Auto Insurance in Minnesota

Overview

While more and more states are going back to a tort liability system of auto insurance, the North Star State is one of only nine states that have yet to repeal their no-fault laws.

No-fault, also known as Personal Injury Protection, began in the ‘30s as an alternative to claim litigation, which was often time-consuming and labor intensive, meaning expensive. Ideally, no-fault was supposed to streamline the process by having the insurer handle the claim rather than the courts.

Initially rates went down, which was great for the consumer. Nearly twenty states went “no-fault” by the 70s. But by the 80s, auto insurance premiums were skyrocketing due to over-aggressive providers such as attorneys and chiropractors, who benefited with the litigious environment that no-fault created.

According to the Insurance Federation of Minnesota (IMF), many in the state are pursuing reform to the Minnesota auto insurance laws. The IMF reports that insurance fraud in the Land of 10,000 Lakes is beyond control. For example, while Iowans pay $520 annually for traditional auto insurance, Minnesota motorists pay $720 in yearly premiums.

In the spring of 2011, elected Minnesota officials are considering legislative reform to the current Minnesota no-fault laws.

Minnesota’s mandatory auto insurance laws

Until Minnesota’s auto insurance laws are reformed, it is mandatory in the North Star State for all residents who register a vehicle or who drive in Minnesota to have the following auto insurance coverages in order to meet Minnesota state requirements.

Personal Injury Protection (PIP)

  • $40,000 – Personal Injury Protection (PIP), per person

Bodily injury

  • $30,000 – Liability for one person; $60,000 for injuries to two or more people

Property damage

  • $10,000 – property damage

Uninsured motorist (UM)

  • $25,000 – one person; $50,000 for multiple victims

Underinsured motorist (UIM)

  • $25,000 – one person; $50,000 for multiple victims

Personal Injury Protection (PIP)

Minnesotans are required to carry PIP coverage. Many motorists mistakenly believe that their automobile insurance policy will take care of all losses sustained in a car crash, but this is not the case. As a no-fault state, Minnesota no-fault auto insurance coverage only covers injuries that result from a car crash. PIP pays medical costs if you receive injuries as a result of a car crash. In a no-fault state such as Minnesota, it does not matter if you or the other driver caused the accident.

The $40,000 cap for PIP covers up to $20,000 for medical costs and $20,000 for non-medical costs per accident such loss of wages.

Beware of forced insurance

If you have financed your automobile through a commercial lender, the lender will usually make comprehensive and collision coverage mandatory in order to protect their assets. At the time of purchasing your vehicle in Minnesota, it is important for you to note that if you do not purchase this coverage with your Minnesota auto insurance policy, the lender is likely to buy this auto insurance coverage, also known as “forced insurance,” and pass the costs along to you, charging you a very expensive premium. This is legal in Minnesota and covers only comprehensive/collision.

Optional Minnesota auto insurance coverage

While the above auto insurance coverages are mandatory, there are several optional auto insurance coverages to consider. It is especially important to consider carrying the optional collision and comprehensive coverages.

Collision. Optional collision coverage protects you in the event that your automobile is damaged in a car crash.

Comprehensive. When it comes to In the Land of 10,000 Lakes, there are a number of situations to consider when it comes to having auto insurance that will cover a loss that is not a result of a car crash. Those situations include the following: theft of your vehicle, fire or falling objects. An important consideration for those who live in rural areas, especially Northern Minnesota, are the numerous potential accidents involving deer.

Who is covered

Any relative living in your household who doesn’t have an auto insurance policy of their own will be covered under your Minnesota auto insurance policy, including any minor who is in your custody.  If you have given another licensed driver permission to drive your automobile, they are also protected under your auto insurance, unless they are covered by a policy of their own.

If you have given permission to friend to use your automobile, and the friend has an accident, your friend will be covered if your current Minnesota auto insurance policy includes comprehensive and collision auto insurance coverage. It is important to go over this with your auto insurance agent or company.

Average annual cost of insurance

According to Insure.com, the 2011 average annual premium for Minnesota auto insurance is $1,614, just slightly above the national average of $1,561.

 

Sources

Insurance Information Institute www.iii.org

Minnesota Department of Commerce – Insurance Commissioner’s Office
Tel  651-296-2488, local
Tel 800-657-3602, in-state
Web www.commerce.state.mn.us