• Auto Insurance Laws You Should Know and Understand

    There are several auto insurance laws you need to be aware of when it comes to coverage for your vehicle. Coverage of some kind is mandatory in all states. That’s a standard, although the amount of minimum coverage will vary from state to state. Knowing what’s legal and what’s not can save you many problems later and keep you on the right side of the law in the event of an accident.

    Minimum Coverage

    Almost all states have minimum requirements for liability coverage. Liability coverage covers a driver’s financial liability in an accident. That means it covers injury to other parties in other vehicles, as well as property damage for other parties. It does not cover damage to the driver’s own vehicle. Liability coverage is generally defined with three numbers that insurance experts call a “triple limit.” It’s important to have the minimum liability coverage in your state in order to legally operate your vehicle.

    Under auto insurance laws you can avoid this by putting up a bond of responsibility, which is usually a minimum of $250,000. This covers you for auto liability in the event you’re responsible for an accident and ensure that the other party is properly compensated.

    Insurance Deposit Laws

    Like mentioned above, many states have laws on the books allowing affluent drivers to bypass most of their minimum liability requirements by making a large deposit to the state treasury that will cover their financial responsibility if they are involved in an accident. However, this is not relevant for most drivers. Though it is still a good one to know about to understand how state car insurance law works.

    No Fault Insurance

    Some states have no fault insurance. Under this, if you have an accident, your insurance company will pay for the damage you and your car suffer no matter who is at fault. You’re not allowed to file suit or attach any blame to the other party under no fault insurance. Notably, though, your insurance company can pursue the other driver’s insurance company if the other driver is at fault in the accident.

    When a state requires no-fault insurance, a victim in an accident claim recovers money from their own insurance company, rather than suing the driver who caused the accident. Although no-fault insurance relieves some of the burden on local courts, it is still highly controversial.

    You need to be aware if you live in a state that has no fault insurance, as it can limit your options when it comes to compensation. You might need to adjust your insurance coverage.


    Some states are known as tort states. They have tort auto insurance laws that are in many ways the opposite of no fault laws. Under these, anyone in an accident can be identified as being at fault. The result of this is that the person at fault can be sued by the aggrieved party and taken to court in order to be compensated for losses. Even in tort states, the laws vary somewhat.


    It’s worth knowing that under auto insurance laws there are also add-on states. In these, you can sue the other party for damages you’ve incurred or for medical expenses, just as you can in tort states. The difference is that accidental damages are reimbursed by your own insurance company. As there are no real national laws relating to auto insurance, if you’re travelling or moving to another state, you should make yourself aware of the auto insurance laws in that state. Be aware that not all auto insurance policies give coverage in all states. Check with your company.

    Contributory Fault or Comparative Fault

    In comparative fault insurance situations, parties can each be assigned a certain portion of the total fault. Claims adjusters and judges determine how much each party was at fault, and in some of these equations, victims who had partial fault can lose their ability to get compensation. It’s important to understand comparative fault if it is in play in your state.

    A few states also have a limited tort option for auto insurance. This means that policy holders can waive their right to collect money for pain and suffering in an accident. This limited tort option brings down the cost of an insurance premium, but leaves policy holders with limited recourse if they are victims in an accident.

    Each state has its own particular laws involving DUI convictions and other high-risk events. Drivers may need to secure what’s called SR-22 insurance, or be subject to driver’s education mandates, have their license suspended, or comply with court orders. It’s all part of making sure state roadways are safe for all who share them.

    These are some of the main car insurance laws that vary from state to state. Better knowledge of these laws enables drivers to make the most of their car insurance policies.