All over the world, you need car insurance that covers the damages you do to others. In Austria and Germany, this insurance has to cover at least 7 790 000 € of damages. Isn't it a bit high?

This Canadian blog explains that coverage of 1 000 000 CAD (741 212 €) is not enough, especially if you cripple someone. I agree, but I don't see any reason to go as high as almost 8 million.

What do things look like in the US, a country of the dreaded 'medical bill'? Shockingly, this website recommends a coverage of $ 300 000 (284 950 €).

It is hard for me to imagine an accident where you would do more than 10 million € of damages. Perhaps seriously injuring 5 or more people, or crash-blocking the only fire exit in a burning building. Maybe crashing into the Louvre and T-boning the Mona Lisa.

Let us look at how often such freak accidents happen. I wasn't able to find any other data than the difference in insurance premiums.

The difference in premiums for a 7 790 000 € coverage and 15 000 000 € coverage for a new driver is about 1 € per month or 12 € per year. The additional claim to be paid by the insurance company lies between 0 and 7 210 000 €. Let's make it 3 million €. For an insurance company to break even, the probability of such a freak accident would have to be 4 in a million per car-year. In Germany, there are about 50 million insured vehicles. That is, to break even there cannot be more than 200 such freak accidents per year. But are there any such accidents at all? I wasn't able to find the data.

Is this all a scheme to get a few more pennies on premiums, or are there any cases when such high coverage is justified?

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    Try to hit a truck with chemicals that spill after the accident. Or a school bus. Yes, the risks are small, but the damage is huge, and the cost are minuscule. That's the original idea of insurance.
    – Aganju
    Commented May 19, 2022 at 17:02
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    @MSalters How expensive are 50 children in Germany/Austria? Commented May 20, 2022 at 13:49
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    Since you readily admit the cost of the additional coverage is negligible, what are you complaining about? You are basically saying the odd victim should suffer with inadequate compensation so you can save €4/year, and your logic is there are less than 200 such incidents a year, which are likely to be multi-victim accidents. Commented May 20, 2022 at 18:48
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    I on the other hand have the opposite question: why is it even legal for insurance companies to cap the payouts to victims.
    – user541686
    Commented May 21, 2022 at 20:28
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    From experience with a project for an insurance organisation, deaths are cheap. They had one guy who got into a bad traffic accident on his first day going to work, aged 16. Will not be able to work ever in his life. That is expensive.
    – gnasher729
    Commented May 25, 2022 at 20:14

10 Answers 10


I think you underestimate the costs of being found liable in an accident where someone is killed or seriously injured. You may be held responsible for the lifetime cost of care of someone on a ventilator, including their lost wages. As a financial advisor once said to me: "You want to know how bad it can be? Imagine being found at fault for an injury accident involving a car full of neurosurgeons". I can't speak to Europe, but in California in 2020 there were six lawsuits involving wrongful death in car accidents that settled for between $3,000,000 and $14,000,000 USD.

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    So if I caused an accident where I would irreparably injure the right hand of a single neurosurgeon who makes 300 000 € in a year, assuming 30 years of career lost, I could be sued for 9 million € ? Commented May 20, 2022 at 19:30
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    @MartinDrozdik: IANAL, but that sounds plausible to me. Any reason why you think it should be otherwise? The money is not meant as "punishment" for you, but as compensation for the poor guy who "lost" all that money due to the accident caused by you. Why should they suffer (financially) because someone else made an (avoidable) mistake?
    – Heinzi
    Commented May 20, 2022 at 20:23
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    Two ways the 300k/yr*30 years is over-simplified: One, it should be the difference between wages without injury and wages with injury, not total wages without injury. Two, it should account for ordinary increases in wages with additional experience and seniority. So it probably ends up being more like 200k+210k+220k+230k+...+490k
    – Ben Voigt
    Commented May 20, 2022 at 20:52
  • I wonder if the relatively high minimum in Germany has anything to do with the relatively high speed limits or lack thereof in some areas.
    – JimmyJames
    Commented May 20, 2022 at 21:05
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    @BenVoigt But you also have to discount those future earnings because they're in the future. Commented May 23, 2022 at 2:50

It sounds perfectly reasonable to me, and I don't know why some countries allow people to drive with such low policy limits, when payouts for permanent life-changing injuries can be so high.

Here in the UK, I have a normal motor insurance policy. It has limits on how much I can claim if I cause an accident, but has no limit on payouts to third parties.

  • Here in New Zealand car insurance is entirely optional which is maddening if you're on the other side of the accident. (Your own insurance usually heals you up while chasing the other person if known) We have limits on how much risk a person can be reasonably exposed to. The damages would have to be foreseeable.
    – David
    Commented May 22, 2022 at 22:34
  • Even without life-changing injuries it can be bad. I've seen what everyone at the time thought was just a fender-bender end up with $300k (probably upwards of $500k in today's money) in medical costs. She went to the doctor a few days later because her neck was bothering her--doc sent her straight to the hospital: Incomplete fracture. One wrong move and she could have dropped dead on the spot. Commented May 23, 2022 at 3:03

In the Great Heck rail accident in the UK on 28 February 2001, a driver, Gary Hart, fell asleep at the wheel. His car (a Land Rover) went off the motorway (freeway), through a fence, down an embankment, and came to rest with the front half on one track of a double-track high speed railway line. While he was using his mobile phone to speak to the emergency services, a passenger train hit the Land Rover, shearing off the front half. The train's leading car then derailed to the right so as to partly overhang the adjacent running line (for trains coming in the opposite direction).

The train travelled another 2000 feet like that, then collided with a freight train (carrying coal) coming in the opposite direction on the adjacent track. The closing speed of the trains has been estimated at 180 mph. Both train drivers and eight passengers died. Many more were injured and some will require lifelong care. Both trains were extensively damaged, as was a lot of track, and several hundred tons of coal spilled. One locomotive was destroyed. Hart was prosecuted and sentenced to five years in prison for causing death by dangerous driving.

By 2003 Hart's insurers had paid out 22 million UK pounds. By 2012 the total was said to be possibly 50 million, and to be 'the largest ever payout for a motor accident in the UK'.

2012 newspaper story about payout

2021 article about crash

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    Yep. People think about "what the heck can I do with my car" and forge the freak circumstances that sometimes hit. And that can rack up expenses into surreal dimensions.
    – TomTom
    Commented May 21, 2022 at 11:08
  • @TomTom -paralyse one person for life and you're looking at millions. Commented Feb 6 at 11:47
  • Why is this answer from 18 months ago suddenly getting all those upvotes? Is it now topical for some reason? Commented Feb 8 at 10:10

"Why is the mandated minimal liability car insurance coverage so high"

I think the main reason is if the 'at fault' party has insufficient insurance and assets to cover the damages the taxpayer may be on the hook to provide for the injured party, even if they are not made whole. For example, a young person can never work again and requires 24/7 medical care.

It also should not be particularly expensive since such accidents are rare for any individual driver, so the incremental cost of the higher coverage should not be high (and competition should ensure that it is not inflated if it's required for all).

So it's deemed to be valuable and deemed to be affordable- so the government mandates it. That's more-or-less the accepted job of governments.

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    Considering it's Germany/Austria, I suspect the 24/7 medical care is on the taxpayer anyway. Lost wages are another matter, though.
    – MSalters
    Commented May 20, 2022 at 10:20
  • @MSalters are they on the taxpayer, or are they on the taxpayer only if there isn't an insured party at fault? I don't know about German / Austrian insurance regulation to know if costs are recovered in such cases, but it's perfectly plausible they could be.
    – Caleth
    Commented May 20, 2022 at 13:01
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    @MSalters in DE/AT medical care is supplied by the statuatory body of health insurances. Those are funded by insurance rates of their members, not by taxes. Anybody who causes accidents and inflicts damage to the insured persons can, of course, be held liable for the expenses. And the insurance companies will get their expenses from injuring parties frequently.
    – Ariser
    Commented May 20, 2022 at 14:16

In the USA: The limits are not arbitrary limits. Actuaries actually work out the risk of loss over large historical periods based upon state, county, age, gender, frequency, and severity. Legal costs can be HUGE, and this is all priced into the costs. It is not based upon 1 or 100 incidents. It is based upon the expected loss to the insurance companies, and of course, most importantly, to the individuals, whos loss is often their life. These numbers are used by state regulators to specify minimum levels of coverage; to afford at least some minimum insurance protection, and to spread out the cost over a large group of insurance holders.

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    Don't neglect the political and cultural dimensions to insurance costs. The middle-class and below are extremely sensitive to car costs including gasoline, car property tax, registration and licensing fees and insurance costs. Politicians who appoint the insurance regulators experience a push-pull: Pushed by insurers to mandate higher and higher-cost policies; pulled by the latent threat of a voters' tax revolt to keep mandates low. Culturally, you might say that Germany's 'engineer' mindset seeks to cover every eventuality, while the U.S. has the opposite, a 'cowboy' or 'wildcatter' mindset. Commented May 22, 2022 at 17:47
  • That may be true. Not directly reflected in insurance costs, although there is always a cat and mouse game played between the insurers submission for rate increases and the regulatory need to keep costs within consumer range. Commented May 22, 2022 at 18:33

We had elective law in high school. The teacher, a judge, was good, I'm still profiting from it. One of the takeaways, derived from his daily practice: Get liability insurance as high as you can, ideally unlimited. You want to be insured against what would ruin you.

He had seen many lives ruined.

On the other end, it is pointless to insure against damages that you can pay for out-of-pocket: As with any insurance you lose money on average, but without benefit.

The picture that emerges is about the opposite of your question: Why on earth are American drivers allowed to drive with this ridiculously low coverage? Many of them could pay $50,000 (a typical minimum amount) out-of-pocket, and some states acknowledge that, offering the possibility to self-insure.

With minimum policies even relatively wealthy drivers, and worse: their victims, are not protected against truly catastrophic events, the kind that you actually need protection against.

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    You usually can set an amount that you pay out of your own pocket before the insurance starts paying, leaving the insurance to cover only risks that I can’t pay for. That will safe you a lot of money. And it saves the insurance money because they don’t have to spend any money handling cheap cases.
    – gnasher729
    Commented May 21, 2022 at 14:02
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    You're absolutely right - the real question is why are limits so low in America. Florida has an absurd $10K min on bodily injury. most states are around $50K, and a few around $100K. What's even more absurd is the need for uninsured motorist coverage because of the large fraction of drivers who are uninsured in spite of the requirements. In 2016, an estimated 12.6% of drivers were uninsured. The top 10 worst states ranged from 29.4% in Mississippi (#1), to 16.6% in California (#10).
    – Llaves
    Commented May 21, 2022 at 22:58
  • Why are American drivers allowed to drive with this ridiculously low coverage? Most Americans also carry homeowners’ insurance, which includes general liability. As some point, if there is a incident where A negligently caused some amount of injury to B and A cannot pay, it becomes like an accident for which no one is to blame. Commented May 22, 2022 at 12:54
  • @MichaelLorton Don't muddle things up by throwing unrelated insurances in the ring. As to "it becomes like an accident for which no one is to blame": And they lived happily ever after? What is it that all fairy tales with a happy ending have in common? No lawyers!" Commented May 22, 2022 at 13:29
  • In Germany it is very hard to drive an uninsured car for any length of time, unless it is stolen.
    – gnasher729
    Commented May 22, 2022 at 15:32

All over the world, you need car insurance that covers the damages you do to others. In Austria and Germany, this insurance has to cover at least 7 790 000 € of damages. Isn't it a bit high?

Car insurance requirements are this high because the government doesn't want to pay for damages out of the tax payer budget. If you get into a car accident and the insurance is too law, the following scenarios are possible:

  1. You have enough assets available to cover everything out of pocket => taxpayers are good.
  2. You have enough assets, but choose to cash them out and escape the country => taxpayers have to pay for treatment/support for the persons injured, plus pay the police to chase you down.
  3. You don't have enough assets, declare bankruptcy => the government now has to pay for treatment/support, plus they've got another bankrupt citizen on their hands. They can send you to jail but that's even more money spent on the mess.
  4. You don't have enough assets, your wages are garnished for life => the government might still have to cover the difference over the years, plus they have a disgruntled taxpayer who barely has an incentive to work harder as most of their wages disappear anyway.

So the easiest solution is introduce high requirements for liability insurance and let individual drivers pay for the potential risks out of their own pocket. In the US the limits are much lower because most voters have to drive to get anywhere, so they don't support restrictive insurance policies. In Germany most people can get around on foot / bike / public transit, so voters are more lenient on strict requirements.

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    Re: #3, you can't be sent to jail for not having enough money to pay out a lawsuit in the US.
    – Navin
    Commented May 22, 2022 at 8:58
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    If you want to compare how "restrictive" the insurance policies are, you should look at e.g. the cost per year, not the coverage. The coverage is irrelevant to the driver. From a quick search, it seems that the cost is very similar in Europe and US, so as usual, you're just getting a really shitty insurance deal in the US. The whole point of insurance is to balance the cost of insurance with the cost of the really bad things that can happen , not the common things you can easily pay out of your pocket. The insurance company can absorb those abnormal costs, you can't.
    – Luaan
    Commented May 22, 2022 at 10:14

Don’t forget: if an risk is extremely unlikely to happen, even if the damage done by the amount is high, insurance against that risk is not expensive.

Imagine that one policyholder in one million will have a $3 million loss each year. The actuarial cost of that insurance is... $3 a year.

I assume that the actual likelihood of loss drops off by the power law, so past a certain point it matters less and less where the limit is.


In the US there exists an issues with underinsured motorists and illegals not having any insurance. Illegal aliens in some states(NY) can now obtain state driver's licenses and purchase insurance.

Auto insurance provides option to purchase additional SUM coverage (supplemental underinsured motorist). This allows for your own insurance to pay you when someone else causes you bodily harm that they do not have the means or insurance to pay for. This also means that you are paying for other peoples negligence.


In my state (Pennsylvania, United States) one might ask why the mandatory limit is so low:

You are in compliance with the law if you have liability insurance in the following amounts: $15,000 for injury or death of one person in an accident $30,000 for injury or death of more than one person in an accident $5,000 for damage to property of another person

As to the reason any law is set the way it is, is a political question.

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