Coverage explained
Why state minimum auto limits are not enough
Minimum liability limits were set decades ago and have not kept pace with medical costs or vehicle values. What they cover, and what happens when they run out.
Every state sets a minimum amount of auto liability insurance you must carry. Almost every state set that number a long time ago, and most have not moved it much since.
That is the entire problem, and it is worth understanding properly, because “I have full coverage” is the single most common misunderstanding in personal insurance.
What the three numbers mean
Liability limits are written as three numbers — 25/50/25, for example. They are in thousands of dollars:
- 25 — the most the policy pays for bodily injury to any one person
- 50 — the most it pays for bodily injury in total, across everyone hurt in one accident
- 25 — the most it pays for property damage you cause
None of these pay for your car, and none pay for your own injuries. Those are separate coverages.
Where the numbers run out
Consider an ordinary accident: you are at fault, one other driver is injured badly enough for an ambulance, an emergency room visit, imaging and a short admission, and their three-year-old vehicle is written off.
Against a 25/50/25 limit, the medical side alone can exceed $25,000 before anyone has discussed physical therapy or lost income. The vehicle side frequently exceeds $25,000 on its own — average new vehicle transaction prices have been well above that for years, and a “modest” used car is often past it.
When the limit is exhausted, the policy stops. The remainder does not disappear; it becomes yours. That can mean a judgement, wage garnishment, or a lien.
What “full coverage” actually means
Nothing. It is not a defined term, and no policy document contains it.
People generally use it to mean liability plus comprehensive plus collision — which describes the categories on the policy while saying nothing about the limits. A policy at state minimum liability with comprehensive and collision is “full coverage” by that usage, and would still leave you personally exposed after a serious at-fault accident.
The number that matters is the limit, not the list of coverages.
What a good conversation sounds like
An agent working to the Client First standards will quote a meaningful liability floor as the recommendation — commonly 100/300/100 or higher — and show you the cheaper option next to it rather than instead of it. They will offer uninsured and underinsured motorist coverage at limits matching your liability, because being hit by someone with minimum limits is the mirror image of this whole problem.
If you choose lower limits after seeing that, it is a legitimate decision. What should happen next is that the decision goes in writing, so nobody is surprised later.
Sources
Where this applies
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