February 26, 2026

Choosing Liability Limits for Car Insurance: A Simple Guide

Liability limits sit at the heart of car insurance. They decide how much your insurer will pay if you injure someone or damage property in a crash you cause. Get them right and an accident becomes a tough day with paperwork. Get them wrong and that same accident can turn into years of wage garnishment, drained savings, and a lawsuit you cannot forget. After a couple of decades watching claims play out, I can say this with confidence: most people underestimate how fast the numbers climb after a serious collision, and how long the ripple effects can last.

What liability coverage actually covers

Car insurance liability has two parts. Bodily injury liability pays for the other party’s medical costs, lost wages, pain and suffering, and legal defense if you are sued. Property damage liability pays to repair or replace the other party’s car and anything else you damage with your vehicle, like a fence, storefront, traffic signal, or even a front yard the tow truck had to cross. Liability does not pay to fix your car or your injuries. That is where collision, comprehensive, medical payments, or personal injury protection come in.

Most policies show limits as a split set of numbers, like 100/300/100. The first number is the maximum the insurer pays per person for bodily injury. The second is the maximum total per accident for bodily injury to all people combined. The third is property damage per accident. When an agent says 25/50/25, that means you have $25,000 per person for injuries, $50,000 total per accident for injuries, and $25,000 for property damage. Some states or insurers offer a combined single limit, such as $500,000, that applies to bodily injury and property damage together.

Why this structure matters will become clear the first time two people go to the hospital from the same crash, or you clip a luxury SUV that also takes out a light pole. The per person and per accident caps can both get tested in a single moment.

The state minimum trap

Every state sets a legal minimum, but the phrase minimum is doing heavy lifting. In some states you can drive legally with limits as low as 25/50/25. Those numbers predate modern health care costs, six figure repair bills for high end vehicles, and the reality that pain and suffering payouts often exceed medical bills. If you rear end a family of four and two passengers need surgery, $50,000 total for bodily injury runs out after the first hospital stay. Once insurance pays its limit, claimants come after you personally.

I have seen people with state minimum limits face $200,000 in claims from a single accident on a rainy day. They were not reckless. They were unlucky, and their coverage was thin. When the insurer wrote the last check, plaintiffs’ attorneys began the work of finding assets and garnishable wages. That is the part most folks do not see until it happens to them.

The math behind a bad day

Picture a 45 mph collision at an intersection where you miss a light. The other driver, a contractor, breaks a leg. He needs surgery and misses six weeks of work. Another passenger suffers a concussion and spends a night in the hospital with scans and monitoring. The contractor’s bills and lost wages are $65,000. The passenger’s bills are $12,000, and a pain and suffering demand comes in at $40,000. Meanwhile the other vehicle, a three year old midsize SUV, is a total loss at $33,000. The city sends a bill for the traffic signal you knocked down at $8,500. You also need a defense attorney because they filed suit, and legal defense costs burn quickly.

If your limits are 50/100/50, bodily injury might barely cover the injuries if a skilled adjuster negotiates hard, but property damage is short once you add the SUV and the city hardware. With 100/300/100, there is breathing room. With a $500,000 combined single limit, the adjuster has flexibility to settle claims in a way that avoids trial. That flexibility tends to lower the odds you get named personally.

What higher limits actually cost

Many drivers guess that moving from 50/100/50 to 250/500/250 doubles their premium. It seldom works that way. Liability coverage is inexpensive relative to the catastrophic claims it covers. While pricing varies by state, driving record, and the insurer, I consistently see jumps like this:

From 50/100/50 to 100/300/100, often a few dollars a month for a standard risk driver.
From 100/300/100 to 250/500/250, maybe another 5 to 15 dollars a month depending on the market.
A $1 million umbrella policy that sits on top of your auto and home liability, often between $15 and $30 a month when you carry adequate underlying limits.

That umbrella number surprises people. Umbrella policies fill the gap when a lawsuit goes beyond your auto or home limits. They require you to carry higher underlying limits, usually at least 250/500 on the auto side and $300,000 on the home insurance personal liability. Price the package together, and you often get multi-policy credits. Whether you work with a local Insurance agency you know or you pull a quick State Farm quote online for a baseline, ask them to price three options side by side so you see the jump in real dollars.

Property damage has changed more than people think

Ten years ago, $50,000 of property damage felt ample. Today, you can exceed it without trying. A new full-size pickup with options can sticker above $70,000. A moderately loaded electric SUV can run higher, and parts are pricey. Add a chain reaction where two cars get hit and you are already past $50,000 before anyone calls the city about the guardrail. I advise $100,000 minimum for property damage in most suburbs and $250,000 in cities where luxury vehicles, dense traffic, and expensive public infrastructure increase the stakes.

Bodily injury is where lawsuits grow teeth

Medical costs rise faster than wages, and juries can be generous when someone’s life changes because of an injury. That does not mean every claim turns into six figures, but the tail risk is real. I have seen a garden variety neck and back strain settle under $10,000 and a similar crash with a disc injury climb past $150,000. The facts matter, the venue matters, the injured party’s attorney matters. Your limits need to account for that variability. A comfortable baseline for many households is 100/300 for bodily injury. Households with teen drivers, high annual mileage, or meaningful assets should look at 250/500 or higher.

Tie your limits to your real exposure

A useful approach starts with a quick inventory of what is at stake. Equity in your home, savings and brokerage accounts, business ownership, and expected future earnings are all targets in a judgment. Someone with $30,000 in net assets and a modest salary faces a different risk profile than a dual-income household with $400,000 in equity, college savings, and vested stock. Your driving pattern matters too. Long commutes, crowded interstates, winter weather, and rideshare side gigs all raise exposure.

For many middle income families, 250/500/250 with an umbrella gives a strong layer of defense for a cost that usually fits under a streaming subscription or two. If that feels steep, still aim for 100/300/100 at a minimum, and match uninsured motorist limits to the same level.

Uninsured and underinsured motorist coverage is your mirror

Uninsured motorist and underinsured motorist coverage pay you and your passengers when the at-fault driver has no insurance or not enough. In several states, roughly 10 to 20 percent of drivers are uninsured. The at-fault driver’s state minimum 25/50/25 does not go far if you are badly hurt. Match your UM and UIM to your bodily injury limits. I have watched clients with generous liability limits choose low UM/UIM to save a sliver of premium, then regret it when they get hit by someone who disappeared after the crash.

If your state is a no-fault or PIP state, coordinate PIP with health insurance deductibles and the likely out-of-pocket for a hospital stay. PIP and MedPay are not substitutes for liability, but they keep your own side afloat while fault is sorted out.

Home insurance and auto limits work together

Personal liability on your home insurance does not pay for auto accidents, but both policies are part of one financial defense plan. Umbrella coverage usually requires both, and the umbrella pulls them together when a claim pierces the underlying limits. If you carry a $300,000 personal liability limit on your home policy, bumping it to $500,000 often costs very little. The umbrella then sits smoothly on top.

There is also a practical benefit. Courts look at the total picture when a judgment is enforced. A well built liability structure on both auto and home, supported by an umbrella, indicates you took reasonable steps to manage risk. That can be useful at settlement conferences, where an insurer’s ability to pay without delay sometimes encourages compromise.

Special cases where you probably need more

Teen drivers lift your risk. They lack experience and they make mistakes at a higher rate. If you have a new licensed teen, revisit your limits the same week you add their vehicle. An extra 10 dollars a month for higher coverage feels better than paying off someone’s injury judgment during your kid’s college years.

If you use your vehicle for business, even a side hustle like deliveries, ask your Insurance agency to check for commercial endorsements or a true business auto policy. Personal policies often exclude business use beyond incidental errands. A florist making regular deliveries or a carpenter hauling tools should be candid with their agent. A State Farm agent or any seasoned local broker can tell you if your pattern is safe or if you need a small commercial tweak.

Rideshare driving needs its own treatment. Most personal policies now offer rideshare endorsements that cover the gap when the app is on but you do not have a passenger. The rideshare company’s policy generally takes over when you have a rider, but limits Angelica Vasquez - State Farm Insurance Agent Car insurance vary by phase. If you plan to drive for hire, read the fine print and get the endorsement.

High value households should treat 250/500/250 as a floor and buy an umbrella starting at $1 million, scaling up based on assets. If you own rental property, hold significant investments, or serve on a nonprofit board, consider higher umbrellas. The price per million in coverage usually falls as you go up.

Why legal defense is part of the limit

Most auto liability policies include defense costs within the liability insuring agreement, and many treat defense as outside the limit. It varies by form and state. If defense erodes your limit, that is one more reason to keep limits healthy. A contested claim can rack up tens of thousands in attorney fees and expert witnesses long before trial. Ask your agent to confirm whether defense costs reduce your limits, and plan accordingly.

A short method for picking limits that fit

Start with your net worth, then add one to two years of household income if you have stable employment. Round to the next $250,000. That number is your target total liability protection across auto and home, before umbrella.
Set auto bodily injury at 100/300 minimum. If your target number is above $300,000, set 250/500. If it is above $500,000, plan for an umbrella of at least $1 million after setting 250/500.
Set property damage at $100,000 minimum, ideally $250,000 in urban areas or if you often drive near high value vehicles.
Match uninsured and underinsured motorist limits to your bodily injury limits.
Price an umbrella and confirm required underlying limits. If you already carry 100/300, the umbrella requirement may prompt an upgrade to 250/500, which is usually a small step in premium.

This quick method is not perfect, but it moves you from guesswork to a structured choice that scales with your real exposure.

How claims really unfold

The early hours after a crash are chaotic. Paramedics transport people, police write reports, and tow trucks clear the scene. Within days, adjusters open claims files. Medical providers send bills to the injured party’s health insurance, then seek recovery from the at-fault driver’s auto policy. Attorneys may get involved quickly, especially if injuries are clear. If your limits are low, everyone knows the pot is small, which can push plaintiffs to file suit early to preserve leverage.

By contrast, with adequate limits, adjusters have room to negotiate bundles that cover medical costs, lost wages, and reasonable pain and suffering without a court date. Juries are unpredictable. Insurers prefer certainty. So do you. Higher limits grease the path to a settlement that closes the file and keeps your name off a docket.

When a combined single limit helps

Drivers who want fewer moving parts sometimes choose a combined single limit of $500,000 or $1 million. Instead of separate caps for bodily injury per person, per accident, and property damage, the policy offers one bucket. If you back into an expensive sculpture in front of a gallery, a single limit means you do not run out of property damage while plenty remains on the bodily injury side. In mixed claims with both injuries and property loss, the adjuster can allocate funds without tripping over split sub-limits.

Not every carrier offers single limits for personal auto, and some reserve them for commercial policies. A quick State Farm insurance search or a call to an Insurance agency near me can tell you what is available in your state.

Coordination with health insurance and deductibles

If you carry high deductible health insurance, MedPay or PIP on your auto policy can save you from writing a large check after a minor crash. These coverages pay regardless of fault up to their limits and can apply toward copays and deductibles. They do not change your liability limits, but they spare your cash flow and reduce friction. Modest MedPay limits like $5,000 or $10,000 are inexpensive and often worth it.

Myths that keep limits low

One common myth is that people will not sue if you look modest on paper. Attorneys do not decide based on your car or your shoes. They look at the facts of the case, the odds of proving negligence, and the available insurance. Another myth says judgment proof means safe to carry state minimums. That might be true for someone with no assets and sporadic income, but even then, judgments can linger and attach to future earnings. A third myth suggests that higher limits make you a target. Plaintiffs rarely know your limits until discovery, well after the decision to file.

When to change your limits

Life events move the target. A promotion, a new teen driver, a home purchase, or an inheritance should trigger a review. So should a change in driving pattern. During a year when you start commuting 60 miles a day, that additional road time increases exposure. After you pay off a car and drop collision, do not forget that liability is the keeper. It protects future you from past you.

I recommend a brief annual checkup. Pull your declarations page, note your limits, and spend ten minutes on the phone with your agent. If you work with a local Insurance agency that knows your family, they can run through scenarios quickly. If you prefer digital, get a State Farm quote or similar as a benchmark, then ask a State Farm agent or another broker to pressure test the numbers. You are not committing to a switch by getting quotes. You are calibrating.

The cost of waiting

Every upgrade starts today, not retroactively. If you raise limits after your neighbor’s teen backs into a Porsche, the old limits still apply to that claim. Do not wait for a scare to act. The difference between 50/100/50 and 250/500/250 is a dinner out each month in many markets. The difference in outcome during a serious crash can be the deed to your house.

Five red flags you are underinsured

Your policy shows 25/50/25 or 30/60/25 and you own a home or have more than $25,000 in savings.
Your property damage limit is $50,000 and you drive daily in dense urban traffic.
Your uninsured motorist limit is lower than your bodily injury limit.
You added a teen driver but never revisited limits or priced an umbrella.
You use your vehicle for deliveries or rideshare, and your agent has not confirmed coverage.

If any of these hit home, raise your limits and get a quote for an umbrella. Most carriers will bind changes the same day.

A quiet benefit: peace of mind

Accidents are draining. You replay the moment, worry about the other driver, and wait for the next call. When clients carry strong limits, I notice a difference in how those weeks feel for them. They still have to answer questions and maybe sit for a deposition, but they sleep better knowing the insurer has room to solve the problem. That peace has value. It is not on the declarations page, but it shows up when life gets loud.

Putting it all together

Start by acknowledging that liability is not a place to shave pennies. Choose bodily injury limits of at least 100/300, consider 250/500 if you have meaningful assets or young drivers, and set property damage at $100,000 or higher. Match uninsured and underinsured motorist to your bodily injury limits. If your combined assets and stable income point above $500,000 of risk, layer a $1 million umbrella on top. If you are not sure how to price the pieces, ask an Insurance agency for three tiered options or pull a quick State Farm quote, then review it with a State Farm agent who can read between the lines of your life. Good insurance is not just about the number on a page. It is about aligning those numbers with who you are, where you drive, and what you have built.

The day you need it, you will be glad you treated liability limits as a core decision and not a checkbox.

Business NAP Information

Name: Angelica Vasquez – State Farm Insurance Agent – Houston #1
Address: 725 W 20th St, Houston, TX 77008, United States
Phone: (832) 548-8000
Website: https://www.angelicainsurance.com/?cmpid=U5XQ_blm_0001

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Angelica Vasquez – State Farm Insurance Agent – Houston #1 serves families and businesses throughout the Houston Heights and surrounding communities offering auto insurance with a quality-driven commitment to customer care.

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Reach Angelica Vasquez – State Farm Insurance Agent – Houston #1 at (832) 548-8000 to review your policy options and visit https://www.angelicainsurance.com/?cmpid=U5XQ_blm_0001 for additional details.

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Landmarks Near Houston Heights, Texas

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About Angelica Vasquez State Farm Editorial Team

Content published by the Angelica Vasquez State Farm team to help individuals, families, and business owners better understand insurance coverage options, policy planning, and risk protection in Houston, TX and surrounding Harris County communities.