All it took was a left turn to send Sara Somers into bankruptcy.
She bought a PT Cruiser and got the minimum coverage requirements — just enough to legally drive in Florida.
“I was making a turn at a green light and the other driver was speeding while running their red light,” she said. Unfortunately, he crashed into her car.
There were no witnesses so the police left it up to the insurance companies to determine fault. “My insurance decided to take fault,” she said.
The state minimum car insurance she signed up for wasn’t enough to cover the damages. So the other driver sued her for $40,000.
What is state minimum car insurance?
Every state has its own laws and legal minimum requirements when it comes to car insurance. It’s mandatory in some and not in others.
Technically, you’re only legally required to carry the bare minimum car insurance for the state you live in.
You might be swayed by the bare minimum since it can save you a lot of cash over the years. At the time, Somers paid $75 a month for her car insurance.
“I couldn’t afford much more,” she said.
You’ll only save money if you don’t get into an accident. But there’s no way to guarantee that. Every time you drive, you’re at risk for getting into an accident. And your state’s minimum might do very little to protect you. The other party could sue, and seize and sell off your assets. This is what happened to Somers.
If you’re unsure about what’s required in your state, you can always ask your insurer.
What kind of insurance is required?
These are the four common types of state minimum coverage:
1. Bodily injury liability
If you get into an accident, this pays for the injuries you cause to another driver and/or their passengers.
State minimum insurance has a maximum payout per person and total payout per accident.
Let’s say your minimum is $25,000 per person and $50,000 per accident. If you hit a car, your insurance would pay up to $25,000 per person for any bodily injuries, but not more than $50,000 total for the accident.
2. Property damage liability
This covers the damage and cost of repairs you cause to another car or property (like a fence) if you get into an accident. It doesn’t cover any damage to your car. You need to have collision insurance to cover your car.
In Somers case, her state minimum requirement was $10,000. Her insurance covered property damage up to $10,000 for her accident.
3. Uninsured/underinsured motorist coverage
About 40 percent of states require some form of uninsured motorist coverage. It protects you if you get hit by someone driving without insurance. Or they don’t have enough insurance to cover injuries to you or your passengers.
A few states require drivers to have uninsured motorist property damage coverage. This covers damage to your car or property if you’re hit by an uninsured/underinsured driver.
The coverage limits typically match the liability limits within your policy.
4. Personal injury protection
Personal injury protection (PIP) insurance covers your or your passengers’ injuries. It doesn’t matter who is at fault in an accident. Only about 20 percent of states require it.
Coverage can extend to medical bills, income loss, rehabilitation, and other expenses depending on the policy.
In some states, MedPay is a requirement instead of PIP. It covers you and your passengers’ injuries, too. But MedPay won’t pay out for lost wages. And the coverage limits are usually lower that PIP.
Deciphering the numbers
You’ve probably seen your coverage limits written in a series of numbers like 25/50/10. Those numbers are your policy limit payouts.
The first two numbers refer to bodily injury liability limits and the last number refers to property damage coverage.
Nevada’s state minimum car insurance requirement is 25/50/20:
- $25,000 bodily injury liability per person
- $50,000 bodily injury liability per accident
- $20,000 property damage liability per accident
In an accident, your policy covers $25,000 per person for injuries up to $50,000 total for the accident, plus $20,000 in property damage.
So say you lived in Nevada and only had the state minimum car insurance. You hit a brand new Lexus SUV and injure four people inside. Your insurance covers their injuries up to $25,000 per person and $50,000 total for the accident as well as $20,000 in property damage.
But their combined medical bills are $100,000 and you totaled their brand new $50,000 SUV. Now, you have to cough up the $80,000 difference.
How much car insurance do you need?
Knowing how much car insurance you need can be tricky. Factors like location, car, age, marital status, driving history, and gender can affect your rate.
You want enough insurance to protect you and your assets but you also don’t need to break the bank with high monthly payments.
Here are some basics to consider when figuring out the best policy for you:
- Liability Insurance: Add up the value of your assets, investments, and income. And then purchase a liability policy proportional to that amount.
- Comprehensive and Collision: Comprehensive insurance protects against damage not caused by a car accident (hail, theft, etc.). Collision insurance covers all types of collisions (accident, tree, potholes). Carrying these depends on the age, mileage, and value of your car.
- PIP: If PIP is mandatory in your state, the minimum requirements are probably enough if you have health insurance and disability coverage. If you don’t, consider increasing your minimums or carry PIP if your state doesn’t require it.
- Uninsured/Underinsured Motorist Coverage: Did you know that an average of one in eight drivers on the road are uninsured? And about 60 percent of states don’t require drivers to carry uninsured/underinsured motorist coverage. It’s inexpensive. So it might be a good idea depending on how much you drive and where you live.
Why you should get more than the state minimum
Most insurers recommend 100/300/50 coverage instead of state minimum insurance.
That’s $100,000 per person for bodily injuries not to surpass $300,000 per accident, plus $50,000 for property damage. It’s more than double most minimum requirements.
State minimums are, well, minimums. It’s the cheapest, bottom-of-the-barrel insurance you can get. It likely won’t be enough if you get into an accident.
You’ll be responsible for expenses state minimum car insurance doesn’t cover. And it’ll have to be out of your own pocket. If you don’t have enough money, the other driver can sue you and go after your assets or have your wages garnished.
That’s what happened to Somers. Her $10,000 state minimum property damage policy wasn’t enough and she got sued for the $40,000 difference. It forced her into bankruptcy.
“I thought that the state minimum was fine and would cover at least some of my damages,” she said. “I thought it would be good enough, like when you buy store brand.”
But it wasn’t enough. The lawsuit impacted her whole life. “After the accident, my credit was garbage, I didn’t have a car and I walked with a limp for months,” she said.
Somers warns other drivers when she can. “I would never recommend getting the minimum state insurance because you’re gambling with your future in so many ways.”
Now, she carries the recommended 100/300/50 coverage plus uninsured motorist insurance. “I have a $1,000 deductible, so I’m not concerned about anything else besides that,” she said.
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