All 50 states require proof of financial responsibility or a form of automobile liability insurance coverage to operate a vehicle on highways. The states set minimum coverage standards, and hree numbers often reflect the insurance industry lingo for coverage. These numbers represent liability insurance for one person injured, maximum insurance for all persons injured, and property damage. Experts recommend that you have more auto liability insurance than the state requires. The Insurance Information Institute suggests a minimum coverage of 100/300, or $100,000 maximum for a single injury and $300,000 for an accident, according to Bankrate.
If your policy limits are 10/20/5, that’s the maximum coverage you have under the terms of the insurance contract. The “10” is for $10,000 in liability insurance for one injury or person involved. The “20” represents $20,000 for the maximum liability insurance for any one accident, regardless of the number of injuries. The “5” is for $5,000 as the maximum property damage coverage for any one accident. You might have other coverage with the same policy not referenced in the insurance jargon.
Liability insurance covers the other driver’s vehicle and injuries up to the policy limits. If you have damage to your car, you’ll need collision insurance when you are at fault. If the other driver is at fault and has liability insurance as required by law, his insurance covers your vehicle.
A determination of who is at fault isn’t required in states where no-fault insurance is the law. In Michigan, for example, you pay for insurance that covers you and your passengers. In exchange, you give up your right to sue for an auto accident except for death or serious injury. The basic no-fault policy in Michigan is 20/40/10. You can purchase insurance with higher limits if you think you need it. Additional liability coverage pays if someone involved in an accident with you sues and collects greater than the basic limits.
Comprehensive and Collision
Comprehensive and collision insurance on your auto policy covers your car, after a deductible amount. The deductible is the amount you pay before the insurance company pays, often $500 or $1,000. Comprehensive insurance covers non-collision events that cause damage to your car, such as a fire, windstorm, hail or vandalism. Collision insurance covers your vehicle in an accident that is your fault, after you pay the deductible amount. Collision insurance covers your vehicle only to actual cash value and doesn’t pay replacement value. Insurers rely on the National Automobile Dealers Association or Kelley Blue Book values for establishing cash value.
If the other driver doesn’t have insurance and is at fault, your uninsured motorist coverage will pay for your car repairs and your injuries. About 20 states require uninsured motorist coverage insurance along with liability. Most insurance analysts consider uninsured motorist coverage a wise purchase on your automobile insurance policy because this is protection for you -- not just for the other driver or just for damage to your car.
Your policy limits of 10/20/5 might increase if you have an accident in a state with higher limits. States such as Texas and North Carolina have 30/60/25 as minimum coverage. If you travel in one of those states and have an accident, your coverage increases to meet the legal requirements of the state you’re in.
Linda Richard has been a legal writer and antiques appraiser for more than 25 years, and has been writing online for more than 12 years. Richard holds a bachelor's degree in English and business administration. She has operated a small business for more than 20 years. She and her husband enjoy remodeling old houses and are currently working on a 1970s home.