January 24, 2012

Why Many State Auto Insurance Requirements Include Liability Coverage

All insurance policies turn to state auto insurance laws for terms of minimum liability coverage. Almost all states are a little different, requiring certain amounts for bodily injury and property damage liability. This is so that they can stay current with statistics to protect their interests. Because of teen drivers, many states will also increase the liability coverage to protect their interests even further.

Teen drivers are notoriously high risk drivers because they are new to the rules of the road and the entire driving experience. They can be easily distracted and they don't have years of experience to fall back on. Throughout the statistics in different states, state auto insurance requirements are in place to help protect the interests of insurance companies.

The states that have higher instances of teen fatalities, accidents and other issues will increase the liability coverage on their teen drivers for this very reason. It is a way of protecting the insurance company as well as the families of the teens so that they are not faced with financial destruction because of a single accident.

When a teen driver does get into an accident, they must satisfy their deductible first. Then the insurance company will take care of bodily injury coverage as well as property damage up to the coverage that is provided for in the particular policy. While the policyholder doesn't have a choice on minimum levels of coverage, there is always the possibility for adding more.

The higher the coverage, the more protection a policyholder has. If the property damage or bodily injury damage is extremely high, the insurance company only covers what's set forth in the premium. Anything over that amount falls back to the policyholder to pay. While this is per accident, the amounts can add up fast. Having the right liability coverage protects all parties and therefore is usually mandated by the state.

Most states that include added liability coverage for the insurance requirements are looking out for both parties. The additional coverage can be an extreme cost savings if an accident does occur because it could mean the difference of going into debt over the accident or not. As for insurance companies, they can ensure that they are properly compensated if they do need to cover an accident as a result of a teen driver.

Liability coverage is predominantly based on general statistics, which is why all insurance quotes start with asking a zip code. The more accidents that occur within a state, the greater the chances of having a higher minimum coverage requirement for those living in that state. It can become more expensive by area, too, depending on the accidents that have taken place there in the past.