December 21, 2011

Why State Auto Insurance Requirements Are Often Low

For over 30 years, most states in the U.S. have required drivers to carry some amount of auto insurance coverage. However, many state auto insurance requirements are extremely low when compared to the potential costs of an accident. Many drivers wonder why auto insurance coverage requirements vary from state to state and whether or not insurance requirements should be used in determining how much insurance to buy.

Insurance laws vary greatly and each state sets its own requirements, which is necessary, as the federal law that sets up insurance requirements restricts highway funding from states who don't require auto insurance but does not set forth any official standards. State auto insurance requirements need to be set low, because otherwise, drivers wouldn't be able to make knowledgeable decisions about their insurance needs. Many drivers don't spend a lot of time on the road and don't need policies with extremely high coverage limits. They may not be able to afford high-coverage policies, and if they're capable of covering their liabilities in an accident, there's no reason to compel them to buy more than a minimal amount of coverage. State auto insurance requirements are typically designed to prevent drivers from operating their vehicles without any liability insurance coverage whatsoever, which could lead to serious problems in an accident.

However, this is not to say that state auto insurance requirements are sufficient to protect all drivers from all of the costs of accidents. Most states only require liability coverage and occasional personal injury protection coverage, but very few require personal injury protection, which pays for the medical bills of a driver and his or her passengers in an accident. These costs can be extraordinarily high. On top of this, many accidents will easily exceed state required minimum coverage limits, so it's important for drivers to evaluate factors such as the value of their vehicles and their driving habits when buying coverage. For example, a driver with a relatively inexpensive vehicle who rarely spends any time at all on the road might be wasting money by choosing a policy with high coverage limits and low deductibles. On the other hand, drivers with expensive vehicles should generally buy larger amounts of comprehensive and collision insurance coverage to keep themselves protected.

When buying auto insurance, drivers should understand their states' requirements. However, drivers should also know their own driving habits and should try to select coverage that will provide adequate protection on the road. While policies with more coverage can be more expensive, they're well worth the extra cost if they provide a better overall value and more reliable auto insurance coverage for their policyholders.