Is Liability Car Insurance Enough?

Whenever you get behind the wheel, you run the risk of getting into an accident. To make sure that drivers can compensate each other for bodily injuries and property damage, all U.S. states, territories, and Canadian provinces have established financial responsibility laws that require drivers to purchase a minimum amount of auto insurance.

Components Of Auto Insurance

In the United States, the statutory minimum has three components:

• Coverage for bodily injury for each party involved
• The total limit for bodily injury resulting from any one accident
• The limit for property damage.

The three limits are commonly written side by side with a slash to separate the numbers, with each number representing thousands of dollars. So, for example, 10/20/5 would represent $10,000, $20,000, and $5,000 of coverage of the respective type.

Statutory Minimum Auto Insurance Chart

Auto insurance policies provide coverage in the United States of America, its territories and possessions, Puerto Rico, and Canada (but are you Driving to Mexico? Here’s What You Need to Know about Auto Insurance).

There is also a provision for those who travel in states or provinces where the statutory minimum is higher than the minimum in the state where the vehicle is garaged. In this case, the limits increase to the statutory minimum of the region in which an accident occurs.

For example, a car is garaged in Illinois (20/40/15), the driver is the at-fault party in Wisconsin (50/100/55), and there is $30,000 in property damage. The policy would cover the entire loss because Wisconsin’s statutory minimum is higher.

Several states have updated their statutory minimums recently, which the chart above does not yet reflect for everyone. California raised its minimum from 15/30/5 to 30/60/15 effective January 1, 2025, the first update since 1967. Virginia raised its minimum from 25/50/20 to 50/100/25, also effective January 1, 2025. Utah moved from 25/65/15 to 30/65/25 in 2025. Always confirm the current minimum with your state’s department of motor vehicles or insurance commissioner before assuming a chart number is still valid.

Are Statutory Minimums Enough?

In most cases, the answer is no. To ensure repayment, auto loan lenders require borrowers to name them as a loss payee on auto insurance policies. Lenders may also insist on limits higher than the statutory minimum as a condition for the loan. In these cases, the consumer has to satisfy it by buying sufficient liability insurance coverage.

Even if the car is fully paid for, the answer is still likely no. Take, for example, a driver in Pennsylvania (where the statutory minimum is 15/30/5) who collides into two parked cars. She does $6,000 in damage to one car, which does not have uninsured/underinsured motorist coverage, and $7,000 in damage to the other, which does have uninsured/underinsured motorist coverage of 250/500/50.

Because her limits are insufficient to cover the damage, the owner of the first car files a small claims action and the insurer for the second car sues the at-fault driver. She ends up responsible for the $8,000 difference between the policy limit and the amount of property damage she caused.

That brings us to a third reason why statutory minimums may be insufficient. Uninsured/underinsured motorist coverage covers damages beyond the other party’s limits. In the example above, the insurer of the second vehicle adjusted the claim and provided for a rental vehicle while the car was being repaired. Thus, the insurer had the right to seek reimbursement for indemnification from the at-fault party.

The numbers on a real injury claim are usually worse than people expect. The Insurance Information Institute reports the average bodily injury liability claim at about $28,278, which exceeds the per-person bodily injury cap in most state minimums (typically $25,000). A single serious injury claim involving surgery or extended rehab can run into the hundreds of thousands. This is why most insurance professionals recommend 100/300/100 as a starting point: $100,000 per person, $300,000 per accident, and $100,000 for property damage. Drivers with significant assets to protect typically go to 250/500/250 or layer an umbrella policy on top.

How To Save On Car Insurance Rates?

There are a few ways to save money on car insurance rates. Here are a few tips:

Maintain a Clean Driving Record

Safe driving habits can significantly impact your insurance premiums. Avoiding accidents and traffic violations demonstrates to insurers that you’re a low-risk driver, which can lead to lower rates.

Choose a Higher Deductible

Opting for a higher deductible means you’ll pay more out of pocket in case of a claim, but it can lead to lower premium costs. Just make sure you have the financial means to cover the deductible if an accident occurs.

Bundle Car Insurance with Home Insurance

Bundling your car insurance with home insurance can lead to substantial savings. Insurance companies often offer discounts for bundling multiple policies, as it allows them to reduce administrative costs. Bundle discounts typically run 5% to 30%, with the average bundle saving around 15%, or roughly $869 a year across home and auto.

Maintain a Good Credit Score

Many insurers use credit scores to help determine premium rates. A higher credit score often translates to lower insurance premiums, as it suggests to insurers that you are responsible and less likely to file claims. California, Hawaii, and Massachusetts prohibit credit-based scoring for auto insurance entirely, so this lever does not apply in those states.

Shop Around and Compare Quotes

Different insurance companies have varying pricing structures and discounts. Getting quotes from multiple insurers and comparing them can help you find the best deal. Keep in mind that while price is important, also consider the coverage and customer service provided.

Conclusion

Although you are required to carry a minimum amount of auto insurance to satisfy the legal requirements of where you reside, the minimum is often insufficient to provide adequate coverage for losses. You may also be required to maintain higher limits to satisfy a lender’s requirements. The additional cost of higher limits is low for the amount of additional protection provided, and should you be the at-fault party for a large loss, you may consider the extra cost a bargain.