Car Insurance Requirements

Any car that is driven on public roads must meet the minimum state requirements for car insurance. In most states, you will not be able to purchase a car without proving you have insurance for it, and if you are financing or leasing a car your lender will have certain car insurance requirements that you must meet in order to be approved for a loan. Minimum car insurance requirements differ greatly from state to state.

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Car insurance protects your assets and the assets of others who may be involved in a car accident with you. It is very important that you have the correct amount of car insurance coverage on the vehicle you are driving.

It is illegal in all fifty states to drive without car insurance that meets at least the minimum state requirements. The minimum amount of car insurance may not be enough; however, to meet your needs and protect you financially in the event of a serious accident.

State-by-State Minimum Car Insurance Requirements

The requirements for car insurance differ from state to state. In many cases, the differences are quite drastic. For example, Alaska and Maine require $100,000 of total bodily injury liability coverage per accident, but California only requires $30,000 of coverage. Knowing your state’s minimum insurance requirements is the first step in making sure your car is properly insured.

Each state lists their requirements in the form of three numbers, such as 30/55/10. The initial number stands for the amount of bodily injury liability insurance in thousands of dollars you must carry per person involved in an accident. The second number is the amount of bodily injury insurance total per accident, and the final number is the amount of property damage coverage you must carry.

Collision and comprehensive insurance are not required based on state minimums.

You can find out more specific car insurance information from your state’s Department of Insurance including the exact amount of liability insurance required by your state. Additionally, insurance companies licensed in your state are listed here to help you in choosing a provider. The Insurance Information Institute allows consumers to search for each state’s information.

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State Minimum Requirements May Not Be Enough

Even states with high minimum requirements, such as Maine and Alaska, may not have high enough minimums to protect you in the event of an accident. Recommended amounts of liability are often three to ten times higher than state minimums. Purchasing the right amount of insurance will protect you in the event you are sued after an accident.

Insurance Requirements for Financed or Leased Vehicles

Most banks will not approve a loan in order for you to finance or lease a car if your coverage does not meet the bank’s minimum car insurance requirements. Bank requirements are typically much higher than state minimum requirements and typically include collision and comprehensive car insurance as well.

Collision and Comprehensive insurance coverage protect the bank’s interests if the car should be severely damaged or totaled. The Insurance Information Institute defines these types of coverage. Collision insurance covers the damage done to your vehicle after you have paid an agreed upon deductible.

Comprehensive car insurance covers damage to your car due to events other than an accident. These might include tree damage, hail damage, vandalism, or theft. A deductible usually also applies for comprehensive coverage.

A bank may require you to purchase GAP insurance.

GAP insurance covers the difference in what you owe the bank versus what your car is worth should your vehicle be totaled in an accident. Collision insurance will only pay you the fair market value of your vehicle. Most often, a person will owe more on their car loan than the current actual value of the car.

Proof That You Meet Minimum Insurance Requirements

Most states also require that you carry proof in your vehicle that you have car insurance coverage that meets at least the minimum state requirements. Your insurance company will typically provide you with a card each year to keep in your vehicle at all times.

This card contains your policy number, the dates the policy is good for, and the contact information for the insurance company should you be in an accident. If you are in an accident or stopped for a traffic violation, the police will want to see this card showing that you are driving a vehicle with proper insurance.

Some states are now keeping an electronic database where insurance companies report your insurance information in the event it needs to be looked up to prove you have insurance coverage. Only certain states have this electronic reporting system so it is still a good idea to always keep your insurance card in your vehicle.

With recent technology advancements, some insurance companies are now offering Smartphone Apps that allow you to show an image of your insurance card without actually having it. This is brand new technology and may or may not be acceptable by law enforcement at this time.

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Consequences of Not Meeting Insurance Requirements

If you fail to meet the minimum state requirements or choose not to carry any car insurance, you are breaking the law and could face serious consequences. If caught, you could face having your license suspended on top of being required to pay a fine.

For example, in the state of Delaware you will be required to pay a fine of at least $1,500 and will lose your license for six months. That is just for the first offense.

Driving without proper insurance is taken seriously!

In order to have your license reinstated you will need to get an insurance company that will file an SR-22 form stating that you now meet the insurance requirements. SR-22 insurance is expensive because by driving without proper insurance you have given yourself the label of someone who is considered a high risk for insurance companies.

A license suspension and dealing with SR-22s may not be your biggest problem if you drive your car without proper insurance. If you cause an accident, you could be sued for any damage or injuries that result. This could include lost wages, childcare costs, or more, which could lead to loss of your home, vehicle, other possessions, or having your wages garnished if you cannot afford to pay.

Purchasing the Right Amount of Car Insurance

Once you know your state minimum car insurance requirements and any additional requirements if you are financing or leasing your car, you are ready to purchase insurance for your vehicle. The following are some steps to take to find insurance that meets your needs and will have your car meeting insurance requirements in no time.

Start by getting quotes from several different insurance providers. You can work with a broker in person or do this yourself online. Research each company to determine if they will meet your needs. Sites such as the Better Business Bureau rate companies on customer satisfaction. Check out A.M. Best’s website for financial ratings to make sure any companies you are considering are financially stable.

Narrow your search to two or three companies and determine what plans they offer and what discounts are available with each. Consider discounts such as:

• Low mileage discounts
• Multi-Vehicle discounts
• Discounts associated with clubs or organizations you belong to
• Safe driver discounts
• Good student discounts
• Retirement discounts
• Discounts for added vehicle safety features
• Discounts for bundling multiple insurance policies with the same company

Once you have found an insurance company that meets your needs you are ready to purchase a policy that will meet insurance requirements. At this point, you can consider adding on to your basic policy in order to protect yourself and your assets at a greater level. There are further ways to save on car insurance in order to afford the level of coverage you require.

Saving Money on Car Insurance

Besides the discounts referenced above there are additional ways to save on car insurance in order to afford enough coverage to meet state requirements and protect your assets.

• Agree to a higher deductible on collision & comprehensive coverage in exchange for a lower premium
• Pay your bill electronically each month
• Pay your premium in one lump sum each year
• Drive a conservative vehicle with a good safety record
• Park your vehicle off the street in a garage if possible
• Keep your driving record clean and if it has a few bumps, agree to participate in a safe driving course
• Keep your credit score strong

If you drive an older vehicle that is not worth much money, consider forgoing collision and comprehensive coverage in exchange for additional liability coverage.

By keeping all of this in mind and shopping around for car insurance, you can find affordable coverage that meets the needs of the law, your state, your lender, and will protect you and your assets in the event of an accident. Additional information on shopping for car insurance is available through the federal government at USA.gov.

Your car will be in good shape as far meeting car insurance requirements as long as you know what the requirements are for your state. Since it is recommended that you purchase additional coverage beyond the state minimum, be sure to take advantage of discounts to have an affordable policy that will fully cover you.

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