My auto insurance recommends taking out a policy with a liability limit of at least my net worth. This doesn't seem intuitive to me in that the less money you have, the more a big bill is going to hurt (and the more likely you are to go bankrupt).
To use an example, imagine there are two people: Alice with a net worth of $200K and Bob with $30K. By this advice Alice might take a policy with a liability limit of $250K and Bob with $50K. Now imagine they both got into similar accidents where they were sued for $100K. Alice would be fine (except for a higher insurance bill). Bob would loose his savings, and still be short $20K (and possibly bankrupt).
I'm not aware of one's personal liability in an accident being in any way limited by personal assets, so why would someone with a lower net worth want less insurance? The only reasoning I can come up with is that they would save a little more with a lower premium.
