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This reference to state minimums is the “piece of string” question. If you ask someone who works in the car insurance industry, they will tell you to buy as much as you can afford. At the other end of the scale, most states have a minimum level of insurance that every driver has to carry before driving any vehicle on a public road. You will probably end up somewhere in between.
Let’s start off with the basic unfairness that each state gets to set its own minimums. So, depending on which side of the state line you live on, your insurance premiums can vary quite considerably. It would be more fair if there was a national minimum but “big government” does not like to regulate state insurance companies. If you have a free choice on where you live, look on a map with insurance minimums written on it before you buy or rent a home. You should also remember that these minimums are not simple numbers. They represent insurance terms. So, under the heading of Bodily Injury, you might see Pennsylvania: 15/30. This means that each person who is injured in an accident gets up to $15,000 under the policy subject to a maximum total of $30,000 per accident. Cross over the border into Rhode Island and you are looking at 25/50. Choose to live in Maine and the numbers are 50/100 (where your premium is likely to be more than three times that payable in Pennsylvania).
In the real world of car insurance, we also have to add in limits for Property Damage, Uninsured/Underinsured Motorist Bodily Injury, Uninsured Motorist Property Damage, and so on. And then some states offer a “no fault” scheme or a standard tort system scheme.
Wow! Did this just get complicated or what!
Concentrating on “bodily injury”, this covers third party liability to those people who are injured or killed as a result of your poor driving. So, if you get sued, the insurance company picks up the legal costs of your defense and, hopefully, there is enough to pay out on a judgment for the medical bills, general damages for pain and suffering, and consequential loss of earnings. If the court awards more than the sum insured, you have to find the balance out of your own pocket. Take a look at the cost of medical treatments. You may think this an incentive to carry more than the minimum.
Remember that the minimum sum under this heading only protects against claims made by third parties. It does not cover injury to yourself or to anyone else named as a driver of the car on your policy. Nor, of course, does it cover damage to your vehicle or to any other property.
In some states, you are required to carry Personal Injury Protection on a first-party basis. This sets minimum limits to cover the general medical, hospital and, if the worst has happened, funeral expenses payable for yourself, any passengers in your vehicle(s) and anyone else you managed to hit or injure as a direct result of the way you drove the car.
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