What Does 10/20/5 Insurance Mean?

The insurance business, like other specialty areas of commerce, uses terminology relevant to the industry that may mean something differently in colloquial terms or common language usage. In addition, trades and professions develop jargon that holds no meaning outside of the specialization. For example, a term such as "10/20/5" is used in reference to insurance coverage maximums in an automobile policy, and it requires defining in its relevance to this one particular usage.


In automobile insurance policies, the amount of coverage the policy provides for liability stated as "10/20/5" translates into thousands of dollars, as in 10,000/20,000/5,000. The first number refers to the maximum amount the policy will pay for bodily injury per injured individual per accident -- in this case, $10,000. The second number refers to the limit of liability amounts for all injuries per accident. The third number, $5,000, refers to the maximum amount of liability coverage for property damage in one accident.


All 50 states and the District of Columbia require motorists to provide some type of proof of liability coverage prior to legally driving an automobile on public roadways. Most states require motorists to contract auto insurance with minimum limits coverage, referred to in terms such as a 10/20/5 policy. The remaining states require proof of financial responsibility. In other words, the driver must have significant assets that could be liquidated to cover damages incurred as the result of an accident.


The purpose of requiring minimum coverage for all legally licensed drivers traveling on public roadways is to protect the public from dire financial losses resulting from an accident. Yet, required minimums vary by state. Looking closely at the amounts as provided for in a 10/20/5 policy, it is evident that the coverage example is rather low. All states with the exception of Mississippi require higher minimums than a 10/20/5 policy.


The state of Minnesota requires drivers to maintain auto insurance coverage with minimum limits of 30/60/10, translating into $30,000 per injury per accident; $60,000 minimum for all injuries per accident; and $10,000 minimum coverage for property damage per accident. The states of Arkansas, Colorado, Idaho and Utah require a 25/50/15 policy minimum. Other states have higher and lower minimums.


Each state has its own department of insurance, which can assist the consumer in comparing and purchasing insurance policies. According to the National Association of Insurance Commissioners (NAIC), a state insurance department is a good place to acquire unbiased information. The NAIC also recommends that individuals with questions or concerns about their specific policies seek help from the official insurance department in their states.