Legal Requirements for Insurance
Insurance, depending on the type, is regulated by a variety of state and federal laws. Automobile insurance is left to states to regulate. As a result, each state has specific laws and mandates. Requirements include coverage that is mandatory and documentation that each driver is required to obtain and maintain whenever a vehicle is driven.
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Insurance Policy
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Every state has laws that require drivers to have an insurance policy in force for the vehicles that they drive. Some states also have no-fault insurance laws, which require individuals that are involved in an accident to file a claim with their own insurance company. No-fault insurance laws place limits on an individual's ability to sue another driver for damages after an accident.
Proof of Insurance
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Individuals in all states are required to show proof of insurance when requested by law enforcement or the courts. When an automobile insurance policy is purchased, the insurance company will provide a temporary certificate of insurance until a permanent certificate is mailed to the insured. A certificate of insurance must be kept up to date.
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Liability Coverage
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All states mandate the minimum of liability coverage for bodily injury. This coverage will pay for medical costs when another driver or individual is injured in a car accident. Coverage amounts on bodily liability vary depending on the levels set in each state.
Property Damage
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In addition to liability coverage, most states also require a minimum amount of coverage for property damage. This coverage pays for damage that is caused to the property of others when an automobile accident occurs. The minimum amount of required coverage varies from state to state.
Uninsured and Underinsured Coverage
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Some states make obtaining uninsured and underinsured coverage optional and others require this coverage on an automobile policy.This coverage pays for damages when another driver is not fully insured or does not have any insurance coverage on his or her vehicle. The limits of needed coverage is determined by each state that requires uninsured and underinsured coverage.
Financial Responsibility
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Many states have financial responsibility laws that require individuals to prove they are financially able to pay for damages when an accident occurs. The easiest way to prove financially responsibility is to purchase an automobile insurance policy with the adequate limits. The penalties for individuals that fail to provide proof in states with a financial responsibility law vary, but usually include the suspension of a driver's license.
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