Understanding The Auto Insurance Term:  20/40/10 vs 25/50/25
  • Post last modified:October 5, 2020
  • Post category:Insurance

Comparing 20/40/10 to 25/50/25 Auto Insurance

When it comes to car insurance policies, the abundance of options offered by auto insurance companies can be overwhelming.

How much coverage do I need? How much coverage is required? How much is it going to cost?

You’ll notice when choosing between policies for your auto insurance, liability coverage is listed in a triad of numbers, 20/40/10, 25/50/25, etc.

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Those numbers have to do with the dollar amount of coverage provided by an insurance policy.

The Three Components of Liability Auto Insurance

paperwork on 100 300 car insurance coverage in oklahoma

No matter the amount of coverage you choose, any car insurance liability policy will consist of three components:

  • Bodily Injury, single: This is the maximum amount an insurance company will pay for bodily injury per person in an accident.
  • Bodily Injury, total: This is the maximum total amount an insurance company will pay for bodily injury if two or more people are injured.
  • Property Damage: This is the maximum total amount an insurance company will pay for property damage in an accident.

To look more specifically at each of these components, let’s compare  20/40/10 with 25/50/25 auto insurance coverage.

What is 20/40/10 Auto Insurance? 

Let’s start with the first number in this triad, 20. This “20” is the limit (in thousands of dollars) that your carrier will pay for bodily injury to one person per accident

This means if you injure someone with your vehicle, your auto insurance carrier will pay that injured person $20,000 for their medical bills. 

This number represents the maximum amount of liability protection for bodily injury for one person per accident.

The next number (40) corresponds to the maximum amount of liability protection for bodily injury for all people in a single accident.

This means in a 20/40/10 policy example, 40 is the limit (in thousands of dollars) your carrier will pay total for all people injured in one accident.

If you are at fault for an auto accident that results in the injury of multiple people, and your car insurance policy is a 20/40/10 policy, the maximum amount of money your carrier is going to pay out, regardless of how many people are injured, is $40,000. 

The final number in this liability policy, 10, is the maximum amount of liability coverage for property damage in a one accident.

This means in an auto accident,  if you damage someone’s property, your insurance carrier will pay up to $10,000 to cover the damages. 

What Does 25/50/25 Auto Insurance Mean?

auto insurance paperwork with a toy car

The numbers in this liability policy are different, but represent the same aspects of coverage as 20/40/10 auto insurance.

25/50/25 auto insurance breaks down like this:

Your carrier will pay out $25,000 in bodily injury per person in a single traffic accident/auto accident that was your fault.. That’s what the first 25 represents in 25/50/25 auto insurance. 

The 50 in 25/50/25 auto insurance represents the most money in thousands of dollars that your auto insurance policy will pay out in the event of an auto accident where you are at fault. Total.

In this case, that number would be $50,000. This means if you are at fault in an auto accident that causes injury to 2 people or 10 people, $50,000 is the most your carrier will provide. 

For example, a 25/50/25 policy would cover two people’s injuries up to $25,000 each, without exceeding the $50,000 limit. The same policy would cover 5 people’s injuries as long as the total was less than $50,000 and no individual required more than $25,000.

The last 25 in a 25/50/25 policy signifies the amount of property damage covered by your policy. In this particular auto insurance policy, you would be covered up to $25,000 for damaged property in an automobile accident for which you are at fault. 

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How Do 20/40/10 and 25/50/25 Auto Coverage Compare?

Both 20/40/10 and 25/50/25 are at the minimum end of auto liability coverage. 

Do not be surprised if your insurance agent encourages you to purchase more coverage than the minimum, as there are risks to your own finances by only carrying the minimum liability requirements. 

Both 20/40/10 and 25/50/25 auto insurance policies operate the same, but 25/50/25 does offer a little more coverage than 20/40/10.

As the policy holder of either of these policies, if you are at fault for an auto accident, each type of policy covers: injury to one person in a single accident, a maximum total dollar amount payout regardless of the number of injured parties, and property damages. 

Learn more about 25/50/25 Insurance

What Auto Insurance is Required on All Cars?

map infographic of required auto insurance coverage by state in the us

While this varies per state, 20/40/10 auto insurance is the state minimum requirement for the following states: Alabama, Connecticut, Hawaii, Michigan, and West Virginia.  

Most states require, and insurance agents recommend, more auto insurance liability coverage than a 20/40/10 policy.

Arkansas, Georgia, Nebraska, New Hampshire, North Dakota, Oklahoma, Rhode Island, and South Dakota are states that require 25/50/25 liability insurance as the minimum

Which Auto Insurance is Cheaper?

This question isn’t clear cut for many reasons. 

Lower insurance premiums often mean higher deductibles. This means you are responsible for more out of pocket expenses before your insurance will pay anything at all towards your insurance claim.

A lower coverage policy may have a more affordable insurance premium, but in the event of a major accident for which you are at fault, that policy will not actually be the cheaper option. 

If you were to be at fault for an accident and you carried a 20/40/10 auto insurance policy, any expenses outside the provided policy would come out of your pocket. 

For example, if four people were injured in an accident for which you were at fault, and their injuries totaled more than $40,000 worth of expenses, you would be responsible for that excess expense. 

Further, if you carried a 20/40/10 policy and only one person was injured and his or her injuries amounted to more than $20,000 worth of expenses, you would be responsible for that excess expense– out of your own pocket. 

Which Auto Insurance is Best for Me?

Both 20/40/10 and 25/50/25 are policies with very low limits. 

If you were to cause an accident and total someone else’s vehicle, or multiple vehicles were involved, these minimum limits will likely be too low to cover all of the damages. 

Not only could this result in you having to pay a significant sum out of pocket, but you could end up being sued by any of the other involved parties.  

It is highly recommended to purchase a liability insurance policy in excess of 100/300/100, consider a personal umbrella policy to protect you in the event you are sued, and/or in general, buy as much liability coverage as you can afford.

Contact us or call us today to get an auto insurance quote, get some insurance advice, or to update your coverage.