Even though car insurance is a recurring expense, it is an important one since it will cushion against financial liability or loss if your car is in an accident resulting to property or physical damages. In the US, car insurance rules differ among states, but in many instances, liability insurance is mandatory as an evidence of financial responsibility, or to put it simply, to show that you, as the car owner, can cover the expenses arising from the damage to other people or property in case of a road mishap where you are identified as the one at fault.
A few states, like Wisconsin, have a more flexible "proof of financial responsibility" requirement. In Virginia, insurance is also not compulsory, and people living there can instead pay the state a yearly fee, about $500 per car, if they opt out of buying liability insurance. In contrast, there are a few states such as North Carolina that require that you purchase liability insurance before a license can be issued. Because of these variations in insurance requirements, it is wise to consult your state's transportation bureau.
Understanding state requirements of car insurance in the USA
When looking at your state's auto insurance requirements, you would most likely come across numbers such as 25/50/25. The first two numbers refer to bodily injury liability limits and the third number is the property damage liability limits. To elucidate, 25/50/25 signifies each individual hurt in a car accident would get a maximum of $25,000, but only $50,000 is permitted for each accident. This means, if there are three people hurt, and each of them need $25,000, whoever files first gets first access to the $50,000 limit. When it comes to last number, it indicates that the total coverage per accident designated for property damage is $25,000.
In case of a car accident, these state required limits often could not sufficiently cover all of your liability and property damage needs. As such, even though buying a policy that satisfies your state's minimum requirements is all that is needed to drive legally in your state or save yourself being penalized for not showing proof of financial responsibility in the event of a car accident, this is not always the best option. This is because doing so would translate to more out-of-the-pocket expenditures for you, and the potential for jail time or being charged in court if you cannot pay for your liabilities.
How much coverage should you buy?
Insurance agents may tell you that you should buy as much as you can pay for. While that may seem logical, it is not always practical. For example, you don't have to shell out a lot of money on a personal injury protection policy if you already have a health insurance or disability insurance via your employer.
A few states, like Wisconsin, have a more flexible "proof of financial responsibility" requirement. In Virginia, insurance is also not compulsory, and people living there can instead pay the state a yearly fee, about $500 per car, if they opt out of buying liability insurance. In contrast, there are a few states such as North Carolina that require that you purchase liability insurance before a license can be issued. Because of these variations in insurance requirements, it is wise to consult your state's transportation bureau.
Understanding state requirements of car insurance in the USA
When looking at your state's auto insurance requirements, you would most likely come across numbers such as 25/50/25. The first two numbers refer to bodily injury liability limits and the third number is the property damage liability limits. To elucidate, 25/50/25 signifies each individual hurt in a car accident would get a maximum of $25,000, but only $50,000 is permitted for each accident. This means, if there are three people hurt, and each of them need $25,000, whoever files first gets first access to the $50,000 limit. When it comes to last number, it indicates that the total coverage per accident designated for property damage is $25,000.
In case of a car accident, these state required limits often could not sufficiently cover all of your liability and property damage needs. As such, even though buying a policy that satisfies your state's minimum requirements is all that is needed to drive legally in your state or save yourself being penalized for not showing proof of financial responsibility in the event of a car accident, this is not always the best option. This is because doing so would translate to more out-of-the-pocket expenditures for you, and the potential for jail time or being charged in court if you cannot pay for your liabilities.
How much coverage should you buy?
Insurance agents may tell you that you should buy as much as you can pay for. While that may seem logical, it is not always practical. For example, you don't have to shell out a lot of money on a personal injury protection policy if you already have a health insurance or disability insurance via your employer.
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Each state has its own auto insurance requirements, but it is often unwise to buy a policy that just meets your state's minimum requirement. Determine your insurance needs and find a package that meets those as well as your state's requirements. To know more about car insurance in USA, visit this link.
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