Is minimum car insurance enough?

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Here's what you need to know...
  • If you have your state’s minimum insurance coverage and no more, you could end up owing a lot of money if you are in an accident
  • You should consider carrying additional insurance options such as collision or comprehensive
  • Speak with an agent about your unique situation before purchasing more coverage than you need


All states require that drivers carry automobile insurance in order to operate a vehicle. However, there are differing statutes in each state when it comes to the minimum amount of coverage that must be carried.

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It can be tempting for drivers to only carry the minimum necessary amount of auto insurance coverage. After all, why should you pay for more than you need? However, skimping on your auto insurance coverage can get you in a lot of trouble in the event of an accident.

What determines the minimum amount of coverage?

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The minimum amount of auto insurance coverage that drivers are required to carry is legislated by the state. The state does this to protect motorists from being involved in an accident with a driver who does not have insurance.

If a driver does not have insurance, it can be difficult or impossible to get them to pay in the event of an at-fault accident. This would leave other drivers potentially responsible for the damages caused by uninsured drivers.

Most people tend to think that an accident won’t happen to them, and they may be hesitant to pay the high cost of auto insurance.

For this reason, state-mandated minimum auto insurance requirements are important.

The state usually sets minimum auto insurance requirements quite low. The goal is to ensure that all drivers have insurance, but not to unfairly burden them with the requirement of carrying excessive coverage.

Who should carry the minimum amount of coverage?

Simply put, almost no one should carry the minimum required amount of auto insurance coverage. Carrying the minimum generally does not provide adequate coverage for most drivers. There are only a few exceptions to this.

One circumstance in which it may be appropriate to carry the minimum amount of coverage is if you are considered a pleasure driver.

Just make sure you are financially comfortable with carrying the risk of paying for additional out-of-pocket expenses if there is an accident. If you drive very little, the cost of a high-level of auto insurance coverage over time may exceed the out-of-pocket amount that you would pay in the event of an accident.

Some drivers may want to carry the minimum amount of auto insurance coverage because they feel that they can’t afford more. This is seldom a good idea.

If you cannot afford auto insurance, you will certainly have a hard time covering extraneous costs in the event of an accident.

An Accident with Minimum Coverage

The amount of required minimum auto insurance varies by state. However, many states require only liability insurance.

This means that your policy covers a certain amount of damage that you may do to another vehicle in the event of an accident.

The coverage will generally cap out at a certain dollar amount. If the amount of damage exceeds that amount, then you will be personally liable for paying it. This could add up to tens of thousands of dollars.

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It is also important to note that minimum liability coverage may not cover damage done to your car.

The policy could pay for the repairs or replacement of the other vehicle, but not your own. Obviously, the repair bills or potential complete replacement of the car could be a huge financial liability for many drivers.

One of the most expensive components of an accident has nothing to do with damage to vehicles or property.

Instead, it can be the hospital and medical bills associated with a car accident. These may apply to you, the other driver, and/or passengers in both vehicles. Medical bills can quickly add up, sometimes in excess of hundreds of thousands of dollars!

Carrying a personal injury protection plan as part of your insurance coverage can protect you from the high cost of medical bills. However, not all states require this as part of mandated minimum coverage.

If you don’t have personal injury protection as part of your insurance policy, you could be personally liable for huge expenses.

Other Reasons to Avoid Minimum Coverage

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The purpose of having auto insurance is to protect yourself in the event of an accident, if your vehicle is stolen, or other unforeseen circumstances. The minimum legal requirements for auto insurance coverage are designed to protect other drivers, not to protect you.

Carrying only the minimum amount of auto insurance may leave you with major gaps in your coverage.

As mentioned previously, minimum coverage may not pay for a single repair to your vehicle in the event of an accident.

If you have an accident, your insurance will only cover up to the maximum dollar amount of coverage on your plan. In some states, such as Florida, this may be as little as $20,000 based on the minimum auto insurance coverage requirements.

Such amounts are dangerously low because they won’t completely cover you in all instances.

Put differently, if you hit and total a $40,000 vehicle, you will max out your low liability coverage limit and be out of pocket $20,000 all at once!

There are other events that most standard insurance plans cover besides just accidents or collisions. What if your car is stolen, vandalized, or damaged by severe weather? In many cases, minimum levels of auto insurance coverage may not extend to these circumstances.

Before you make any decisions about your insurance policy, you should be fully educated about your state’s insurance requirements as well as the different types of insurance coverage that are available in your area.

You should understand what the minimum amounts are for coverage and whether you should consider purchasing more than that required amount.

To find this data, visit the National Association of Insurance Commissioners’ consumer-friendly website to view their map of the entire United States.

You can select your state from the map and you will be directed to a wealth of information about insurance requirements and companies in your area.

Why Additional Coverage is a Good Idea

It may seem counterintuitive to pay more for an auto insurance policy in order to save money. However, that is exactly what you are doing when you get the right policy that is perfectly tailored to your needs.

Buying additional coverage, such as personal injury protection or comprehensive collision coverage, can give you peace of mind that you will not have significant out of pocket expenses if you are involved in an accident.

You can also make sure that the dollar amount of your coverage is sufficient to meet any circumstances that may arise.

While it certainly costs more to have $250,000 worth of liability coverage instead of just $25,000, it is important to be realistic about what accidents really cost.

If you max out your coverage limit, you will be personally responsible for paying the overage.

You also may have specific needs that are unique and not covered by minimum auto insurance coverage. For example, if you travel frequently and rent cars, you may want a policy that extends to rentals.

If you frequently carry valuables in your vehicle, you may want to add a special rider to your policy to cover the contents of your car in the event of a theft.

Determining What Amount of Coverage is Right for You

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There are many resources available to help you determine what types of auto insurance coverage you should carry and how much.

Doing some research before you purchase coverage can help you make the best decision.

The Insurance Information Institute (III) offers information and resources on all types of insurance needs. You may want to consult their articles about how much coverage is best to carry and how to avoid mistakes when trying to save money on car insurance.

The amount of coverage you need is very specific to your financial situation, comfort level, and risk profile.

The amount of coverage you should carry will likely change several times over your lifetime.

It is always a good idea to carefully review your insurance policy every year to make sure that your policy and coverage is still appropriate for your needs.

A good auto insurance agent or company can help you discover the proper amount of coverage to carry. However, beware of being oversold. It is important to work with a reputable company who will consider your best interests.

Finding a great auto insurance provider near you is easy.

In order to get unbiased ratings and reviews for a potential insurer, visit an unaffiliated consumer review board.

J.D. Power and Associates provides an exhaustive list of insurance providers and their rankings. You can browse insurers by state or region and see comprehensive ratings and reviews that will help you chose the right auto insurance partner.

Don’t get caught in the trap of carrying the minimum level of auto insurance. It may seem like an easy way to save money, but it could end up costing you much more than you think in the long run!

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