Mandatory Car Insurance Laws Push Families Into Bankruptcy!

North Carolina insurance coverage lawyer Carl Nagle has shared this important warning to drivers across the country:  All states require drivers to carry liability insurance, which pays innocent victims after a driver causes an accident.  The laws that require auto insurance are called “financial responsibility laws”.  Connecticut was the first state to mandate car insurance in 1925 and, by 1927, all states required auto insurance.  Because auto accidents were a leading cause of traumatic injury throughout the country, state legislators agreed that drivers should be required to carry insurance which would fund medical needs for innocent crash victims, and to cover car repairs for innocent drivers.

Unfortunately, these laws have been very slow to change, and the current amount of required coverage is tragically low in every state.  For example, in California, New Jersey and Pennsylvania, while a driver must carry auto insurance that pays for damage to other drivers’ vehicles, the total amount of required coverage for “property damage liability” is just $5,000.00 per accident.   According to data released by Kelly Blue Book and Cox Automotive in late 2022, the average cost of a new vehicle in the U.S. is just above $48,000.00.  In a total loss case, required coverage would fund only 10% of a total loss claim.  For repairs, even moderate collisions typically result in repair and rental car costs that vastly exceed $5,000.00.  Thus, the mandated insurance coverage is insufficient to cover most property damage claims in these states.  

When reforms occur, they are always too little AND too late.  For example, in late 2022, California Governor Gavin Newsome signed Senator Dodd’s bill into law, reforming California’s law to increase the state’s mandatory insurance limits.  However, the statutory revision for property damage coverage only increased the total limit from $5,000.00 to $15,000.00.  This is the first change in 55 years.  Obviously, the “new” limit of $15,000.00 certainly will fall short for property damage claims arising from thousands of collisions for years to come.  Remember, many accidents involve multiple vehicles.  In these cases, the New Jersey or Pennsylvania limit of $5,000.00 or California’s revised limit of $15,000.00 must be divided and shared to pay for all vehicles damaged by the at-fault driver plus all other personal property damaged in a collision.  

Injury claim coverage is also tragically limited under our current laws.  Bodily injury liability coverage is the coverage that pays an innocent victim who suffers injuries in an auto accident.  The coverage is typically issued as “split limits” coverage, with a per-person amount limiting the amount that any individual victim can receive, and a per-accident limit which is the total amount of injury claim coverage that must be shared by all victims of the accident.  In North Carolina, our Financial Responsibility Act requires drivers to carry $30,000.00 per person and $60,000.00 per accident to cover crash-related injury claims.  If a driver causes catastrophic injuries to several victims, no individual victim receives more than $30,000.00 to cover all ambulance, hospital and medical bills, all lost wages and any additional claims for pain and suffering.  Further, even if several people endure severe injuries, the entire group of victims must divide and share the per-accident limit of just $60,000.00.

North Carolina’s laws are actually more favorable than the vast majority of other states.  Most require bodily injury liability limits of just $25,000.00 per person and $50,000.00 per accident, and lower limits are required in some states.  For example, in Louisiana and Pennsylvania, the total amount of bodily injury liability coverage required is just $15,000.00 per person, and $30,000.00 per accident.  In Iowa and Hawaii, mandatory limits for injury claims are $20,000.00 per person, and $40,000.00 per accident.  

According to, the average cost of a 3 day hospital stay is approximately $30,000.00.  This does not include surgical costs and, in many areas, typical medical costs are much higher.  For a collision resulting in ongoing medical care or surgery, the claim for medical bills alone vastly exceeds the minimum mandatory limits for bodily injury liability coverage on all auto insurance policies.  Thus, victims are often left with significant medical debt and zero payment for lost income or for pain and suffering.  Unfortunately, unexpected medical debt is a leading motivation for personal bankruptcy filings throughout America.  

As a Raleigh, NC car accident lawyer, I speak with collision victims every day.  I see how often crashes result in huge medical bills and other financial losses.  

Very little is being done around the country to address these archaic laws and, as we see in California, when change finally occurs, it is often far too little to make any real difference.  Consumers, victims and drivers everywhere should invest the time to contact local legislators to request meaningful change.  Michigan, Maine and Alaska currently require all drivers to carry bodily injury liability limits of $50,000.00 per person and $100,000.00 per accident.  North Carolina followed this lead and passed new legislation that moves the limits to $50,000.00 per person and $100,000.00 per accident beginning January 1, 2025.  Even these revised limits are quite low considering today’s medical care costs.  However, the laws of Michigan, Maine, Alaska, and North Carolina show that higher mandatory limits have been deemed appropriate in today’s economic markets.  All states should follow their lead.  

As a Raleigh, NC car accident lawyer, I speak with collision victims every day.  I see how often crashes result in huge medical bills and other financial losses.  If you cause an accident and don’t have enough insurance to cover all victims’ claims, you remain personally responsible for all expenses and damages that exceed your auto insurance limits.  To avoid losing your wealth due to an accident, you should always carry liability insurance limits higher than the minimum required in your state.  Also, to protect yourself, your family and your guest passengers, always carry high limits of Uninsured Motorist (UM) and Underinsured Motorist (UM) coverage.  UM coverage pays your injury claims if you are injured either by a driver who failed to carry insurance, or by a hit & run driver who cannot be identified after the accident.  UIM coverage pays you additional money in the event that a careless driver caused you injuries, but doesn’t have enough insurance to fully fund all of your injury claims. 

Please make careful, well-informed choices when purchasing auto insurance.  Always carry more than the minimum coverage required by law, and always invest in high limits of UM and UIM coverage.  Since auto accidents are quite common, this is the cheapest and easiest way to protect your personal wealth and assets.