3. Underinsuring Your Vehicle
Some drivers assume that minimum coverage is enough just because it is legally required. In reality, state minimum liability limits are often far too low to cover the real cost of a serious accident, especially one involving injuries, a hospital stay, or a totaled luxury vehicle.
If you cause a crash that results in significant injuries or property damage beyond your policy limits, minimum coverage might leave you personally responsible for the difference. That could mean lawsuits, wage garnishment, liens against your property, or years of debt that follow you long after the accident itself is forgotten. Carrying adequate liability limits, ideally well above the state minimum, protects your finances, your home, and your future income, not just your car.
Quick tip: A common rule of thumb many financial advisors suggest is carrying liability limits at least equal to your total net worth, since that is roughly what you would have to protect in a serious lawsuit.