Although auto insurance is a recurring expense, it is an important one since it will cushion against financial liability or loss if your car is in an accident that resulted in property or physical damages. In the US, car insurance rules differ among states, but in most cases, liability insurance is mandatory as a proof of financial responsibility, or in other words, to demonstrate that you, as the car owner, can cover the cost of damage to other people or property in the event of an accident where you are at fault.
Some jurisdictions, like Wisconsin, have less stringent proof of financial responsibility requirement. In the state of Virginia, insurance is also not compulsory, and people living there can instead pay the state an annual fee, about $500 per car, if they opt out of buying liability insurance. By comparison, there are some states such as North Carolina where it is mandatory for you to buy liability insurance prior to the issuance of a driver's license. Due to these variations in insurance requirements, it is wise to check with your states transportation department.
Understanding state requirements of car insurance in the USA
When reading about your states insurance requirements, you would probably come across numbers such as 25/50/25. The first two numbers refer to bodily injury liability limits and the third number refers to the property damage liability limits. For instance, 25/50/25 signifies each person hurt in a car accident would get a maximum of $25,000, but only $50,000 is permitted per accident. This means, if there are three people hurt, and each of them need $25,000, whoever submits a claim first gets first access to the $50,000 limit. When it comes to last number, it indicates that the total coverage per accident designated for property damage is $25,000. Visit here to discover more about auto insurance companies in USA.
In the event of a car accident, these state required limits usually could not adequately cover all of your liability and property damage requirements. Therefore, even though buying a policy that meets your states minimum requirements is all that is required to drive legally in your state or avoid from receiving punitive action in the event of a car accident, this is not always the best option. This is because doing so would translate to more out-of-the-pocket expenditures for you, and the possibility of jail time or being charged in court if you cannot settle your liabilities.
How much insurance should I buy?
Insurance providers might convince you that you should buy as much as you can afford. While that may seem logical, it is not necessarily practical. For instance, you do not need to spend a great deal of money on a personal injury protection policy if you already own a health insurance or disability insurance via your employer.
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