Understanding the minimum state requirements for auto insurance

Car insurance is an expensive recurring expense, but it is essential. It will protect you from financial loss or liability if your vehicle is in an accident that results in property or other damages. The rules for auto insurance in the United States vary from one state to the next. However, in most cases liability insurance is required to prove that you can pay the costs of damages to property or other persons in the event of an accident in which you are the cause.

Wisconsin is one example of a jurisdiction that has less strict “proofs of financial responsibility” requirements. Virginia does not require insurance. Residents can pay a $500 annual fee to the state if they do not want to purchase liability insurance. In North Carolina, for example, it is mandatory to purchase liability insurance before a driver’s licence can be issued. These insurance requirements can vary so it is a good idea to consult your state’s transportation agency.

Understanding the requirements for car insurance in USA

You will likely see numbers like 25/50/25 when you look at the state’s insurance requirements. The first two numbers are for bodily injury liability limits, while the third is for property damage liability limits. 25/50/25 means that each person injured in a car accident will receive a maximum $25,000; however, each accident is limited to $50,000. If there are three people hurt and each one needs $25,000, the first person to file a claim gets access to $50,000. It also indicates that property damage coverage is $25,000 per accident.

These state-required limits may not be sufficient to cover your property damage and liability in the event of an incident. Even though a policy that meets your state’s minimum requirements may be all you need to legally operate a vehicle in your state, or avoid being penalized for failing to show proof of financial responsibility in case of an accident, it is not always the best option. Doing so will result in higher out-of-pocket costs for you and the possibility of being sued or jailed if you are unable to pay your liabilities.

What amount of insurance should you purchase?

Agents from insurance companies may advise you to buy as much as you are able to afford. Although this may sound rational, it’s not always practical. If you have health insurance or disability insurance through an employer, you don’t need to spend a lot on personal injury protection policies.

Every state has its own requirements for auto insurance. However, it’s not a good idea to purchase a policy that only meets the minimum state requirement. Find the right package for your needs.

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