No Inflation Here: Auto Insurance Liability Minimums Up After 37 Years
Massachusetts will implement its first increase in mandatory auto insurance minimums since 1988, next July
Governor Maura Healey signed legislation on December 23, 2024, raising the minimum bodily injury liability coverage to $25,000 per person and $50,000 per accident from the current $20,000/$40,000 requirements. Property damage minimums will increase sixfold to $30,000 from the current $5,000. The changes take effect July 1, 2025.
The legislation, however, leaves the other mandatory coverages: Uninsured motorist bodily injury coverage at $20,000/$40,000 and personal injury protection at $8,000 per person per accident.
While substantial, the bodily injury and property damage limit updates still fall short of keeping pace with nearly four decades of inflation. Boston has experienced a cumulative price increase of 170.94% between 1988 and 2024, with an average annual inflation rate of 2.81%. Thus, the 1988 bodily injury minimum of $20,000 would equate to approximately $54,200 today, making the new $25,000 requirement less than half of inflation-adjusted protection. However, the 1988 property damage minimum of $5,000 would equal roughly $13,550 today. This new $30,000 minimum property damage limit exceeds this inflation-adjusted figure by a wide margin, making it more in tune with vehicle repair costs today.
The new minimum bodily injury limits seem insufficient compared to modern medical costs and liability exposures, especially considering the rising costs of medical treatment and extended care.
Insurers have approximately six months to implement these changes for policies issued or renewed after July 1, 2025. This may require swift action to update forms, adjust rating models, and communicate changes to policyholders.
