Why Carrying Minimum Car Insurance Coverage Could Cost You More


When shopping for car insurance there is the temptation to select the lowest price which often means the lowest level of coverage. Enhanced vehicle coverage may increase premiums, but in most cases, increasing coverage will save you money in the long run.

When Might Minimum Coverage Be the Right Choice?

Households with no assets and little income might accept minimum coverage because you do not have assets to levy. College students or a recent bankruptcy can create a scenario where an injured party is not likely to target you for a lawsuit to recover the additional costs not paid by insurance.

Homeowners and families building wealth, should expand your car insurance policy to a level that will fully pay for an accident.

What is State Minimum Coverage?

Every state has established compulsory minimum coverage you must carry if you choose to drive a vehicle.

There are two aspects of car insurance coverage: property damage and personal liability. Property damage covers your vehicle, other vehicles, and property such as a building, light post, or a mailbox. Personal liability pays for medical injuries that occur.

Policies list coverage limits in the format 25/50/25: The first number represents the maximum coverage per person for bodily injury, the second number is the total payout per accident for bodily injury and the last number is the maximum paid for property damage due to the accident.

For instance, New York’s minimum coverage is 25/50/10, meaning they will pay up to $25,000 per injured person, and up to $50,000 maximum per accident for injuries. The policy also pays up to $10,000 for property damage. Arkansas only requires 15/30/15, and California’s minimum property damage is only $5,000.

The problem with minimum coverage is that it will not begin to cover the actual costs of even a small accident. Consider that the average cost of a new car exceeds $31,400. Replacing a bumper on a new vehicle can exceed $1,000, just for the parts. The math is similar when it comes to bodily injury: When a broken collarbone averages over $6,000 and a broken femur cost nearly $10,000, it is easy to see how injuries can reach the low maximum limits without being life-threatening.

Monetarily Responsible for an At-Fault Accident

If you are at fault, you are responsible for damages to both vehicles and personal property, along with any injuries to someone else in your car or another vehicle. Exhausting your policy limits beyond the state minimums could leave you with increased liability.

A moderately severe accident can cost over $100,000+ when including personal injuries.

When insurance does not pay the entire amount, injured persons can sue you for damages against the unpaid balances and levy assets or garnish wages for the payment.

The Cost of Additional Coverage

Doubling coverage is sometimes as small as $100 more per year, or less than $10 extra a month. You can save money through a higher deductible or forgo add-ons, rather than skimping on coverage.