The answer to this question not only relates to the level of assets we need to protect but also to the level of damage we are capable of doing.
Liability refers to the responsibility we have to each other. If you or I damage someone’s property or injure them, we have a responsibility to make them whole. Not only that, but I believe most of us would want the person we injured to be able to get back to a normal life as quickly as possible.
Just living life carries risks with it. I may be a safe driver but still cause an accident in which another person is injured. When that happens I am responsible for the physical damage, the bodily injuries as well as some less tangible costs such as lost wages or loss of quality of life.
Liability insurance protects the people around us but it also protects us. In the above scenario, without insurance I might have to sell my house, liquidate assets or have my wages garnished for years in order to make the other person whole again. So, my limits of liability protect my lifestyle too.
The true answer to this question is that we need higher liability limits because medical costs are rising, wages are rising, vehicle repair costs are rising. It may cost a few dollars more each month but the risk of low limits far outweighs this increase.