How much auto insurance coverage you need or should carry is determined by a number of different factors such as if your car is financed, the age of your car, and your tolerance for risk. Your state will require you to carry a minimum amount of coverage. The liability coverage that you need to purchase depends on the particular state in which you reside. The purpose is not to protect you. State minimum coverage is for the protection of other drivers if you cause them bodily injury or damage to their property.
You need more than the state minimum coverage if you finance your vehicle. Your lender will not give you a loan if you do not have full coverage (collision and comprehensive) on your vehicle. Insurance is there to make sure you will have enough money to make the necessary repairs to your vehicle if you get into an accident. Since the car is technically not yours until you fully pay off your car note, the lender has an interest in seeing that the value of the vehicle is protected.
If your vehicle is stolen, the lender will hold you responsible for the outstanding balance of your loan. If you have comprehensive insurance, any settlement check from your insurance company will first be applied to paying off the loan. If there is any remaining balance, you will receive a check in that amount. If you owe more than the car is worth, the settlement will not be enough to pay off the balance of your car loan. In that case, you will be held personally liable for the difference still owed on your car.
Even if you have clear title to your vehicle and do not owe any money to a car financing company, you need more than minimum coverage if you do not want to bear the full burden for loss or damage to your vehicle. Before you decide to go with the bare minimum insurance required by state law, think about the maximum potential loss you could suffer. If you are not willing to personally assume that risk, you might want to buy more complete coverage.