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Auto Insurance in United States

Pertaining to the risk of financial accountability or the loss of a vehicle the owner may face if their vehicle is involved in an accident resulting in property or physical injury/loss, vehicle insurance, is planned to cover up for the same injury/loss.

Some states require a motor vehicle owner to carry some minimum level of liability insurance.

On the other hand, it’s quite surprising that car insurance isn’t mandatory in some states, e.g. Virginia, Alabama, Iowa, Mississippi, New Hampshire, Pennsylvania, etc. These states have incorporated ‘financial responsibility’ laws, which requires a vehicle owner to post a bond, cash deposit or approved self-insurance with the state to cover damages if they are involved in an accident. The U.S. Constitution protects the rights of citizens in each respective state when traveling to another.

You typically pay insurer a monthly fee, often called an insurance premium. The insurance premium you pay is usually determined by different factors including the type of covered vehicle, your age and gender, your driving history, and the location where your vehicle is primarily driven and stored.


Many factors influence the cost of car insurance, some of the factors are listed below:

  • The make and type of car
  • How expensive the car is to repair.
  • The type of insurance cover required.
  • The age and value of the car.
  • Your age, sex (sometimes women drivers are offered discounted prices from some companies) and occupation.
  • The purpose of using your car (e.g. business or pleasure).
  • The driving experience and driving record that you have.
  • Your accident record and no-claims bonus (good-driver discount).
  • Who will drive the car.
  • Your health (you may be required to pay an excess if you suffer from epilepsy or diabetes).
  • Where you live and whether your car is stored in a locked garage overnight.
  • The number of miles you do each year.
  • Any extras required, such as a rented car when your car’s being repaired after an accident.

Buying car insurance in the US is much more complicated than other countries and might include the following types of cover:

1. Liability insurance:

Liability insurance covers you when you get into a car accident and it is determined that you are at fault in the accident. It covers the cost of repairing any property damaged in the accident damage caused to someone else’s property, e.g cars or buildings), as well as the medical bills for any physical injuries resulting from the accident (injuries you cause to someone else).

Most states have a minimum requirement for liability insurance coverage that you absolutely must have. If affordable by you, it is a good idea to have liability insurance that is above your state's minimum liability coverage requirement, as it will provide extra protection in case the accident is a result of your actions. You don’t want to risk yourself into paying a large amount of money because your policy limit has been exceeded.

2. Collision Insurance:

Collision coverage will pay for the repairs to your car, irrespective of who was responsible for the damage. Collision cover usually has an excess (deductible); the higher the excess, the lower your premium. Collision insurance isn’t a must-have, as far as insurance goes. If your car is older, it may not be worth carrying a collision coverage on it. But if you’ve a more expensive car or your car is relatively new, it’s worth having a collision insurance.

3. Comprehensive insurance:

Comprehensive cover is for loss of the vehicle resulting from fire, theft, storms, floods, riots, explosions, earthquakes, falling objects, accidental glass breakage. It may not be necessary to carry this type of insurance, since it can be costly,especially if your car is easily replaceable. But you can bring down the price of this policy if your vehicle has an anti-theft and tracking devices installed.

4. PIP: Personal injury protection/Medical expenses insurance:

Personal injury protection (PIP) is a very important insurance that you should have. PIP medical expenses pays the medical expenses of anyone injured when travelling in your car, no matter who is at fault. Depending on your policy, it may also pay your medical expenses when you or your family members are travelling in someone else’s car, or if you’re hit by a car while walking.

Some states let you choose someone other than your car insurance company, e.g, you can choose your employer’s health insurance company as your PIP health insurance provider.

5. No-fault insurance:

This insurance covers injuries and property damage, no matter who is at fault for a given accident. Your decision on choosing no-fault insurance actually depends on the other insurance options that are available to you and at what price. Some no-fault policies can be expensive, making it more cost-effective to choose other options, especially if your car is affordable to replace.

6. Uninsured / Underinsured Motorist Protection:

State laws instructs that all drivers should be insured, but this is unfortunately not always the case. Another issue that can arise is that a driver in spite of having a liability insurance, may not be allowed to cover all of the expenses of an accident, since many states have relatively low minimum coverage requirements. So, if someone is legally responsible for damages related to an accident, you won't receive any payment if they do not have coverage or you will receive less than you need to cover the cost of damages if your damages exceed their coverage amount. In these kinds of situation, Uninsured/Underinsured Motorist Protection would help with expenses. Considering the amount of protection it offers, it's usually relatively inexpensive to add uninsured/underinsured motorist protection to your car insurance policy.

This information in this newsletter is a summary only. It does not include all terms and conditions and exclusions of the services described. Please refer to the actual policy for complete details of coverage and exclusions. Coverage may not be available in all jurisdictions and is subject to underwriting review and approval.

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