Auto Insurance: Understanding Minimum Coverage Requirements

The minimum amount of auto insurance you need to buy varies by state. But no matter where you live, liability car insurance—which covers damage and injuries you cause to others in an accident—is the main required coverage. The minimum car insurance required by your state is important to know, but this amount may not be adequate for your needs.

The most common minimum limits for liability are $25,000 per person and $50,000 per accident for bodily injury and $25,000 for physical damage. But your state’s requirements may be higher or lower.

Liability insurance

Bodily Injury Liability Protection

This covers the medical expenses of the other party if you are found at fault in the accident. In some circumstances, it may even cover lost wages and/or legal fees if the injured party files a lawsuit. The minimum coverage limit for this type of insurance varies depending on the state and is typically expressed as a series of numbers, such as 15/30/10. The first number refers to the maximum amount that the insurance company would pay out for injuries per person, the second number refers to the maximum amount per accident, and the third number refers to property damage liability per accident. For example, in Illinois, the minimum auto insurance liability limit is $25,000/$50,000/$20,000. This means that the insurance company would pay out a maximum of $25,000 for injuries per person, $50,000 for injuries per accident, and $20,000 for property damage per accident.

Property Damage Liability Protection

This covers damages to property resulting from a covered accident in which you're at fault. It may cover the other party's vehicle repair or replacement costs, as well as other property that may have been damaged in the accident, such as fences, structures, phone poles, and other types of property.

While liability insurance is a mandatory minimum requirement, it is recommended to purchase more than the minimum required amount if you can afford it. This will provide you with additional financial protection in the event of a serious accident.

Bodily injury liability

While the minimum coverage may be sufficient to drive legally in your state, it is generally recommended to have a higher amount of coverage to protect yourself financially in the event of a significant accident. A good rule of thumb is to have enough liability coverage to protect your assets in case of a lawsuit.

In addition to bodily injury liability insurance, property damage liability insurance covers any damage to another person's vehicle or property as a result of the accident. Together, these coverages form the basis of liability car insurance, which is required in almost every state.

Property damage liability

The minimum amount of property damage liability coverage required varies by state. For example, in New York, the minimum limit is $10,000 per accident, while in Massachusetts, the minimum is $5,000, and in Alabama, it is $25,000. It is important to note that state-mandated minimums may not be sufficient to cover all property damage in the event of an accident. Therefore, it is advisable to purchase additional coverage for greater financial protection.

When choosing a property damage liability coverage limit, consider how much you can afford to pay out of pocket and how much coverage you need to feel protected. Keep in mind that if you cause damage exceeding your coverage limit, you will be responsible for the remaining amount.

In addition to property damage liability coverage, auto insurance policies typically include bodily injury liability coverage, which covers medical expenses and lost earnings for the driver and passengers involved in an accident. Some states also require uninsured and underinsured motorist coverage and personal injury protection (PIP).

Uninsured/underinsured motorist coverage

Uninsured motorist coverage will protect you if you are hit by a driver who does not have auto insurance, while underinsured motorist coverage will protect you if you are hit by a driver who does not have enough insurance to cover the damages or injuries they caused. These coverages are usually offered together and can be essential if you are involved in a hit-and-run accident, as you may be able to file a claim against your own uninsured motorist coverage.

In some states, such as Illinois and New Hampshire, uninsured and underinsured motorist coverage is required by law. Other states, like Massachusetts and South Carolina, only require uninsured motorist coverage. However, even if it is not required in your state, driving without this coverage can be risky, as nearly 13% of drivers countrywide do not have auto insurance.

When choosing your uninsured/underinsured motorist coverage limits, consider matching the amount of your liability coverage. For example, if your liability limits are $50,000 per person and $100,000 per accident, you may want to choose the same limits for your UMBI and UIMBI coverage. This will ensure that you and your passengers are adequately covered in the event of an accident. For UMPD coverage, you can select a limit that reflects the value of your vehicle.

In conclusion, uninsured/underinsured motorist coverage is an important type of insurance that can provide financial protection in the event of an accident with an uninsured or underinsured driver. It is mandatory in many states and highly recommended for all drivers. By understanding the different types of coverage and choosing appropriate limits, you can ensure that you have the protection you need.

Personal injury protection

In other states, PIP is either optional or not available. For example, in Texas, PIP insurance is not mandatory, but you must sign a waiver if you want to decline the coverage.

PIP coverage limits vary by state. In Texas, for instance, insurance companies are required to offer every driver at least $2,500 of PIP insurance, with the option to increase coverage to $5,000 or $10,000. In Florida, PIP options range from basic to extended, with basic PIP covering 80% of medical bills and 60% of lost wages and replacement services, and extended PIP covering 100% of medical bills and 80% of lost wages and replacement services.

It's important to note that PIP has some exclusions. It typically doesn't cover the other driver's injuries in a collision or any injuries sustained while committing a crime or receiving payment for driving. To ensure you're fully covered, it's recommended to have additional policies such as bodily injury liability insurance and property damage liability insurance.

Frequently asked questions