• 25
  • April
    2011

The Wisconsin legislature has passed legislation to reduce the minimum amount of automobile insurance that motorists are required to carry. Known as Assembly Bill 4, the bill passed the State Assembly in March and the State Senate earlier this month. It now awaits Governor Walker's signature.

The background to the bill was a 2009 law that substantially increased minimum liability limits on car insurance policies. The 2009 legislation increased the minimum required coverage for accidents involving bodily injury or death to $50,000 for one victim. The amount for multiple victims was raised to $100,000. The figure for property damage is $15,000.

The 2011 legislation seeks to roll back those limits significantly. AB4 would make the mandatory limits $25,000 for bodily injury or death of a single victim, $50,000 for multiple victims, and $10,000 for property damage.

Officials from the insurance industry assert that the 2011 legislation will reduce the number of uninsured motorists by making coverage more affordable. There are, however, major flaws in that reasoning.

First of all, there is no evidence that cutting the minimum coverage in half would have the desired effect. Reducing the minimum limits could cause the cost of underinsured motorist (UIM) coverage to go up. This, in turn, may result in fewer people buying UIM coverage - interfering with that mechanism for properly compensating injured people.

In practice, the 2011 law could very well leave accident victims with less money than their claims really warrant. The fact is that $25,000 for bodily injury does not go very far in a serious accident. The medical costs of a serious injury are remarkably high. Lowering the auto insurance limits to $25,000 may therefore prevent many injured people from receiving the compensation that they need to move forward with their lives.

Source: "Wisconsin Passes Bill to Reduce Auto Liability Coverage Minimums," Insurance Journal, 4-6-11