Auto Insurance Laws

The type of automobile insurance you are required to have depends on a couple of things. First it depends on which state you live in and second it depends on the car you have. There are basically three types of insurance requirements in the United States. There are tort states, no-fault states and add-on states.

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Tort Insurance:

Tort states can vary in insurance regulatory requirements from state to state. In these states if you are involved in an accident and found to be at fault, the other party that was involved can sue you to have you pay for the loss they incurred as a result of the accident.

By definition a tort is an injury to the property of another person or to another person which is compensable by law. It doesn’t matter if the damage is willful or negligent in nature.
Which States are Considered Tort States?

– Benefits of a Tort State

In the case of an accident, a tort state will find someone at fault for the accident and that person will be required to pay for all damages related to the accident, both to the car and to the person or people involved.

– Disadvantages to Tort States

The biggest disadvantage is that many people who live in these states will have to get some additional insurance coverage in case of an accident where they are at fault. This additional coverage will help cover the costs of any medical expenses incurred as a result of an accident for the other party involved.

Another disadvantage is because this type of state allows you to sue the other party, or at fault party, reimbursement can get caught up in the court system for long periods of time. This results in delayed payments to you the consumer.

– Which States are Tort States?

The vast majority of the states in the US are considered tort states. In addition some tort states double as an add-on state as well.

No-Fault Insurance:

No-fault states are a bit different than tort states. In a no-fault state your insurance company will reimburse you up to the amount of the policy limit for the damages to your automobile. It doesn’t matter if you were at fault or the other party involved in the accident was at fault. In these states because the insurance company pays you, you are not allowed to sue the other party unless the amount of your medical bills and treatments related to the accident exceed that which your insurance company pays and only if the other party is believed to be at fault.

– Benefits of No-Fault States

The benefit of living in a no fault state is insurance premiums are lower because of decreased court battles and legal fees. With no court battles to worry about the insurance companies are quicker to pay out on a claim.
Disadvantages of No-Fault States

Due to your own insurance company paying you in the event of an accident, you are not able to sue the other party for damages to your automobile, even if they are believed to be at fault. Furthermore, you cannot sue for pain and suffering. You are only permitted to sue if the cost of your medical bills exceeds that which your insurance pays.

– Which States are No-Fault States?

There are thirteen states in the United States that are considered no-fault states. They are Utah, Pennsylvania, New York, North Dakota, New Jersey, Kentucky, Michigan, Minnesota, Massachusetts, Kansas, Florida, Hawaii and Colorado

Add-On Insurance:

The drivers in add-on states will get monetary compensation from their insurance company for an accident and face no restrictions regarding lawsuits.

– Benefits of Add-On Insurance

There are several advantages to having add-on insurance. The biggest benefit is that you can choose the amount of insurance coverage you desire and this can completely cover you in the event of an accident. These states even offer you Personal Injury Protection, or PIP, insurance which will assist you in the event of an accident by paying up to 80% of your wages while you are off work as well as give you money to pay a caregiver if you need one after an accident. In order to refuse PIP insurance you have to do so in writing.

– Disadvantages to Add-On Insurance

The biggest disadvantage to living in a state with Add-on insurance is that you can still be sued, regardless of the amount of insurance coverage you have. The high cost of medical coverage can quickly exceed the amount of insurance coverage you have for an injured person.

– Which States are Considered Add-On States?

There are currently ten states that are considered add-on states. They are Arkansas, Delaware, Maryland, New Hampshire, Oregon, South Dakota, Texas, Virginia, Washington and Wisconsin. Of these ten states there are four in which add-on coverage is compulsory. Those states are Arkansas, Delaware, Maryland and Oregon.

Special Considerations for New Hampshire

The only state in the United States that does not require a driver to have some kind of insurance is New Hampshire. In order to prevent problems related to not having at least liability coverage in this state you will need to prove that you have enough money both saved and in assets to cover the state’s minimum insurance requirements which are 25/50/25.

General Information

Automotive insurance is basically a necessary evil when driving. There are different laws in different states but basically each state has a required minimum liability statute. In addition there are penalties which can be very stiff if you are caught driving without proof of insurance or without insurance altogether.

For example, driving without proof of insurance in California could result in fines and penalties up to $500, vehicle impoundment and a suspended driver’s license. In addition you would be required to pay all the charges incurred with towing your vehicle. Imagine getting into an accident without insurance and being required to pay for all of the legal, vehicle and medical expenses of the other party out of your pocket.
At the opposite end of the country, Florida gives you time to prove you have insurance or financial responsibility. If you fail to prove this you face fines and penalties that can include losing your license and vehicle registration for up to 20 years for repeat offenders.

It is important to know what the state minimum coverage is for the state in which you reside. Furthermore you need to make sure the amount of coverage you have meets or exceeds the amount of assets you own in order to completely cover yourself and your family in the event of an accident in which you are at fault. Know the laws for your state.