What happens when an at-fault party doesn’t have enough insurance?


You’ll still be held responsible for all of the damage caused in an at-fault accident, even if you don’t have enough car insurance, but there are some types of insurance that can help fill in the gaps in coverage.

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Rachael Brennan

Rachael Brennan

Senior Editor & Licensed Auto Insurance Expert

Rachael Brennan is a senior editor and a licensed auto insurance expert at Policygenius. Her work has also been featured in MoneyGeek, Clearsurance, Adweek, Boston Globe, The Ladders, and AutoInsurance.com.

Published January 20, 2022 | 5 min read

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Car insurance is required in almost every U.S. state to help make sure everyone is financially protected in a car accident. However, some states have very low required minimum levels of insurance, which means it is easy to cause more damage in a car accident than your insurance will cover.

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Choosing to have just the minimum levels of car insurance required in your state is enough to be able to legally drive, but in many cases it won’t be enough to pay for the damage you cause in an accident, which could leave you responsible for tens of thousands of dollars or more.

Key takeaways

  • The at-fault driver is still responsible for the damage they cause in an accident, even if it’s more than their car insurance coverage limits.

  • PIP helps cover medical expenses for you and your passengers in the event of a car accident, regardless of fault.

  • If the other driver was at fault but has no insurance, your uninsured motorist coverage will pay for your medical bills (up to the limits of your policy).

  • Umbrella insurance is a separate policy that gives you additional liability coverage to protect you and your assets if you are sued for damages.

What happens if I don’t have enough insurance to cover an accident?

Okay, so you’ve caused a car accident. Maybe you backed out of your driveway without looking, or you made an illegal left turn into traffic. There are some important steps to follow when you file a claim, including:

  1. Make sure everyone is okay and file a police report

  2. Provide information about the accident to your insurance company, including any pictures and relevant information such as driver’s license numbers and a copy of the police report

  3. If anyone needed medical care, make sure to save copies of all medical paperwork and provide insurance information to the doctor or hospital

  4. Get estimates for any necessary repair work

  5. Work with your insurance adjuster to make sure the process goes smoothly

Now comes the hard part — you find out your insurance policy, which is set to the state’s minimum required levels of coverage, doesn’t cover all of the damage you caused.

If a claim exceeds your coverage limits, you are still responsible for the damage caused in the accident. You can be sued for the damages you caused that went beyond the coverage limits and can be forced to pay by the court, which could mean having future earnings garnished and personal property auctioned off to pay for the damage.

This can vary from state-to-state, however, depending on whether you are in an at-fault or a no-fault state.

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Who pays for damages that exceed the policy limits?

Most of the time, the person who is at fault for the accident is legally responsible for 100% of the damage caused in an accident and can be taken to court and forced by the state to pay the damages that exceed their policy limits. 

However, this can vary depending on the laws in your state. For example, no-fault states require all drivers to have insurance that pays for their own injuries, no matter who is at fault in an accident. 

Additionally, some states operate under the concept of comparative negligence, which means damages are reduced in proportion to the degree of negligence. For example, if one party is found to be 75% responsible for an accident, they will be responsible for paying for 75% of the damage.

→ Learn more about no-fault states

How do liability limits work?

Your liability coverage is the part of your policy that pays for damage you cause to other people in an at-fault accident. Most auto insurance is written as a split level policy, which shows you the various liability levels you have on your coverage, like 100/300/50.

It is broken into two parts: 

  • Bodily injury liability: This is the coverage that pays for medical expenses if you injure someone else in an accident. This is listed as a per person amount and a per accident amount on your auto policy. In the example above, the 100/300 stands for $100,000 of coverage per person and $300,000 of coverage per accident.

  • Property damage liability: This is the coverage that pays for property damage you cause to other people in an at-fault accident. In the example above, the 50 stands for $50,000 of coverage per accident.

→ Learn more about how liability coverage works

What if I’m hit by a driver without enough insurance?

If you’re hit by a driver whose insurance doesn’t fully cover the cost of the accident and you purchased uninsured motorist coverage, your insurance can help pay for the damage or injuries. Uninsured motorist (UM) and underinsured motorist (UIM) coverage are designed to protect you if you are injured in an accident that is not your fault. 

If the other driver has no insurance, your UM coverage will pay for your medical bills (up to the limits of your policy). If the other driver has insurance but they caused more damage than their coverage will pay for, UIM coverage will step in and pay the difference between the other driver’s liability coverage and your medical bills, also up to the limits of your policy.

How does uninsured motorist coverage work?

Say you’re hit by another driver whose liability limits are set at 25/50/25. In a fender bender this is a decent amount of insurance, but if you are saddled with $45,000 worth of medical bills and their bodily injury coverage only goes to $25,000 per person, you may be left with $20,000 in medical expenses. 

While you can take the at-fault driver to court to get your bills paid, that is a process that can take years and leave you with mounting unpaid medical bills in the meantime.

In this scenario, UIM would pay the difference between the other driver’s liability limits and your total medical bills, up to the limits of your policy. UM and UIM are set to match your bodily injury liability levels, so having higher levels of liability insurance can help you in more ways than one.

→ Learn more about uninsured motorist coverage 

What does personal injury protection (PIP) do?

In some states, drivers are required to carry PIP coverage to pay for their own medical bills in the event of an accident. Also referred to as no-fault coverage, PIP insurance helps cover medical expenses for you and your passengers in the event of an accident, regardless of fault. PIP coverage is required by law in some states and covers more than just medical expenses, including:

  • Lost income when you can’t return to work after an accident

  • Child care expenses due to the accident

  • Death/funeral costs

  • Disfigurement

  • Dismemberment

There are laws limiting your ability to sue the at-fault party in most no-fault states, but it is still possible in some situations. If the damage is significant enough, some states will allow you to sue the at-fault party. Also, a lawsuit is often allowed in cases of gross negligence, like being hit by a drunk driver.

→ Learn more about personal injury protection (PIP)

Do I need umbrella insurance?

Sometimes referred to as personal liability insurance, umbrella insurance is a separate policy that provides additional liability coverage to protect you and your assets if you are sued for damages, usually sold in one million dollar increments. 

For example, if you accidentally crash your car into a Tesla Model X SUV and total it, that is easily more than $100,000 in property damage. Having an umbrella policy would cover you beyond your auto insurance limits so you would not be held responsible for paying that cost out-of-pocket.

Frequently asked questions

How often do insurance companies settle out of court?

The majority of car accident trials settle out of court. Taking a case to court is expensive, which means it isn’t worth going in front of a judge if the facts of the case are relatively clear cut.

How do insurance companies determine settlement amounts?

There are a number of factors used to determine how much to pay for a settlement, including liability, damage amounts, and the specifics of the insurance policies of both parties. There are various formulas, the most common of which is referred to as the multiplier method, that can be used to help companies determine how much to pay in a settlement.

Can someone sue you after insurance pays?

Generally speaking, part of agreeing to a settlement is waiving your right to sue again for the same accident. There can be exceptions to this rule, however, if there is reason to believe there was some type of wrongdoing or malfeasance on the part of the defendant’s legal counsel.