3.1 Indiana Auto Insurance Requirements

Minimum Liability Coverage: 25/50/25

Indiana's financial responsibility law (Indiana Code 9-25) requires every owner of a registered vehicle to maintain liability insurance at or above the state minimum, expressed as 25/50/25.

These are split limits. A combined single limit (CSL) of $25,000 does not satisfy the law because it would not guarantee the $50,000 per-accident aggregate. On the exam, watch distractors such as 15/30/10 or 20/40/15 — neither is Indiana law.

Uninsured & Underinsured Motorist Coverage

Under Indiana Code 27-7-5-2, insurers must offer UM and UIM coverage on every auto policy, and the coverage is automatically built in unless the named insured rejects it in writing.

Uninsured Motorist (UM)

• Pays when the at-fault driver has no insurance, or is a hit-and-run.
• Bodily injury minimum: 25/50.
• UM property damage may also be offered (commonly $25,000).

Underinsured Motorist (UIM)

• Pays when the at-fault driver's limits are less than the insured's damages.
• Statutory floor is $50,000 — it cannot be written for less.
• Example: at-fault driver carries 25/50; your damages are $70,000. After collecting the $25,000 from the at-fault driver, UIM (if $50,000) fills the gap up to your UIM limit, paying the next $45,000.

Rejection Mechanics

• A written rejection is required; a verbal or checkbox-only waiver is invalid.
• Once validly rejected, the insurer need not re-offer at each renewal.
• The insured may later add the coverage back in writing.

Trap: Candidates confuse "must be offered" with "mandatory." UM/UIM is included by default but can be waived in writing — it is not flatly required like the 25/50/25 liability minimum.

Proof of Financial Responsibility

Drivers must carry evidence of insurance and present it on demand:

• A paper or electronic insurance ID card is acceptable.
• Proof is required at registration and may be demanded after a crash or stop.
• The BMV may issue a random verification request; failure to respond suspends driving privileges.

At-Fault Tort System & Modified Comparative Fault

Indiana is a tort (at-fault) state, not a no-fault state. The injured party pursues the at-fault driver (and that driver's liability insurer). Recovery is governed by modified comparative fault under Indiana Code 34-51-2-6.

The 51% Bar Rule

• A claimant recovers only if less than 51% at fault.
• Recoverable damages are reduced by the claimant's own fault percentage.
• At 51% or more, recovery is zero.

Worked example: Two drivers collide; a jury assigns 40% fault to the claimant. With $80,000 in damages, recovery is $80,000 x (1 - 0.40) = $48,000.

Claims Against Government Entities

The Comparative Fault Act does not apply to suits against governmental defendants. Those claims retain the older, harsher contributory negligence rule: any fault by the claimant defeats recovery entirely. This distinction is a favorite exam point.

Exam Tip: Memorize the threshold: less than 51% to recover. A claimant exactly at 50% still recovers (reduced by half); at 51% they recover nothing.

How the Pieces Fit Together in Practice

When a producer writes an Indiana personal auto policy, the conversation runs in a predictable order, and the exam tests each step:

1. Confirm the legal floor. The applicant must accept at least 25/50/25 liability. Selling below that is a producer compliance failure, not merely a coverage gap.
2. Address UM/UIM. Because Indiana includes UM and UIM unless rejected, the producer documents either the purchase or a signed written rejection. A missing rejection form means the coverage is presumed in force at the limits offered, which can expose the carrier to a claim it never intended to write.
3. Match limits to exposure. A driver with significant assets is advised to buy above the minimum, because the 25/50 bodily-injury floor is quickly exhausted by a serious injury, and excess judgments attach to personal assets and future wages.
4. Explain the tort consequence. Indiana being an at-fault state means the other driver's liability insurer pays the insured's injuries; the insured's own UM/UIM is the safety net when that driver is uninsured or underinsured.

Common Application Errors

• Treating UM/UIM as automatically waived when no signature appears — it is the reverse: silence keeps the coverage.
• Quoting a single combined limit and assuming it satisfies the split-limit law.
• Forgetting that hit-and-run losses fall under UM, not collision, when the at-fault driver is never identified.

These distinctions — written rejection, split limits, the 51% bar, and the at-fault structure — are the most heavily tested concepts in the Indiana casualty section, so anchor every auto question to them.