Auto Insurance Requirements
Every state requires motorists carry minimum levels of auto insurance coverage, or the equivalent in financial responsibility waivers, to ensure that drivers can cover the cost of damages to people or property in the event of an automobile accident.
Auto insurance is your financial shield if you are involved in a traffic accident or if your car is stolen or damaged. Your policy is a contract between you and your insurance company. You will pay regular monthly or yearly premiums, and the insurance company will pay for any losses that the policy covers.
Depending on the coverage you select, your policy protects you in the following situations:
- If your car is stolen or totaled in a wreck, the insurance company will reimburse you for the cost of the vehicle.
- If you car is damaged in an accident, the cost of repairs will be paid by your insurance company.
- If you are involved in an accident and injure someone else, the legal damages you are liable for (including the victim's medical bills) will be taken care of by your auto insurance provider.
A basic auto insurance policy is comprised of six basic types of coverage. While some of these types of coverage are required by state law, some are considered optional. These are:
- Bodily injury liability
- Property damage liability
- Medical payments or Personal Injury Protection (PIP)
- Uninsured/underinsured motorists coverage
USA.gov offers some tips on what to look for when purchasing auto insurance. Also, the Federal Citizen Information Center (FCIC) offers a list of ways to lower your insurance costs.
For more information on the auto insurance requirements in your state, or to see if your state has a low cost auto insurance program, you may wish to contact your state insurance regulator.