Most drivers are aware that states mandate a minimum level of coverage for auto insurance policies. Yet, few drivers know what these minimum requirements pertain to and what the exact figures are for their state. Worse, some drivers reflexively agree to state minimum insurance when presented with the option by their insurance agent or sales rep. Until you understand what state minimum car insurance is and until you know what the requirements are in your state, you can't hope to make an informed decision about the best auto policy for you. With this in mind, here's what you need to know about these minimum requirements before you buy your next auto insurance policy.
An Overview of State Minimum Car Insurance
State auto insurance requirements create a minimum limit for bodily injury and property damage liability coverage. In other words, if you hit somebody with your vehicle, your auto insurance policy must guarantee compensation for their medical costs and property damage up to a certain limit. Three specific limits must be met: 1) bodily injury (per person), 2) bodily injury (per accident), and 3) property damage.
For example, your state may require that your insurance pays up to $25,000 to cover medical costs for each individual injured, or up to a $50,000 limit per accident. Additionally, your state may require that your insurance pays up to $10,000 for property damage that occurs. These requirements are commonly expressed as 25/50/10 state minimum car insurance. You can use the following list to find the minimum car insurance requirement in your state:
10/20/10: FL, LA, OK
15/30/5: CA, DE, NJ, PA
15/30/10: AZ, GA, NV
20/40/10: AL, CT, HI, MI, WV
20/40/15: IL, IA, MD, TX
20/50/ 10: ID
25/50/10: IN, KS, KY, MO, MT, NM, NY, OR, TN, VT, WA, WI
25/50/15: AR, CO
25/50/20: VA, WY
25/50/25: MS, NE, NH, ND, RI, SC, SD
50/100/25: AK, ME
State Minimums and Insurance Costs
It's easy to assume that lower insurance requirements would correlate to lower insurance costs. In fact, the opposite tends to be true. Yes, the higher your liability limits, the higher the cost of your policy will be, but your overall risk profile matters more. As such, population density, climate, traffic patterns, and state-wide driving habits are the key determinants of how much auto insurance costs state-by-state. Want statistics? Consider that three out of the four most expensive states for auto insurance (New Jersey, Florida, and Louisiana) have some of the lowest insurance requirements for any state. Meanwhile, Maine, Utah, North Carolina, and Minnesota have some of the highest insurance requirements, yet they all boast below average insurance costs. These numbers even suggest that states with inherently higher insurance costs and risk profiles may actually establish lower state minimum car insurance requirements to help residents afford their coverage, despite the fact that these lower requirements leave residents vulnerable to out-of-pocket costs.
State Minimum Car Insurance No Guarantee
Probably the biggest and most dangerous myth about state minimum car insurance is the notion that these minimum requirements are sufficient to fully protect from liability costs. If you're in a serious auto accident and found liable for property damages or bodily injury that exceeds the liability limits of your insurance coverage, you may very well be forced to make-up the difference. Unfortunately, the auto industry is changing in ways that make increasingly high liability costs more likely. In California, for example, the trend toward hybrids and other expensive, eco-friendly vehicles makes the $5,000 liability limit for property damages look absurdly low. The price tag for bodily injury claims, moreover, is notoriously unpredictable. As such, you need to take a good, hard look at the minimum insurance requirements in your state and ask yourself if these liability limits afford you adequate financial protection. Armed with this knowledge, you can buy an auto insurance policy that makes sense for you.
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