Editorial Stance
State minimums are not enough for anyone with a home, savings, or future wages to protect.
Most states require only 25/50/25. These limits were set decades ago and have not kept pace with medical inflation, vehicle prices, or litigation awards. A single serious accident -- three injured occupants, two requiring hospitalization, one totaled vehicle -- can generate a liability claim of $150,000-$300,000. Your 25/50/25 policy covers $75,000. You owe the rest personally.
The 25/50/25 Scenario That Wipes You Out
At-fault accident: you + 3-occupant Toyota Camry
This $87,000 personal liability is recoverable from your assets: home equity, savings, investment accounts, and future wages via wage garnishment. Judgments in most states last 10-20 years and are renewable.
Recommended Limits by Net Worth
| Net Worth | RECOMMENDED LIMITS | Umbrella? | Extra Annual Cost | |
|---|---|---|---|---|
| Most state minimums | 25/50/25 | Not recommended -- insufficient for anyone | No | $0 |
| < $50,000 | 50/100/50 | Low-asset renter with limited future earnings | No | ~$40/yr |
| $50k-$250k | 100/300/100 | Recommended baseline -- home owner, savings, career | No | ~$80-120/yr |
| $250k-$1M | 250/500/250 | Significant assets at risk | Yes ($1M umbrella) | ~$300-500/yr total |
| > $1M | 250/500/250 | High net worth -- maximum exposure | Yes ($2-5M umbrella) | ~$400-700/yr total |
Why Moving to 100/300/100 Is Cheap
The additional annual cost to move from 25/50/25 to 100/300/100 is typically $60-$120/year. This seems surprisingly cheap for quadrupling your per-person limit. The reason: catastrophic at-fault claims generating $100,000+ in personal liability are statistically rare. Insurers price this risk at a low annual premium because it applies to only a small fraction of policyholders in any given year.
Compare this to the alternative: a $100,000 uncovered judgment lasts 10-20 years, accrues interest, and can attach to home equity, bank accounts, and future wages. The $80-120/yr additional premium is among the best risk-adjusted purchases in personal finance.
Umbrella Insurance: The $1M Safety Net for $200-300/yr
An umbrella policy sits on top of your auto and home liability limits, adding $1-5 million of additional coverage. A $1 million umbrella typically costs $200-$300/year -- about $17-25/month. It requires maintaining underlying liability at 100/300/100 or 250/500/250 as a precondition.
Recommended for anyone with net worth exceeding $250,000, a professional license at risk in litigation (doctors, lawyers, business owners), property that generates liability exposure (pools, trampolines, rental properties), or teenage drivers on the policy (significantly elevated exposure).
Liability limit decisions connect to asset decisions. If you are evaluating whether to buy or lease a car -- and how that affects your required coverage and financial exposure -- see buyvsleasecar.com for the full buy-vs-lease analysis. For the state-by-state minimum comparison see our state minimum table.
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