In the 47 states and the District of Columbia that require liability insurance, a minimum amount of coverage is also required. Even the states that do not require liability insurance insist that when liability insurance is purchased in the state, it needs to meet a minimum requirement.
These minimum requirements are usually represented by a series of three numbers. The first number represents the amount of money (in thousands) an insurance company is required to pay for bodily injury for one person injured in an accident. The second number represents the amount an insurance company is required to pay in total for all the injuries in an accident. The final number represents the amount the insurance company must pay for property damage in an accident.
For example, the liability requirements of the state of Alabama are usually represented as 20/40/10. Thus, insured drivers in Alabama are required to carry a minimum of $20,000 of medical coverage for a single person injured in an accident, $40,000 of medical coverage for all people injured in an accident, and $10,000 of coverage for property damage.
Insurance companies are not allowed to sell policies that are under the liability limits. In Alabama, a motorist could not buy $10,000 worth of coverage for a single person injured in an accident or $5,000 of coverage for property damage. Insurance policies must at least meet the minimum requirements, although they can offer more coverage than the requirements. States that do not mandate liability insurance also have liability minimums—insurers cannot sell policies in those states below the minimums.
Not all states require medical liability insurance to be carried by drivers:—in Florida and New Jersey, only property damage liability is mandatory. California also allows lower minimums for eligible low-income drivers in the California Automobile Assigned Risk Plan. In New York, drivers are required to carry a higher amount of liability insurance designed to cover injury from the accident which results in death.
States have different laws as to when proof of insurance must be presented. Some states oblige such proof to be offered when a car is registered, others ask for such proof only when drivers are charged with a traffic violation or have an accident on their records.