When shopping for auto insurance, you may be asked how much coverage you want. This can be difficult for some people to determine, because the issue of liability is sometimes confusing. How will you know how much is enough?

First, it helps to understand what protection your auto insurance coverage will provide. Basically, if you are in an accident, there are two different kinds of costs to cover. One of these pertains to people, and one pertains to loss of property. Each state requires you to carry a minimum coverage for each, but the minimums are generally considered to be very low. So low, in fact, that the state requirements may lull you into a false sense of security. If you get into an accident and don’t have enough coverage, your assets—current and future—could be jeopardized if you get sued. Just use the words “pain and suffering” and you get the picture.

So, how do you determine what is the right amount of protection?

Bodily injury liability protects you against legal claims put forth against you by others for accidents you caused (or were partially responsible for). States—such as Illinois and Iowa—may require as little as $20,000 per person, or $40,000 maximum of coverage. Ask yourself, would that be enough money to cover you, should you be sued? Will that protect your salary, your savings and other assets? Most financial experts feel that a minimum of $100,000 per person, and $300,000 per accident, will adequately protect a motorist in our, unfortunately, litigious society.

The second portion of your policy deals with property damage, and it covers not only damage to other cars, but any damage to landscaping, buildings and the like that may have occurred during an accident. The recommended minimum for property damage is $50,000. Some states, such as Maine and Delaware, have a minimum of $5,000. Would this be enough to replace or even repair a newer model car?

All of these may sound expensive, but the truth is that raising your limits to these recommended levels, above what your state requires, may actually be less expensive than you think.

There are ways you can help offset the cost of raising your limits above the state-required minimums. You could raise your deductible, or you might also consider trading in that high-theft-risk car (if you have one) for one that is less desirable to thieves.

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