Dave Ramsey recommends carrying enough car insurance to protect your assets from a potential lawsuit, which means going beyond your state's minimum requirements. His core advice is to have high liability limits, typically 250/500/100, and to add an umbrella policy for an extra $1-2 million in coverage. The goal isn't to protect your car; it's to protect your wealth if you're at fault in a serious accident.
State minimums, like 25/50/25 in many places, are dangerously low. The first number ($25,000) is the maximum per person for bodily injury liability. Medical bills from a multi-car accident could easily exceed $100,000, leaving you personally responsible for the difference. Ramsey's suggested 250/500/100 provides substantially more protection.
| Insurance Coverage Type | Typical State Minimum (e.g., Texas) | Dave Ramsey's Recommended Minimum |
|---|
| Bodily Injury Liability (per person) | $30,000 | $250,000 |
| Bodily Injury Liability (per accident) | $60,000 | $500,000 |
| Property Damage Liability (per accident) | $25,000 | $100,000 |
| Uninsured/Underinsured Motorist | Often minimal or optional | Match your liability limits |
| Personal Injury Protection (PIP) | Varies by state | Follow state law |
| Comprehensive & Collision | Not required by law | Only if you can't afford to replace your car |
You should also carry uninsured/underinsured motorist coverage that matches your high liability limits. This protects you if someone with little or no insurance hits you. As for comprehensive and collision coverage, Ramsey advises dropping them if you can afford to replace your car out-of-pocket. The insurance is meant for catastrophic financial loss, not small fender-benders. An umbrella policy is the final, crucial step. It's inexpensive and kicks in after your auto (and home) liability limits are exhausted, providing a safety net for your savings, home, and future income.
