State Minimum Car Insurance vs. Recommended Coverage

This shouldn’t come as a shock, but it’s illegal to drive without car insurance. Sure, there are rare exceptions. But virtually all drivers are required by law to carry a certain amount of liability coverage, aka state minimum car insurance. But is state minimum coverage actually enough to protect you?

 Home and auto insurance aren’t just about low rates—they’re about the right coverage level. Talk to a trusted pro who can help you get both.

The truth is, the only thing state minimum insurance is good for is keeping you out of legal trouble if you get pulled over. But when it comes to financial protection, the state minimums just don’t cut it for most car accidents.

That’s why we recommend you get at least $500,000 in total liability coverage. And here’s the good news about that: You’ll only pay a little bit more for that half a million dollars in coverage than you would for your state’s minimum coverage. So why not work the right coverage into your budget?

We’ll go over all you need to know about state minimum liability car insurance, how it compares with our coverage recommendation, and what you can do to get the right amount of coverage today. Sound good? Let’s go!

What Is State Minimum Car Insurance—And What Does It Actually Pay For?

What State Minimum Liability Actually Covers

Each state sets its own minimum coverage amount. You can check your state’s insurance department or department of motor vehicles website for minimum liability coverage requirements. Amounts vary widely—from $50,000 per person in many states to much higher requirements in places Alaska and Maine

Let’s look at an example.

In Alabama, the minimum requirements are:

• $25,000 bodily injury liability coverage (per person, per accident)
• $50,000 total bodily injury liability coverage (two or more people) per accident
• $25,000 property damage liability coverage¹

That means the highest payout an Alabama driver with minimum coverage can expect to get for an accident is $75,000 total. (We’ll go over how to read liability limits on your policy a little later.)

So, if Nick carried the state minimum coverage in Alabama and was found to be at fault (liable) in a car accident that injured two people in another vehicle, his policy would cover up to $50,000 for their doctor or hospital bills and up to $25,000 for any repairs needed for their car.

No one enjoys being in a car accident, but at least Nick would be covered financially . . . as long as the injuries and damage were relatively minor.

Is State Minimum Car Insurance Enough?

But let’s be real: Some car accidents are not minor, and many cause serious damage and injuries—often costing six figures or more. Screech! In a case like that, state minimum liability limits won’t be enough to protect your finances because you’ll be on the hook for the amount insurance doesn’t cover. That’s why most people need more car insurance than they get with state minimum coverage.

If you don’t believe us, take a look at the data. Nationwide, the average cost of property damage in a car accident is $6,300, and the average injury cost from an accident ranges from about $27,000–167,000.²

Think about Nick’s accident. Even if the people injured in that case racked up only moderate medical bills, the total medical cost could easily hit six figures—and that’s double the max that his puny-looking state minimum policy would cover. Once the insurance company had paid out $50,000, Nick would have to cough up the rest.

But if Nick follows our advice, he’ll add another zero to all three coverage amounts and change his policy coverage from 25/50/25 to 250/500/250. Here’s how his new policy should look:

• $250,000 bodily injury liability coverage (per person, per accident)
• $500,000 bodily injury liability coverage (two or more people) per accident
• $250,000 property damage liability coverage

Now Nick’s coverage will provide $500,000 to cover any injuries (which meets our total recommendation) plus another $250,000 for property damage for good measure. That combo should protect his finances even in the event of a serious accident he’s liable for.

If you’re worried that adding that much coverage to your policy will send your insurance costs through the roof, you can relax. Liability coverage is one of the best deals in the insurance world. So raising your coverage limits to 250/500/250 will only cost you a few extra bucks a month for potentially 10 times the coverage of state minimums.

How Do State Minimum Liability Limits Compare With Ramsey Recommendations?

We’ll say it again: State minimum liability limits are usually not enough to protect you in all the situations you could run into on the road. To see why state minimum coverage isn’t enough for most drivers, compare typical state limits with the coverage we recommend:

Average state-minimum premiums based on Quadrant Information Services data. Rates are accurate as of March 2026.

How to Read Liability Limits

Now that we’ve covered how important it is to have the right amount of coverage, let’s talk about how to read the liability limits on your auto policy’s declaration page. That way, you can be sure you have the coverage you need.

For starters, auto liability limits are often written in a three-number split format, like 100/300/100 (those numbers are better than the minimum in almost every state, but still not up to our Ramsey-recommended levels).

Here’s how to read that:

• $100,000: Maximum the insurer will pay per person for bodily injury
• $300,000: Maximum the insurer will pay per accident for bodily injury (all injured people combined)
• $100,000: Maximum the insurer will pay for property damage per accident

So, if you cause an accident:

• One injured person could receive up to $100,000
• The total payout for injuries to multiple people can’t exceed $300,000 (and is also limited per person to $100,000)
• Payouts for damage to other cars or property are capped at $100,000 total

As we’ve said, you should adjust your numbers like this: 250/500/250.

• $250,000 bodily injury liability coverage per person
• $500,000 total bodily injury liability coverage per accident
• $250,000 property damage liability coverage per accident

Our recommendation for $500,000 in liability coverage is focused on that $500,000 per accident for bodily injury. The policy will usually also include the additional $250,000 for property damage.

What about single-limit policies? If your policy says something like “$500,000 CSL,” you have combined single-limit coverage. That means the policy provides one pool of money that can be used to cover bodily injury and property damage combined. In other words, there’s no per-person split. And just like with split-coverage policies, we recommend setting your CSL to at least $500,000.

How to Decide Whether to Carry More Than Your State’s Minimum

So far, we’ve been pretty clear that you need a lot more liability coverage than most state minimum limits provide. But if you’re still hesitating, we get it. Pumping up your coverage by 10 times could feel like you’re going overboard. So we’ve got three practical questions to help you understand the risks you’re taking by sticking with your state’s minimums.

1. If you caused a serious accident tomorrow, could you afford to be personally sued?

For most people, that answer is a hard no. But even if your answer is yes, keep in mind that the main purpose of insurance is to transfer the risk of having your hard-earned financial progress wiped out.

As we’ve seen, state minimum limits are quite low, usually in the range of $25,000–50,000 per person injured. Medical bills from a single hospital stay can easily exceed that and often do.

Think about this: If costs go above your policy limits, you’re personally responsible for covering the difference out of pocket. That could put your savings, home equity or future income at serious risk.

When you look at it that way, higher limits make a whole lot of sense.

        2. Do you have assets or income worth protecting?

We’re talking about stuff like:

• A home
• Significant savings or investments
• An income that could be garnished (meaning money can be taken directly from your paycheck or bank account to pay off a debt)

The more you have to protect, the riskier it is to keep minimum coverage only.

       3. How much more would it cost to increase your limits to Ramsey’s recommendation?

For most people, increasing from minimum liability coverage to our goal of 250/500/250 costs only a little more per month in premiums. It’s a great deal for the amount of coverage you get.

Everyone’s situation is different, so look into how much more you’ll pay for increased coverage. We’re willing to bet the extra premium will be small compared to your financial risk of having only minimum liability coverage (because it almost always is). You’ll see that you actually can’t afford to put off raising those limits.

By the way, we know some great people who can help you get exactly the right levels of car insurance coverage. They’re our RamseyTrusted^® pros— experienced experts we’ve vetted to be sure they know their stuff and are really good at sharing that knowledge with others.

What Is Liability-Only Insurance?

A liability-only insurance policy only covers damages or injuries you cause to someone else or someone else’s property. It doesn’t cover anything that happens to you or your car. That’s why we’d almost never recommend coverage that skimpy (as you’ll see soon).

When Should You Have Liability-Only Insurance?

There is one scenario where you can safely carry liability-only coverage: if your car is worth less than your deductible (and you have enough cash to replace it easily) and you don’t owe anything on it.

In that case, you’re not facing the huge financial risk of getting stuck with a loan on a totaled car or having to take out a loan to replace your car.

What Does Recommended Coverage Include Beyond Liability?

Recommended Car Insurance Coverage

While liability coverage is the only kind of auto insurance that’s strictly required by law almost everywhere (the exception is New Hampshire), we recommend several other coverages because they’re smart, affordable ways to reduce your risks on the road. Let’s look at each one.

Comprehensive

Comprehensive insurance covers your vehicle against a wide range of non-collision risks, including:

• Theft
• Vandalism
• Natural disasters like earthquakes or landslides
• Falling objects or debris
• Damage from wildlife

With comprehensive coverage, you choose a deductible and your coverage is capped at your car’s current value. While it’s optional, it may be required if you have a car lease (a bad idea, by the way). Comprehensive insurance is almost always a good addition to your auto insurance. After all, car accidents happen—and they don’t always involve another car!

Collision

While liability pays for damage to someone else’s property, collision coverage is the flip side: It covers the cost of repairing or replacing your own car after an accident. Although it isn’t required by state law (unless your lender or leaseholder requires it), it’s still a smart choice—even for a paid-off vehicle. If you couldn’t afford to replace your car out of pocket, collision coverage will help pay to replace it if it’s totaled—and that’s great news for your budget.

Uninsured and Underinsured Motorist Coverage

Uninsured motorist coverage pays for your medical expenses (and your passengers’) if you’re hit by a driver with no insurance or involved in a hit-and-run. It may also cover vehicle damage if you don’t have collision coverage.

Underinsured motorist coverage, on the other hand, protects you when the at-fault driver has insurance but not enough liability coverage to fully pay for your medical bills.

We recommend both coverages—and they’re pretty inexpensive to add to your existing auto policy.

Personal Injury Protection

Personal injury protection (PIP)—often called no-fault insurance—is similar to medical payments coverage (see below) but offers broader support after a serious accident. It can help cover expenses like lost wages or even childcare if you’re unable to work or care for your children. PIP is mandatory in some states, so check your state’s requirements. And remember, working with a RamseyTrusted pro is a great way to understand what your state requires for car insurance.

MedPay Coverage

Medical payments coverage (MedPay) helps cover medical costs for you and your passengers after an accident, including expenses like:

• Hospital visits
• X-rays
• Surgery

It applies regardless of who caused the accident, so you’re protected no matter what. Like PIP, MedPay coverage may also be mandatory in your state.

We talk a lot about risk, so we’re willing to risk being repetitive one more time: While carrying the state minimum for liability coverage meets the legal requirement for coverage, it’s almost never enough to truly protect your money. One serious accident and lawsuit could wipe you right out. But pumping up your liability coverage to the recommended Ramsey level of at least $500,000 usually costs very little—and it can protect you from potentially devastating financial losses.

How to Upgrade Your Coverage Without Overpaying

Now that you’ve got the lowdown on the main reasons to go above your state minimums, you also need to know the smartest way to put it all into practice! Good news: We have some practical next steps you can take toward getting the right car insurance coverage in place today.