It is simply the state minimum car insurance limits you must have. Policies that fall short of these cannot be sold in the market. So, you really don’t need to worry about buying anything less than basic requirements. Having such coverage allows motorists to comply with the laws while delivering much needed financial support to third parties who are injured or suffered monetary loss.
Setting the lowest protection offered to third parties is a balancing act. It is important that authorities come up with certain level of provision for unsuspecting citizens who might be a victim of a traffic accident. On the other hand, if the premiums are too high due to large liability facility people cannot afford them and go without it no matter how tough the penalties are.
However, remember that these liability limits are basic and you should increase them if you can afford it. One big vehicle accident you caused can ruin your financial well being if you don’t have insurance to pay for damages and injuries, especially if you have assets and businesses that have taken an entire life to build. People will not hesitate to come after you for any shortfall once liability coverage is exhausted. There are plenty no win no fee lawyers lined up to help them go after at fault drivers or their carriers.
Also, a few carriers take an interesting stand on this and can even try to price out applicants wanting the absolute minimum, as they consider such people to be high risk. Also, there is a high chance that such limits will be used up even in a small accident that there is no incentive for offering cheap rates. So, most standard policy packages come with increased level of liability protection already.
Generally, the premium will only go up a little even you buy much larger package. The best thing you can do is to get a quote for the mandatory cover and another one for the level of protection you want and see the premium difference. We have done this and found that if the minimum liability coverage costs you $700 increasing it 10 times may cost you extra $80 – $100. So, it would be a smart move to buy 10 times more protection for a fraction of additional premium.
Then, you need to consider what else you want to add on to a policy, based on the value of the automobile and current health plan. You should also purchase Uninsured Motorist coverage. This pays for your own damages and injuries if one of those drivers hits you and its limits are the same as what you afford for others. The state may require this to be included automatically with every policy sold. Otherwise, you may need to request separately. In any case, it is good to have it.
Keep in mind that rates vary substantially depending on the company you get a quote from. So, you shouldn’t accept the first one hurriedly and get several quotes before making your mind up. There are plenty resources here to help you find out which auto insurance is better for you. So do stay on and browse around.