Here's What Happens When You Get in a Car Accident With State-Minimum Coverage

All states require their drivers to carry some auto insurance in order to drive legally. Though each varies in what they require, state-minimum coverage rarely costs more than a few hundred dollars per year. This makes it a tempting buy for those who are short on cash. 

But what often seems like a cost-saving measure at the time could lead to huge financial headaches in the event of an accident. Below we'll take a closer look at what happens to drivers who find themselves in a wreck with state-minimum coverage.

What is state-minimum coverage?

State-minimum car insurance is the minimum amount of coverage the state requires drivers to have in order to legally operate a vehicle. The required limits and coverage types vary by state. But typically, state minimum coverage includes at least:

• $25,000 of bodily injury liability coverage per person
• $50,000 of bodily injury liability coverage per accident
• $25,000 of property damage liability coverage

These are designed to protect other drivers if the policyholder causes an accident. The bodily injury liability coverage pays for any physical injuries that result from the accident while property damage liability pays for the other driver's vehicle and any possessions damaged in the wreck.

Some states also require their drivers to have uninsured and underinsured liability coverage, which take effect if the policyholder is hit by a driver without insurance or one without adequate coverage to pay for the damages. Personal injury protection (PIP) is also a requirement in no-fault states where drivers typically bill their own insurance for hospital bills resulting from a crash.

What happens to drivers who get in a car accident with state-minimum coverage?

What happens when a driver gets in a car accident with state-minimum coverage depends on a few factors, including who caused the accident and how severe it was. In most states, the driver who is found to be at fault is responsible for paying for the damages to both parties. So if a driver has state-minimum coverage and is hit by someone else, they shouldn't have much to worry about unless the other driver also has state-minimum coverage or is driving illegally without insurance.

But an at-fault accident is a different story. The insurance carrier will pay up to the policy's limits for damages to the other driver. But in a severe accident, that may not be enough. If someone suffers a serious injury costing tens or hundreds of thousands of dollars, they could wind up suing the driver in an attempt to recoup the remaining costs. 

The driver would also be out of luck when it came to repairing their own vehicle. State-minimum coverage doesn't include any protection for the driver's own car. Those hoping to protect their vehicle as well need to invest in optional collision and comprehensive coverage. But these will cost extra.

Purchase more coverage when possible

Though the likelihood of being in a costly car accident is pretty low, it's not a risk most want to take. It could lead to massive debt, not to mention legal headaches. So it's best to purchase more coverage whenever possible.

This might be difficult for those on a budget, but there are a few things drivers can try to get additional protection at a price they can afford, including:

• Shop around: Compare rates from several insurers before purchasing a policy. Every company weighs risk differently and offers a unique rate to each driver.
• Take advantage of all possible discounts: Car insurance companies apply most discounts to a policy automatically. But there are a few drivers that have to opt into, like driver monitoring programs. There's usually an upfront discount for participating in these, plus the option to save even more based on driving behavior.
• Go with a higher deductible: Deductibles are the out-of-pocket costs drivers pay in the event of an accident. Choosing a higher one usually lowers the policy's premiums.

State-minimum coverage is certainly better than skipping insurance altogether, but it's far from ideal. Drivers who aren't able to purchase extra coverage at the moment should strive to do so as soon as they have a little extra cash in their budgets, to ensure they're better protected in the event of an accident.