December 13, 2009

Why Are All State Auto Insurance Requirements Different

When it comes to auto insurance requirements, each state in the United States sets its own standards that its citizens need to adhere to in order to operate a vehicle. Because there are no federal standards for auto insurance, there are no states that have the same requirements. For instance, each state mandates the minimum amount of coverage an auto insurance policy must provide in terms of bodily injury liability per person, total bodily injury liability and property damage liability on an accident-by-accident basis. Similarly, the penalties for not having adequate auto insurance also vary by state. The primary reason why states vary in their auto insurance requirements is because each state is loosely classified as being either a tort state, no-fault state, or add-on state.

Tort states, also known as fault’ states, require auto insurers to cover claims only to the degree by which the driver is decided not to be at fault. For instance, if you run a red light in a tort state and cause an accident, your insurer may not be responsible for covering any costs you personally incur for either property damage or medical bills, or costs for which you are deemed responsible following a lawsuit. However, even in tort states most auto insurance providers offer policies that cover medical bills and sometimes even property damage regardless of fault. Most states have adopted these tort-based systems.

No-fault states differ from tort states in that insurers are required to cover medical costs regardless of who is determined to be at fault for an accident. The most important feature of no-fault states is that while they do not allow one driver to sue another seeking medical compensation, they do allow for insurers and individuals to sue one another for property damage, including damage to one’s vehicle. The justification for a no-fault system of auto insurance is to reduce the costly burden placed on both the legal system and individuals in resolving accident claims via lawsuits and to generally expedite the process for drivers.

Add-on states represent a combination of the tort and no-fault state approaches, generally requiring that accident victims seek compensation from their own insurers, but place little or no restrictions on lawsuits against the other involved parties in order to seek compensation based on who was at fault. Drivers in add-on states can purchase optional personal injury protection that requires their own insurer to pay medical costs regardless of fault, but still maintain the driver’s legal right to sue the other party for additional accident-related injuries and for pain and suffering.

It is important for all drivers to familiarize themselves with the requirements of their own state to ensure they seek the proper sort of auto insurance quote.