When people talk about car insurance policies, the focus is usually on the cost of their premiums. But there’s another key factor vehicle owners in Pennsylvania should be considering: mandatory minimum coverage.
Recently, the American Association for Justice (AAJ) released a report making the case that raising mandatory minimums on auto policies should be strongly considered. Here are some of the key takeaways:
Minimum Insurance Levels Are Woefully Inadequate
The report noted that in 2019, the total monetary cost of all car accidents in the United States was more than $340 billion. You might think that insurance companies would pay all or most of that amount, but that’s often not the case. In reality, insurance companies only covered 54% of this figure. The rest of that amount was paid by others, as follows:
- Crash victims paid 23%
- Local governments paid 9%
- Charities, healthcare providers, and other sources paid the remaining 14%
So why is there such an extreme disparity in the cost of accidents and the amount that insurance companies pay? Insurance companies are only required to pay out the amount of coverage that was purchased by their policyholder. In many instances, the coverage amount that is purchased is the mandatory minimum that is required by each state.
Essentially, mandatory insurance minimums are outdated. Most states established their mandatory minimums in the 1970s, and those mandatory minimums have remained largely unchanged ever since.
This means that mandatory minimums haven’t kept up with inflation, let alone the soaring costs of medical care and car repair. As a result, insurance payouts rarely come close to paying for all costs associated with an accident.
Raising Minimum Insurance Requirements Protects Victims
It’s easy to say that if insurance doesn’t completely cover the cost of an accident, the at-fault party will. This principle sounds good in theory. Unfortunately, in the real world, things are rarely that straightforward.
For example, suppose that you are hurt in an accident where you aren’t at fault. You live in Pennsylvania, where the mandatory minimum liability coverage is as follows:
- $15,000 for injury or death of one person
- $30,000 for injury or death of multiple people
- $5,000 for property damage
The at-fault driver only has the state mandatory minimum liability coverage that is required – $15,000.00. Your hospital bills alone are over $25,000.00 – not an atypical cost for medical bills associated with a car accident. However, the other driver’s insurance is only required to pay you the $15,000.00 in liability coverage that was purchased by the at-fault driver.
In practice, it is extremely difficult to collect money personally from an at-fault driver. If the other driver doesn’t personally have the money to cover the rest of your out-of-pocket medical expenses, you could be left handling the remaining $10,000.00 in unpaid medical costs on your own. And this doesn’t even begin to take into consideration the victim’s lost wages, pain and suffering, or other losses incurred.
When purchasing car insurance, many people choose the state mandatory minimum. In today’s society, this is often insufficient to fully compensate victims. States, such as Pennsylvania, should raise the required amount of mandatory minimum coverage so that situations like this example can be avoided.
Raising Minimums Likely Won’t Increase Premiums
A common argument against raising mandatory minimum coverage is that it will raise insurance premiums. However, the AAJ report notes that states that have raised insurance requirements have actually seen less of an increase in insurance premiums than the country as a whole.
Another frequent argument is that raising mandatory minimum coverage will lead to more uninsured drivers on the road. The AAJ report cites multiple studies that indicate increasing mandatory minimums aren’t directly associated with an increase in uninsured drivers.
The Outlook on Mandatory Insurance Minimums
Currently, it’s unclear whether states (including Pennsylvania) will raise the mandatory minimum coverage anytime soon. But requiring higher amounts of mandatory minimum coverage may be less expensive and less financially stressful for everyone in the long run.
In any case, consulting with an experienced car accident attorney can help you find the best ways to cover the costs of a collision.