Policy: Federal or State Laws?
The essence of the law behind your auto insurance policy in the US and elsewhere is to cover the risk of pecuniary liability or loss of a car which the owner may encounter if it’s involved in a crash leading to property damage or bodily injury. Some states obligate a car owner to subscribe to certain levels of coverage. Other states like Virginia do not enjoin car insurance as the fee is payable to the state, New Hampshire and Mississippi , on the other hand, allow vehicle owners to post cash-bonds instead.
Similarly, penalties for flouting mandatory insurance depend on the state legal framework; however, it typically involves paying a whopping fine, license or registration cancellation or revocation and possible jail incarceration. Generally, the minimum legal requirement is third party coverage to safeguard against financial repercussions of loss, property damage or bodily injury inflicted by a car.
State laws may be strict, you should check with your jurisdiction, for instance California along New Jersey have passed Personal Responsibility statutes that peremptorily impose liability insurance lest the driver loses non-pecuniary damages like pain in case of injury while driving the vehicle. By the same token, in North Carolina, a driver needs liability insurance as a prerequisite prior to getting a license. Other states dictate that proof of coverage should be present on the car always while others don’t. Thus, there is no federal code that regulates auto-insurance but state legislative laws.
Insurance Coverage Products
Though there is no federal policy or legal framework that governs vehicle insurance, service providers offer coverage in tandem with state laws where your car is located. However, there are various packages that insurance companies have straddled across all states and to some extent globally, including:
Collision Insurance: protects the vehicle against hazards like fire, theft, vandalism, and crashing and is essentially not obligatory if the auto has been paid off. Since it is meant to safeguard the car owner’s interests, it’s normally optional but highly indispensable.
Liability Insurance: this coverage is quintessentially compulsory as it protects other persons against injury and property damage. The notion is founded on the school of thought that touts cushioning a country’s economy wholly where a driver may not be able to pay. When the two are combined, the policy comes as a full coverage.
Non-insured or under-insured car coverage
Non-insured or under-insured auto coverage foots damages when your vehicle collides with a car lacking insurance, is under-covered or driven by unidentifiable driver. It is generally not mandatory in all states. The policy also covers medical expenses and occupants costs as well in case the faulty car is not insured or under-covered and there are injuries sustained. Some products of car insurance policies also pay lost earnings and other non-quantifiable damages.
Medical payment insurance In case you sustain injuries in an accident, optional medical payment insurance can support you when clearing medical bills.
Comprehensive coverage Since liability and crash or collision insurance products are ineluctable for car owners, auto loan lenders and coverage service providers, comprehensive coverage products that cover the two are law in most states. What’s more the coverage extends to damages not stemming from collisions.