Why You Should Carry More Than Your Auto Insurance State Minimums

Car insurance coverage minimums fulfill each state’s insurance requirements, but what happens if they’re not enough – you’re on the hook. The reason being – while the main role of auto insurance is to protect us and our family from possible financial hardship in case of a loss; too often, people drive around with the absolute barebones minimum coverage and leave themselves vulnerable to the very hardship they’re trying to avoid.

Unfortunately, this is a result of not taking into account the potential for their whole world to be turned upside down in the event of an accident, even a relatively minor one in which they’re at fault. Because insurance is regulated at the state level, each of the 50 states and Washington D.C. adhere to their own insurance laws as they relate to automobile insurance. And, since each state stands alone, the insurance laws can vary somewhat between them.

The most regulated form of coverage the states have in common is liability, which protects an insured individual when they’re responsible for injuries to another individual or for damage to something another individual owns, such as a car. Under the majority of states’ insurance statutes, you’re required to purchase the least amount of liability insurance allowable before you can legally operate a vehicle on public roads.

Again, keep in mind that each state may differ in their minimum requirements, including those who offer no-fault insurance coverage, such as Kansas and a dozen or so other states. However, in a non-no fault state, using the base requirements below, you could find yourself in a financial nightmare that may be difficult to wake up from.

  • $15,000 – Bodily injury or death to one person.
  • $30,000 – Bodily injury or death to more than one person.
  • $5,000 – Property damage.

Before breaking down the numbers, it’s important to understand each item and what they all mean to you in an accident.

1. Bodily injury or death to one person – This is the amount your insurance company will pay out for medical costs or death of any one individual in an accident you caused. But, it does not include covering burial costs if the person dies from their injuries. Furthermore, if their family sues you, that’s the absolute maximum your insurance company will pay for.

2. Bodily injury or death to more than one person – This is the aggregate total your insurance company will pay out for all the people injured or killed in the crash. In other words, if three people were seriously injured at a cost of $15,000 each, your insurance company would only pay out $30,000 total.

3. Property Damage – This is the total amount your insurance company will pay out for damage you caused to property in the accident, including the other car, buildings, walls or fences, etc. If it doesn’t involve people, this category pays for the damages only.

Now, using the same liability insurance minimums, let’s say you hit a late model BMW SUV and cause $15,000 of damage, which is not that hard to do on high-end vehicles. Riding in the car are four people and all sustain injuries. If each person requires $10,000 worth of medical treatment, that means, according to your aggregate total of $30,000, you’ll be out of pocket another $10,000 to cover the fourth injured party, which your insurance isn’t paying for.

Still, more bad news could be coming your way. Remember, you hit a BMW SUV and the damage was $15,000…and, your insurance company is writing out a check to the owner for only $5,000 because that’s all they’re covering for the damage to the other car.

This means…you’re stuck holding the bag for another $10,000 to cover the difference, leaving you with an additional $20,000 total between the two you’ll need to come up with.

That’s why getting more insurance coverage makes sense. It’s a relatively inexpensive safeguard against possible financial ruin. And, raising your liability insurance is often more affordable than you might think. Check with your insurance agent or shop around for the best rate.

Don’t be penny-wise and dollar foolish, make sure you have enough liability coverage and also make sure you’re getting the best rate on your auto insurance.