Many states require a mandatory minimum liability insurance policy for any registered automobile.  This was implemented to decrease the number of uninsured drivers on the road.  In response to the law, insurers have developed a “bare bones” insurance policy, which insures the driver of the vehicle only for damages they may become liable (found at fault) for in the event of an accident.

Typically this type of insurance coverage is advertised as, “Monthly payments as low as $39!” or some other eye-catching title.  It’s important to note that “liability-only” policies can carry insurance much higher than a mandatory state minimum.  This policy will insure the driver for bodily injury claims and physical damage they cause to another person, vehicle or property for the state mandated minimum limits of insurance.

This policy WILL NOT pay for damage to the policy holder’s vehicle in the event of an accident.  In the event you are found liable for an auto accident, it is possible to have a judgment filed against you for more than the limits of insurance of your policy, in which case you would be responsible for paying the additional damages out of your own pocket.

Let’s look at an example: Tom has a $39 liability-only policy with limits of 25/50/25.  Tom goes through a red light and runs into Mary’s car.  Both Tom and Mary’s cars are damaged and Mary suffers a broken leg.  Tom’s policy would cover the damage to Mary’s car (up to $25,000 in repairs) and Mary’s hospital bills for her broken leg (up to $25,000).  However, Tom’s policy would not pay for the damage to his own car or for any injuries he sustains.

This type of insurance policy is best suited for a person who has no assets to protect in the event of a judgment against them, and/or is not concerned with having their car repaired in the event of an accident they are found liable for.

Below is a list of minimum mandatory insurance requirements by state:

California: This state offers an Assigned Risk Plan.  This means if you do not “qualify” for insurance, due to various reasons including not being able to afford it, the state will place you with an Insurance Company who must insure you.

Florida: Combined Single Limit insurance is available to satisfy the State Minimum Insurance requirement.

Maine: Maine requires you to have a minimum of $1,000 Medical Payment (Med Pay) insurance.

Maryland: You are required to have Personal Injury Protection (PIP) for the passengers in your car, but can waive it for yourself as a policy holder.

New Jersey: You have the option of 10/10/5 minimum limits, with no Uninsured Motorist (UM) or Underinsured Motorist (UIM) coverage.  Underinsured Motorist (UIM) is mandatory if you choose the Standard Minimum limits program.

New York: You must carry 50/100 limit Wrongful Death coverage.

Rhode Island: Combined Single Limit insurance is available to satisfy the State Minimum Insurance requirement.

Tennessee: Combined Single Limit insurance is available to satisfy the State Minimum Insurance requirement.

Utah: Combined Single Limit insurance is available to satisfy the State Minimum Insurance requirement.