Lights	2%	NA	2%	3%	5%	5%	7%	3%	NA	NA
Defensive Driver	10%	10%	NA	10%	10%	5%	10%	5%	10%	3%
Distant Student	35%	15%	30%	30%	20%	10%	20%	20%	7%	NA
Driver's Ed	10%	10%	8%	NA	10%	8%	10%	15%	8%	3%
Driving Device/App	20%	40%	20%	NA	30%	40%	20%	50%	30%	5%
Early Signing	10%	12%	15%	15%	8%	8%	8%	15%	10%	12%
Electronic Stability...	2%	3%	3%	2%	5%	NA	5%	NA	3%	2%
Emergency Deployment	5%	NA	20%	25%	NA	NA	NA	NA	20%	25%
Engaged Couple	10%	10%	5%	NA	5%	10%	5%	NA	NA	10%
Family Legacy	NA	10%	NA	5%	10%	5%	5%	NA	5%	10%
Family Plan	20%	NA	15%	NA	10%	25%	NA	15%	15%	NA
Farm Vehicle	10%	NA	10%	NA	10%	5%	NA	5%	10%	NA
Fast 5	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA
Federal Employee	13%	15%	NA	12%	10%	16%	NA	15%	NA	NA
Forward Collision Warning	5%	10%	5%	10%	5%	NA	5%	5%	5%	10%
Full Payment	10%	10%	8%	NA	$50	8%	10%	NA	8%	NA
Further Education	NA	NA	NA	NA	10%	15%	NA	NA	NA	NA
Garaging/Storing	NA	NA	NA	NA	NA	NA	NA	NA	NA	90%
Good Credit	10%	NA	5%	10%	5%	NA	10%	NA	10%	NA
Good Student	20%	23%	NA	15%	23%	10%	8%	25%	8%	3%
Green Vehicle	10%	NA	5%	NA	10%	NA	NA	10%	10%	NA
Homeowner	3%	3%	5%	NA	5%	5%	NA	3%	5%	NA
Lane Departure Warning	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA
Low Mileage	30%	30%	25%	25%	30%	25%	NA	25%	30%	25%
Loyalty	5%	15%	5%	NA	15%	5%	15%	15%	5%	NA
Married	5%	NA	5%	NA	NA	NA	5%	NA	NA	NA
Membership/Group	NA	7%	NA	NA	10%	7%	NA	NA	NA	7%
Military	NA	NA	15%	15%	4%	10%	NA	NA	NA	30%
Military Garaging	NA	NA	NA	NA	NA	NA	NA	NA	NA	15%
Multiple Drivers	25%	20%	20%	NA	NA	25%	NA	NA	25%	NA
Multiple Policies	10%	29%	20%	10%	20%	10%	12%	17%	13%	NA
Multiple Vehicles	NA	10%	8%	25%	10%	20%	10%	20%	8%	NA
New Address	NA	5%	NA	NA	5%	5%	NA	5%	NA	NA
New Customer/New Plan	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA
New Graduate	5%	15%	10%	NA	5%	15%	10%	5%	15%	10%
New Vehicle	30%	NA	30%	15%	40%	NA	40%	10%	12%	NA
Newly Licensed	NA	NA	NA	NA	5%	NA	NA	NA	NA	NA
Newlyweds	10%	NA	5%	5%	5%	NA	10%	NA	10%	NA
Non-Smoker/Non-Drinker	NA	NA	10%	NA	10%	10%	NA	NA	NA	10%
Occasional Operator	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA
Occupation	NA	NA	NA	NA	10%	15%	NA	NA	NA	NA
On-Time Payments	5%	10%	NA	10%	10%	15%	15%	NA	15%	NA
Online Shopper	10%	NA	NA	NA	10%	NA	7%	NA	10%	NA
Paperless Documents	10%	5%	NA	5%	5%	5%	$50	10%	5%	10%
Paperless/Auto Billing	5%	5%	NA	NA	3%	$30	NA	$20	3%	3%
Passive Restraint	30%	30%	NA	40%	NA	20%	NA	40%	NA	NA
Recent Retirees	NA	NA	NA	NA	4%	NA	NA	NA	NA	NA
Renter	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA
Roadside Assistance	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA
Safe Driver	45%	NA	NA	15%	NA	35%	31%	15%	23%	12%
Seat Belt Use	NA	NA	NA	15%	NA	NA	NA	NA	NA	NA
Senior Driver	10%	NA	NA	NA	NA	NA	NA	NA	NA	NA
Stable Residence	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA
Students & Alumni	NA	NA	NA	NA	10%	7%	NA	NA	NA	NA
Switching Provider	NA	NA	NA	NA	10%	NA	NA	NA	NA	NA
Utility Vehicle	15%	NA	NA	NA	NA	NA	NA	NA	NA	NA
Vehicle Recovery	10%	NA	NA	15%	35%	25%	NA	5%	NA	NA
VIN Etching	NA	NA	NA	NA	5%	NA	NA	NA	NA	NA
Volunteer	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA
Young Driver	NA	NA	NA	NA	NA	NA	NA	NA	NA	$75

Read more: Engaged Couple Car Insurance Discounts

Contact your insurance company to determine whether or not there are any discounts that you aren’t currently getting that you qualify for.

Lastly, you will want to ensure you are getting the best price on your insurance.

What should you be paying for your coverage? It depends on the type, coverage limit, where you live, your driving record, and a number of other factors, but to give you an idea of what you might pay, we’ve summarized average rate data for each state in this table. Take a look.

Car Insurance Quotes by State

Keep in mind these averages are not necessarily reflective of what you’ll pay, but can be used as a baseline to help you gauge whether a quote is fair.

The best way to find affordable coverage is by getting an auto insurance quote. Using a quote tool is an easy way to determine how much your insurance is going to cost you.

Of course, to get the best discounts, you need to get quotes from several companies.

To save time, you should use a free quote tool offered by an independent source, like the one on this page, as opposed to one offered by a company that is biased in its own favor.

These rate quote tools allow you to get the quotes that you need from all of the companies that you want so that you can compare them side-by-side. Plus, this is much faster and easier than visiting individual websites.

How do I find a car insurance company that meets my needs?

Choosing the right insurance company is just as important as choosing the right per-accident limits. When choosing your insurance company there are some things that you want to consider.

1. First of all, you want to consider the reputation of the company. You should only consider auto insurance companies that have an excellent reputation for paying claims. If you have an accident, you don’t want to fight with your insurer to get money for repairs.
2. Second, you want to consider how they treat you as a customer. You can check the Better Business Bureau and your state’s Department of Insurance to see how a company resolves any issues they have.
3. Third, you should also consider the length of time the company has been in business and their financial security. You can check how an insurance company is doing financially by checking with companies like A.M. Best, Fitch, and Standard & Poor’s.

Once you get a quote, our rate quote device can save your profile (and your quotes) so that you can do the research you need. Once you’re done, come back to your profile, click on the company you have chosen, and finish the process of purchasing your auto insurance.

Case Studies: Car Insurance Coverage Limits

Case Study 1: SafeShield Insurance

John, a policyholder with SafeShield Insurance, was involved in a severe car accident resulting in significant damage to his vehicle and substantial medical expenses. Fortunately, John had opted for high coverage limits on his comprehensive and liability insurance.

As a result, SafeShield Insurance covered the full cost of repairs to his vehicle and the medical bills, ensuring he didn’t face any out-of-pocket expenses. The comprehensive coverage limits offered by SafeShield Insurance proved invaluable in his time of need.

Case Study 2: Protective Auto Insurance

Samantha, a customer insured with Protective Auto Insurance, was involved in a multi-vehicle collision caused by another driver’s negligence. Samantha sustained severe injuries and required prolonged medical treatment.

Thanks to her high coverage limits for bodily injury liability and uninsured motorist coverage, Protective Auto Insurance was able to cover her medical expenses, including surgeries, rehabilitation, and ongoing care. The comprehensive coverage limits provided by Protective Auto Insurance gave Samantha peace of mind during her recovery process.

Case Study 3: SecureDrive Insurance

Robert, a policyholder with SecureDrive Insurance, experienced a break-in where his car was stolen along with valuable belongings inside. Thankfully, Robert had opted for comprehensive coverage with high limits.

SecureDrive Insurance promptly reimbursed him for the full value of his stolen vehicle and replaced the stolen belongings, up to the limits specified in his policy. The comprehensive coverage limits provided by SecureDrive Insurance helped Robert recover financially from this unfortunate incident.

Case Study 4: Reliable Insurance Company

Mary, insured by Reliable Insurance Company, was involved in a car accident caused by her own negligence. The collision resulted in substantial property damage to the other party’s vehicle and injuries to the occupants.

Fortunately, Mary had purchased high liability coverage limits. Reliable Insurance Company stepped in to cover the property damage and medical expenses, ensuring Mary didn’t face financial ruin due to the accident. The liability coverage limits offered by Reliable Insurance Company played a vital role in protecting Mary’s financial well-being.

Case Study 5: Trusted Auto Assurance

Michael, a policyholder with Trusted Auto Assurance, experienced a minor fender-bender in a parking lot. While the damage was relatively small, the repairs still amounted to a significant sum. Fortunately, Michael had opted for collision coverage with generous limits.

Trusted Auto Assurance covered the repair costs, saving Michael from having to pay out of pocket. The collision coverage limits provided by Trusted Auto Assurance proved to be a wise investment for Michael.

The Bottom Line for Car Insurance Coverage Limits

What are insurance coverage limits? In this article we explained that auto insurance coverage limits are the maximum amount a car insurance company will pay per accident.

With this in mind, it follows that it is important to ensure when you purchase your auto insurance policy that you have the right coverage and limits for your unique needs.

Determining the risks you face on the road, how likely you are to get in an accident in your state, and the average cost of an accident in your state can help you determine the normal auto insurance coverage limits you’ll need.