The amount of car insurance you need in Alabama is a complicated question and personal decision. Alabama’s state minimum requirements and requirements from your lender will help guide your decision, however, these limits will likely be too low for most drivers. This article walks through the various car insurance requirements in Alabama and helps you determine the coverage you need.
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Alabama State Minimum Car Insurance Requirements
Alabama state law requires that all drivers purchase a certain amount of liability insurance coverage. If you get into an accident, liability insurance helps cover the costs of the person you hit. There are two types of liability insurance, bodily injury and property damage, both of which are required in Alabama. The below table defines these two types of coverages and the minimum limits you will need for each:
| Description | Minimum Required Limit | |
| Bodily Injury Liability | Covers the medical bills and injuries of the person you hit | $25,000 per person / $50,000 per incident |
| Property Damage Liability | Covers the repair costs of the car or other property you hit | $25,000 per incident |
Alabama has these minimum insurance requirements in place to protect all drivers. Without these minimum requirements, accident victims would have to pay out of pocket to fix their car or medical bills. Alabama’s minimum insurance requirements ensure that accident victims will have a way to reimburse their costs when they are hit!
How do Alabama’s insurance requirements compare to other states?
The minimum car insurance limits required in Alabama are similar to other states. Unlike some other states with broader requirements, however, Alabama requires no other car insurance beyond minimum bodily injury and property damage liability. Some other states require coverage like uninsured motorist or personal injury protection.
Can you purchase less than the state minimum insurance in Alabama?
No! Purchasing less than state minimum requirements (or deciding not to purchase car insurance at all) is illegal. Driving without car insurance in Alabama is considered a misdemeanor and can result in several consequences. Depending on whether it is your first or second offense, these consequences can include:
- Fines of up to $3,000
- Imprisonment of 3-6 months
- Vehicle impoundment
- License and car registration suspensions
While these are serious consequences, the biggest risk of not carrying car insurance is getting into an accident without insurance. If you cause an accident and don’t have insurance, you may be taken to civil court by the accident victim. In civil court, you may be required to pay a significant amount to the accident victim. Depending on how severe the accident is, this could cost you your savings and other assets (potentially even your house!).
Do I need proof of insurance in Alabama?
Starting in 2003, law enforcement officers can immediately verify Alabama driver’s insurance through an online verification system. Although there is an online verification system, however, Alabama requires that you carry a physical insurance card or an electronic picture of your card. Although most insurance cards will include all relevant information, you will need to confirm that the below are included in your card:
- Current policy date
- Insurer’s National Association of Insurance Commissioners number
- Vehicle identification number (VIN)
- Policy number
Is it enough to just purchase Alabama state minimum insurance?
In 2019, the average car accident victim in Alabama received injuries costing $17,741, which is below the national average of $22,352. An average accident also resulted in a $5,025 payment to replace or repair the victim’s car – which is above the national average of $4,659 (based on data from the NAIC).
Based on these averages, Alabama’s statement minimum requirements may be enough for most accidents… however, averages can be misleading. In more severe accidents, you may be required to reimburse victims for significantly more than these averages. For example, one law firm estimates spinal cord injuries settle for $350k-$400k on average! If you had state minimum insurance and caused a spinal cord injury your coverage wouldn’t be nearly enough!
Alabama Lender Requirements
If your car is financed or leased, you will likely have additional insurance requirements stipulated by your lenders. The best source to find your lender’s requirements will be speaking directly with your bank. Typically, however, your lender will require you to purchase comprehensive and collision insurance. A description of these two insurance coverages is below:
| Description | Required Amount | |
| Collision Coverage | Replaces or repairs your car if you get into a crash | The cost of replacing your car |
| Comprehensive Coverage | Replaces or repairs your car if it is damaged by things outside your control (like hail) | The cost of replacing your car |
Unlike Alabama’s state requirements – which protect people you might hit – lender requirements typically only concern your property.
What happens if you don’t insure a financed car in Alabama?
If you don’t purchase collision or comprehensive insurance for a financed car, you will likely be in violation of your lender contract. When this happens the lender can legally cancel your loan and repossess your car.
In lieu of repossession, a lender can also put “force-placed” insurance on your account. What this means is that the lender will obtain insurance on your behalf. They will then include the monthly cost of this insurance in your car loan payment. Force-placed insurance is bad for two reasons:
- Your insurance company has no incentive to price shop, so often force-placed insurance is more expensive than if you were to obtain insurance on your own.
- Force-placed insurance is designed to protect your insurance company, not you!
If you make the decision to purchase a financed car, it is essential to make sure you can also afford enough coverage to satisfy lender requirements. You do not want your car repossessed or to be forced into an insurance policy by your lender.
How much car insurance do I need in Alabama?
Although most Alabamians could benefit from increased insurance coverage, realistically the cost of increasing your coverage is expensive. Bodily injury liability is typically the most expensive, but also the most critical type of insurance to purchase. This is because the cost of injuries is typically determined by lawsuits, and settlements can theoretically be limitless! It usually makes sense to prioritize increasing your bodily injury liability coverage over collision, comprehensive, or property damage liability insurance.
There is no rule for adequate insurance coverage, but you should balance what you can afford with your risk tolerance. For example, if you have children or other dependents you should consider purchasing more car insurance.
Can I have too much car insurance in Alabama?
Yes! At a certain limit, it is typically more cost-effective to purchase an umbrella insurance policy instead of continuing to increase your auto coverage limits. Generally, if you need car insurance coverage at or above the limits in the below table, umbrella insurance may be a more cost-effective option:
| Bodily Injury Liability Limits | $100k per person / $300k per accident |
| Property Damage Liability Limits | $100k |