This is an often asked question to which there is no straight answer. The best answer that any auto insurance agent can give you is that you must buy as much insurance as you can afford.
The first thing to do when deciding how much to buy is to find out how much the state prescribes as the minimum auto insurance coverage. This way you will know how much is the bare minimum that is necessary.
For example, in Nevada, for bodily injury liability the coverage is 15000$ per person per accident and 30000$ for all the individuals involved in the accident per accident. And for property damage sustained during the accident, the minimum coverage that is required is 10000$ per accident. All states have a more or less similar limit structure.
The second step is to understand what exactly the minimum coverage can take care. As can be seen from the figures, the minimum coverage is just not enough for a major accident. You can get away with small accidents, but a real accident could affect you such that the insurance will not even matter. The bodily liability coverage for the entire accident is not even enough for a single persons medical bills. In fact the emergency care itself will cost so much. And the 10000$ for property damage can get you a little body work, a small paint job and maybe an engine retuning.
Now that we have found out that the minimum coverage is not sufficient, the third step is to find out what other coverage is available and whether you can afford it.
There are other options like tort option, medical benefits, underinsured or uninsured motor vehicle coverage, rental car reimbursement etc.
Tort option coverage will help you fight legal battles in court with relation to accidents suffered in your vehicle. It acts like a buffer amount that you can access until you win your court case which will result in the other party paying your bills.
Medical benefit coverage is an additional post trauma medical coverage for expenses like prescription medicines and follow-up treatments. It is good to have such a coverage which will take care of all the post operative treatments which are not usually covered by your regular insurance. We all know how costly prescription medicines can be these days!
Uninsured motorist coverage allows you to file a claim with your insurance company for an accident which was caused due to another person. In this case you can file the claim with your insurance company because the other person does not have insurance or is underinsured. In a lot of cases, this is a very helpful coverage, because the value of auto insurance coverage that each person has on the road can vary widely. And the value of no two vehicles is going to be the same. This result in people requiring a lot more money to cover for vehicular damages than what coverage some may possess.
Rental car reimbursement and towing charges are other types of small value coverage. These are usually thrown in as freebies by the insurance agents while making a deal. As the name suggests, they cover your rental car charges when your vehicle breaks down or is totaled. And also the towing charges to get your car from the road to the garage are covered.