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It Can Be Cheap to Get More Than the Minimum Car Insurance Quote

Sept. 16, 2015
Auto Insurance, Insurance
It Can Be Cheap to Get More Than the Minimum Car Insurance Quote
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Each state has a minimum amount of coverage that drivers must choose when getting a car insurance policy. This might lead you to think that the minimum car insurance is sufficient. That could be a big mistake.

If you cause an accident, the costs you would be personally responsible for could easily surpass those minimums, leaving your personal assets at risk in a lawsuit. And skimping on liability coverage might not even save you that much money.

[Compare car insurance quotes through NerdWallet’s Car Insurance Comparison Tool.]

State car insurance minimums

The most common state liability coverage requirement — it’s the mandatory minimum in 12 states — is 25/50/25. The numbers mean you must have insurance that can pay up to:

  • $25,000 for injuries to one person
  • $50,000 for total injuries in any one accident
  • $25,000 in property damage

For bodily injury liability, Alaska and Maine have the highest requirement, with a minimum of $50,000 per person and $100,000 per accident. Florida has the lowest, with $10,000 per person and $20,000 per accident. Property-damage liability minimums range from $5,000 (California, Massachusetts, New Jersey and Pennsylvania) to $25,000 (in 17 states).

For specifics about your own state, check NerdWallet’s list of all state liability insurance requirements.

Many states also require personal injury protection (PIP) and uninsured motorist (UM) coverage, which will be included in your quote. Remember, these required minimums don’t cover damage to your own car. That would fall under collision and comprehensive coverage, which is optional, although it may be required by your lender if you have borrowed money to buy your car.

The price of higher insurance limits

NerdWallet looked at car insurance quotes for minimum liability policies in three states from the four largest auto insurance companies. We priced the most common requirement, 25/50/25, then checked how much it would cost to raise coverage to 100/300/100, which would offer much more protection.

In the states we analyzed, raising liability limits boosted premiums by an average of 13%. That means spending $247 more a year, on average, will buy protection for an extra $250,000 in injury claims and $75,000 in property damage. Not a bad deal.

That said, there’s considerable price variation among both companies and states (except for State Farm, which consistently charged 24% more for the higher limits in the three states we examined).

Insurance rates for minimum vs. high liability limits
Liability coverage level Allstate Geico Progressive State Farm Average
Alabama minimum liability $747 $256 $1,094 $381 $619
Alabama high liability $778 $305 $1,178 $473 $683
Extra cost 4% 19% 8% 24% 10%
Georgia minimum liability $1,014 $313 $1,033 $586 $736
Georgia high liability $1,301 $372 $1,071 $726 $868
Extra cost 28% 19% 3.7% 24% 18%
Ohio minimum liability $640 $360 $777 $332 $527
Ohio high liability $709 $404 $790 $412 $579
Extra cost 11% 12% 2% 24% 10%
Methodology: Minimum required liability limits are $25,000 in injuries per person and $50,000 per accident, plus $25,000 in property damage. High liability limits are $100,000 in injuries per person and $300,000 per accident, plus $100,000 in property damage. Rates do not include comprehensive, collision, personal injury protection or uninsured motorist coverage. Rates shown are for a 30-year-old with a clean record driving a 2015 Toyota Camry 10,000 miles a year. Your own rates will be different.

Car accident costs

You might think that an extra $247 is better spent on something other than more insurance. But consider this against the risk you’re taking with minimal liability coverage.

In 2013, the average property-damage liability claim was $3,231, while the average injury liability claim was $15,443, according to ISO, an industry information provider. Looking at those averages, the state minimum requirements are perfectly adequate for the typical accident.

But insurance is supposed to protect against a disastrous event. According to the New York Times, about 5% of injury claims in 2010 topped $100,000, while about 2% were for at least $300,000.

Once claims exceed your insurance liability limits, you’re responsible for the rest. That’s why buying 100/300 coverage is often recommended to protect you in the event of a big accident.

Buying a policy with high liability limits has another advantage: It makes you eligible to buy an umbrella policy — an even cheaper way to add extra liability coverage on top of your auto (or homeowners) coverage. A $1 million umbrella policy typically costs $150 to $300 a year, according to the Insurance Information Institute. People buying only minimum insurance limits can’t buy umbrella policies.

If you have significant assets, you almost certainly want to buy more than the minimum amount of liability coverage, and you may want to consider an umbrella policy to protect you against the impact of a major accident.

NerdWallet’s car insurance comparison tool can help you shop around for coverage with higher liability limits.

Aubrey Cohen is a staff writer covering insurance and investing for NerdWallet. Follow him on Twitter @aubreycohen and on Google+.

Image via iStock.