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Do all cars need a required amount of auto insurance coverage?

Things to Remember...
  • Knowing the minimum coverage and finding the right coverage can be confusing
  • Virtually all states require drivers to carry liability insurance
  • Different states have specific laws regarding the coverage

From the time the automobile was invented, drivers have had to deal with the risk of accidents.

It soon became clear that the statutes requiring at-fault parties to assume financial responsibility for damages they caused were not adequate to address automobile accidents.

Individual states began enacting laws that required drivers to prove they had the assets to pay for damages if they were at fault.

Eventually, most states passed laws requiring drivers to carry certain types of automobile insurance.

Although each state has different requirements, the amounts of coverage are typically the same for all cars and all drivers within the state.

Enter your ZIP code into our FREE car insurance comparison tool right now to see quotes for different levels of coverage.

Table of Contents

Types of Car Insurance Coverage

In most states, drivers are allowed to choose the types of coverage they wish to purchase. Certain coverages, however, are mandatory.

Vehicle owners typically need to provide proof of auto insurance coverage to register their cars.

In some states, if the Department of Motor Vehicles receives notice that a policy has been canceled, it may revoke the registration or suspend the owner’s license.

  • Liability – The minimum policy limits vary by state, and in some jurisdictions, drivers with a history of driving while intoxicated must carry higher limits. Liability is composed of bodily injury and property damage protection, but it does not pay for damages suffered by the policyholder.
  • Uninsured/Underinsured Motorist  Despite the laws, some drivers fail to even purchase cheap auto insurance or they purchase policies with limits that are insufficient to cover a serious accident. This type of coverage pays the policyholder for damages caused by an uninsured or underinsured motorist.
  • Personal Injury Protection – Personal injury protection pays the medical bills for the policyholder and his passengers, up to the policy limits, regardless of who is at fault for the accident. The coverage is not offered in all states; it is mandatory in some but optional in most.
  • Collision – If the covered vehicle is damaged in a collision, this is the type of coverage that will pay for repairs. Should the vehicle be damaged to the extent that repairs will cost more than the depreciated value of the car, the insurance company will make a lump-sum payment.
  • Comprehensive – This coverage pays for damages or losses to the covered vehicle that are not the result of a collision. Vandalism, hail damage, and theft are examples of losses that would fall under comprehensive coverage.
  • Gap Coverage – Because collision and comprehensive payments are based on the current value of the vehicle, some lenders may find that a payment for a total loss is insufficient to pay off the outstanding loan. Gap coverage pays the difference between the remaining loan amount and the depreciated value of the vehicle.
  • No-Fault – In simplest terms, no-fault insurance means that when there is an accident, each driver’s insurance company covers its own policyholder’s damages. It does not matter who is at fault. In most states that require no-fault automobile insurance, the policyholders are limited in their ability to sue the other driver.

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Finding the Best Prices on Car Insurance

Although it is true that all cars need the same amounts of liability coverage and need to be covered against loss in amounts that reflect the value of the car, insurance rates can vary widely.

Each state has an insurance board or commissioner that regulates insurance companies, but the range in which the rates must fall is quite large.

Obtaining online quotes from a number of different companies is the easiest way to find which company offers the best rate.

Not every company is the least expensive for all drivers, so just because the owner of an expensive sports car finds a great rate at one company, it is not always true that the owner of a family sedan will do likewise.

The driver’s history of accidents and tickets is an important part in determining insurance rates. In most states, insurance companies can also take the driver’s credit history into account when deciding whether to issue a policy.

The more accurate the information entered when requesting a quote, the more accurate the quote will be.

Know what states have the highest auto insurance rates so that you can compare quotes among other quotes for that state.

Mandatory Minimum Coverage by State

Liability insurance is typically represented by three numbers, such as “20/40/15,” which state the coverage amounts in thousands.

The first number is the amount the policy will pay for bodily injury to one person injured in an accident for which the policyholder is at fault, the second number is the amount for all people injured in the same accident, and the third number is the amount of property damage protection.

Many people ask why auto insurance minimums vary so much per state, but it is important to know the coverage levels for your state.

Be sure to compare quotes and know what you are looking for in order to get the best auto insurance rates.
Enter your ZIP code into our FREE auto insurance comparison tool to start comparing quotes right away!

  1. http://www.naic.org/state_web_map.htm
  2. https://www.allstate.com/auto-insurance/liability-coverage.aspx
  3. https://www.thebalance.com/comprehensive-vs-collision-coverage-527402
  4. http://money.cnn.com/pf/money-essentials-car-insurance/index.html
  5. https://www.allstate.com/tools-and-resources/car-insurance/speeding-ticket-and-car-insurance.aspx

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