Just because you have the state minimum coverage doesn’t mean you have adequate coverage. Major accidents often result in medical expenses, property damage, and lawsuits that dwarf minimum coverage amounts. When that happens, your bank account, investments, and even your paycheck could be on the line.
We see it often at Bowthorpe & Associates Insurance Producers. Policies that meet legal minimums but don’t offer adequate protection. That’s why we want to help you understand common limits that leave drivers underinsured.
State Minimum Liability Limits Are Too Low
For drivers that carry liability coverage, limits are typically expressed in split limits. For example, 25/50/25.
That translates into $25,000 of coverage per person, $50,000 per accident, and $25,000 of coverage for property damage.
As you can see, the problem starts with “per person” limits. Minimum state requirements were designed around affordability rather than actual claims.
In many states, just one trip to the emergency room with X-rays could cost upwards of $15,000. Once you factor in surgeries, hospital stays, and rehabilitation costs, it’s easy for one injured party to exceed $100,000 in medical bills. If more than one person is injured, a per-accident limit of $50,000 won’t go very far.
Property damage isn’t immune either. The national average cost to replace a new vehicle now exceeds $40,000. It won’t take long for two newer model vehicles to reach a property damage limit of $25,000. Rental cars, guardrail repairs, and damage to buildings must also be paid for out of that $25,000.
When your costs exceed your insurance policy limits your insurer only pays up to your maximum limit. You are responsible for the balance.
Multi-Car Accidents Expose You To Huge Liability
Imagine you rear-end two cars waiting at a traffic light. Both drivers sustain injuries requiring medical care. Each driver has $75,000 in medical expenses and lost wages. Damage to the cars and a utility pole totals $40,000.
With limits of 25/50/25, here’s how your insurance would respond:
The insurer would pay $25,000 per injured driver
Your total bodily injury payout would be capped at $50,000
Property damage would only be covered up to $25,000
That leaves you responsible for over $115,000 in damages. If the injured parties decide to sue and win a settlement or court judgment, they can potentially garnish your wages, levy your bank accounts, and place liens on real property.
Higher limits close this exposure dramatically. Increasing your limits to something like 100/300/100 or even 250/500/100 will often cost less than you think.
Uninsured And Underinsured Motorists Are Everywhere
When you’re driving you can control your own risk. Unfortunately, you can’t control who you share the road with.
Many drivers on the road carry no insurance or only the minimum required by law. Imagine you suffer $200,000 worth of injuries in an accident. If the other driver only carries liability limits of $25,000 their insurer will only pay that.
Without adequate uninsured or underinsured motorist coverage on your policy, your health insurer, bank account, or lawyer may have to make up the difference. And if you sue someone who doesn’t have substantial assets you may not collect on a favorable judgment.
Make sure you have uninsured and underinsured motorist limits that equal your liability limits. It’s one of the best ways to protect yourself when the other driver can’t.
Don’t Overlook Medical Payments & PIP
Medical payments coverage and personal injury protection offer a buffer for medical expenses. But they often come with low limits.
You may have up to $1,000 to $10,000 of MedPay coverage. Enough to cover an ambulance ride and emergency room visit, but maybe not surgery and rehab.
In no-fault states personal injury protection can provide medical payments coverage as well as a portion of lost wages. However, most drivers aren’t realizing the full benefit of their PIP coverage because of low limits. $10,000 to $25,000 doesn’t go very far when you’re out of work for an extended period due to injury.
Higher limits mean you’re less likely to pay out of pocket after an accident.
Protect Your Assets With Umbrella Coverage
Own a home? Have an investment account? Make a decent living? If so, you have assets that could be targeted in a lawsuit.
Severe injury crashes with lifetime disabilities can result in judgments for $1 million or more. If you only carry 100/300 limits and a $1.5 million award is granted by the court, your insurance company would pay their $300,000 and you would be left footing the bill for $1.2 million.
Umbrella insurance is designed to protect you when claims exceed your normal liability limits. Most insurers offer umbrellas starting at $1 million in coverage. They also usually require you to carry minimum auto insurance limits of 250/500.
The cost of a $1 million umbrella policy is often surprisingly low. For families that qualify it can cost less than $500 per year. And that works out to be one of the cheapest ways to buy $1 million in liability insurance.
Review Your Limits Regularly
Take some time to review your coverage and consider the following suggestions:
Increase liability limits to at least 100/300/100, ideally higher limits of 250/500/100
Set your uninsured/underinsured motorist limits equal to your liability limits
If you carry med pay or PIP, make sure the limits are high enough to be effective
Consider an umbrella policy if you own a home or have significant savings
Remember that premium increases are typically small for adding higher limits. Your premium will not double by increasing your limits. Being underinsured however could cost you for decades.
Don’t sacrifice your future just to save on your insurance premium. Contact Bowthorpe & Associates Insurance Producers to discuss your options.
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Frequently Asked Questions
Q1: Do I really need more than the minimum car insurance coverage?
A: YES! You should never just buy the minimum car insurance coverage allowed in your state. Many people only carry insurance because it’s required by law. But do you really want the bare minimum?
Q2: How much car insurance do I really need?
A: Every situation is different. We can’t tell you how much insurance you should carry. But we can help you review your current limits and identify places you may be underinsured.
Q3: What Are Typical Car Insurance Limits?
A: 25/50/25 is very common because technically it’s enough to meet the minimum requirements in most states. But it doesn’t provide much protection at all. Consider higher limits like 100/300/100 or more to keep yourself adequately insured.
Q4: Should I get 100/300/100 car insurance?
A: If you only carry liability limits of 25/50/25 then yes. 100/300/100 is definitely recommended over state minimum limits.
Q5: Will paying more really lower my car insurance?
A: For liability limits, the answer is typically yes. You can usually increase your limits without a significant increase in premium. And that buys you a lot of protection if you are at fault in an accident.