How much car insurance do you actually need?

What liability limits mean

Liability is written as three numbers — 30/60/25, for example. The first is the most the policy pays for injuries to any one person. The second is the most for all injuries in one accident. The third is the most for the other party’s property.

Those are ceilings. When the bill goes past the ceiling, the rest is yours: your savings, your wages, whatever a court decides you can pay.

One hospital stay and one late-model vehicle will reach a state minimum without anything unusual happening. That is the scenario to price, not the fender bender.

A workable way to pick a number

Carry enough liability to cover what you could lose. For most households the honest answer is somewhere above the minimum and below what a lawyer would recommend if fear were free.

• If you rent and have little saved, the minimum is a real choice, but understand what it is.
• If you own a home, have equity, or have wages worth garnishing, higher limits are the cheapest protection of those you will buy.
• If you are already at 100/300, ask what 250/500 costs. The step is usually far smaller than the first step off the minimum.

Uninsured motorist is the one to think hardest about

Liability protects other people from you. Uninsured and underinsured motorist coverage protects you from the driver who has nothing — or who has the minimum and hit you with a bill that is a multiple of it.

Texas and New Mexico both require carriers to offer it, and both require your rejection of it to be in writing. That requirement exists because the legislature knows what happens without it.

A sensible default is to carry it at the same limits as your liability.

Deductibles: what you are buying is timing

A deductible is not a fee. It is the amount of each claim you have agreed to pay, and raising it is a way of buying a lower premium with money you will owe later if something happens.

The test is simple. Pick the highest deductible you could write a check for tomorrow without it being a crisis. Below that number you are over-insuring; above it you are not really covered.

When to drop collision and comprehensive

On an older car there is a point where the premium for physical damage approaches what the carrier would ever pay out, because it will only ever pay the car’s actual cash value minus the deductible.

It is not a rule about age or mileage — it is arithmetic about that specific car. Ask what the two coverages cost on their own and compare it to what the car is worth. If the car is financed or leased, the lender decides this, not you.

The lines people skip and then miss

• Rental reimbursement. Priced per vehicle and usually small. The question is how you get to work for two weeks.
• Roadside assistance. Often cheaper than a standalone membership, and already attached to the policy.
• Medical payments or PIP. Pays for you and your passengers regardless of fault, with no deductible. In Texas, PIP must be offered and rejected in writing.
• Gap coverage. If the car is financed and worth less than the loan, this is the difference. New cars, long loans and small down payments are where it matters.