How your limits and deductibles change what you pay

Reading the numbers: 25/50/25 and other limits

A limit is the most the policy pays for one kind of loss. Liability limits are usually written as three numbers in thousands of dollars. Alabama's minimum, set by Section 32-7-6 of the state code, is a typical example: $25,000 for injury or death of one person, $50,000 for all injuries in one accident and $25,000 for property damage. That reads as 25/50/25.

The first two numbers work together. If you injure three people and their claims add up to $90,000, a 25/50 policy pays at most $25,000 to any one of them and $50,000 in total. The third number is for damage to other people's property: their car, a fence, a storefront. Anything above a limit is not the insurer's to pay, and it can come back to you.

A deductible works the other way around. It is the part of a claim you pay before the insurer pays the rest, and it applies mainly to the coverages that fix your own car: collision and comprehensive. With a $1,000 collision deductible and a $4,000 repair, you pay $1,000 and the policy pays $3,000. Liability has no deductible for you, because it pays other people.

Where the money goes on a full-coverage bill

The National Association of Insurance Commissioners (NAIC) publishes what insurers collected per insured car. Its 2023 figures show how the lines of a full-coverage policy compare across the country.

Liability is about half of the combined premium, and collision and comprehensive make up the rest: $702 together. That split tells you where each choice bites. Your limits act on the larger line; your deductible acts only on the physical damage lines. The NAIC's separate "average expenditure," $1,282 in 2023, is lower because it mixes liability-only cars with fully covered ones.

Choosing liability limits

State minimums are the floor for driving legally, not a measure of what a crash costs. Regulators say so themselves. The Texas Department of Insurance warns that minimum limits might be too low if you cause a multi-vehicle accident or the other driver's car is totaled, and that you could be responsible for losses above your coverage. Maine's Bureau of Insurance calls its minimums a starting point that may not fully protect your assets.

Higher limits cost more, but there is no fixed price per step: each insurer files its own rates for each limit level. The only way to see the real difference is to ask for the same policy at two or three levels, for example your state minimum, 50/100/50 and 100/300/100, and compare the extra premium with the extra protection it buys.

• Look at what you own and earn. Savings, home equity and future wages are what is exposed above your limits.
• Size property damage for what you could hit. A $15,000 or $25,000 property damage limit has to cover a newer car, several cars or a building.
• Price uninsured and underinsured motorist coverage at the same time. The Insurance Research Council estimated that 15.4% of U.S. drivers were uninsured in 2023 and 33.4% were uninsured or underinsured. In some states, such as Maine, your uninsured motorist limit must match your liability limit unless you reject the higher amount in writing.

Choosing a deductible

Raising a collision or comprehensive deductible lowers the premium for that line, because you agree to pay more of each claim yourself. Whether that trade pays off depends on two numbers: how much the premium falls, and how often you expect to claim.

Here is an illustrative example, not a quote. Say moving from a $500 to a $1,000 deductible cuts the premium by $120 a year. You have taken on $500 more risk per claim, so you need about four years and two months without a claim before the savings cover one extra $500. Our deductible break-even calculator runs the same sum with your own numbers.

• Keep the deductible in savings. If a $1,000 bill tomorrow would go on a credit card, a lower deductible may cost less in the end.
• Check your loan or lease. A lender or leasing company sets its own coverage requirements and may limit how high your deductible can go.
• Treat the two lines separately. Collision and comprehensive often carry their own deductibles, and the savings from raising each can differ.
• Watch an older car's value. When the car is worth little more than the deductible, the coverage pays out little even after a total loss.

Our guide to raising your deductible covers the trade-off in more detail.

Setting your limits and deductibles

1. 1 Find your current choices. Your declarations page lists every limit and deductible; our guide to reading your declarations page explains each line.
2. 2 Ask for prices at two or three liability levels with everything else unchanged, and note the yearly difference between them.
3. 3 Run the deductible math for $500 and $1,000 (or $1,000 and $2,000) and keep the option your emergency fund can cover.
4. 4 Compare insurers on identical choices. A quote with lower limits or a higher deductible will look cheaper without being cheaper.
5. 5 Trim extras before you cut core protection. Rental reimbursement or roadside help may be worth less to you than liability; see trimming optional coverages.

Questions drivers ask