Insurance Basics: Everything You Need to Know

Circumstances Under Which Minimum Auto Insurance Coverage May Be Enough

Every state sets its own auto insurance limit, with some being as low as $30,000 bodily injury for everybody injured in a single accident. Most people agree that these limits are pretty low for a typical motorist. For example, if you are found liable for an accident involving several vehicles and several people are injured, the bodily injury is likely to be way more than $30,000. This is why it's advisable to exceed your state's limit. However, you can also make do with the bare limits if:

You Have No Assets Whatsoever

Your auto insurance coverage is the premier source of funds if you are found liable for causing an accident. This means you don't pay anything if the damages don't exceed the applicable car insurance limits. However, the accident victims have the right to come after your assets if their damages exceed your coverage limit. This is likely to be the case in a serious accident, a multi-car accident or any accident involving considerable property damage and bodily injuries.

In such a case, the victims will petition the court to let them recover their damages from your salary, real estate properties, shares, and stocks, among other forms of assets. This means raising your auto insurance coverage limits is also a way of protecting such assets. As such, you should only consider surviving on the minimum limits if you don't have assets that potential accident victims can claim.

The Alternative to Minimum Limits Is No Insurance

You may also be a candidate for minimum auto insurance if the only other alternative for you is to drive without insurance. Low coverage limits equal low rates, and this is one of the reasons go for the state minimums: in most cases, the bare minimum will give you the lowest rate possible. Because the protection it (the minimum coverage) affords you is also minimal, you should always strive to raise your limits unless you absolutely can't do it. In short, buying minimal coverage is way better than not having any coverage.

You Have Excellent Health Insurance

Auto insurance doesn't just pay for other people's injuries or damages; it also caters to your damages. For example, your auto insurance coverage will take care of your medical bills if you are hurt in a car crash that no one else can or should pay for. Depending on your state's laws, your car insurance company pays your bills up to a limit, and your health insurance company settles the rest of the bills. However, your health insurance company can also take care of the bills if you don't have car insurance coverage. This means you are doomed if you lack both adequate car insurance and auto insurance coverage; you will have to use your private funds to pay for your medical bills if you are injured in a car accident.