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Understanding State Minimums so You Can Stay Legal

If you own a car or truck, then carrying auto insurance is a must.

Not only is carrying car insurance a smart move, but it is also the law in all 50 states.

Additionally, most of the 50 states also require drivers to carry a minimum level of protection.

So, how do you know what these state minimum levels are and should you carry more than the minimum levels?

What are the State Minimum Levels?

These include two essential areas of liability coverage: bodily injury and property damage.

These levels are expressed as three individual numbers. For example, the state minimum levels for policies in Alabama are 25/50/25, which translates to a $25,000 maximum in bodily injury liability for a single person, with a maximum of $50,000 in bodily injury for all persons injured in a single accident, and a $25,000 maximum in property damage liability.

These levels kick in when the policyholder is found to be at fault for the accident.

In addition to these two areas of liability coverage, some localities also require that drivers carry personal injury protection, which looks after medical, hospital and funeral costs regardless of who is at fault for the accident.

Personal injury provides this protection for not only the policyholder but also the policyholder's relatives living in the same household, passengers in the policyholder's vehicle and other authorized drivers. This option also protects the policyholder and family members if they are injured while riding in another person's vehicles or as a pedestrian.

Another type of protection that is required by some states is uninsured motorist coverage. This option protects the policyholder if there is an accident that is caused by another driver who turns out to be uninsured.

Do the Minimums Provide Enough Protection?

While carrying the minimum levels might keep you out of jail, they will not necessarily keep you out of court.

It is not uncommon for the costs stemming from an accident to exceed the minimum levels of coverage.

For example, an average hospital stay in 2006 was 4.6 days, according to the U.S. Department of Health and Human Services. That length of stay cost just under $24,000.

Now, if you carried the least amount of protection in Alabama, you would have just enough to look after this cost, provided the injured person does not require any care following discharge from the hospital.

However, if you carried the minimum levels in Arizona, your insurance would payout only $15,000 in bodily injury coverage for a single person.

If you find yourself in a situation in which you are at fault for an accident and the costs resulting from that accident exceed your maximum payouts, you will still be on the hook for those expenses. There is a very good chance that the injured person will sue you for any expenses not looked after by your plan.

As such, the Insurance Information Institute recommends that drivers carry at least $100,000 in bodily injury liability coverage per person and $300,000 in bodily injury liability per accident.