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Auto Insurance

What are the driving laws in my state?

Automobile Financial Responsibility Laws

Most states require car owners to buy a minimum amount of bodily injury and property damage liability insurance before they can legally drive their cars. All states have financial responsibility laws. This means that people involved in an automobile accident will be required to furnish proof of financial responsibility up to certain minimum dollar limits. To comply with financial responsibility laws, most drivers purchase automobile liability insurance.


 

 

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Automobile Financial Responsibility/Compulsory Limits by State


State

Liability limits (1)

State

Liability limits (1)

State

Liability limits (1)
Alabama 20/40/10 Kentucky 25/50/10 North Dakota 25/50/25
Alaska 50/100/25 Louisiana 10/20/10 Ohio 12.5/25/7.5
Arizona 15/30/10 Maine 50/100/25 Oklahoma 10/20/10
Arkansas 25/50/15 Maryland 20/40/15 Oregon 25/50/10
California (2) 15/30/5 Massachusetts 20/40/5 Pennsylvania 15/30/5
Colorado 25/50/15 Michigan 20/40/10 Rhode Island 25/50/25
Connecticut 20/40/10 Minnesota 30/60/10 South Carolina 15/30/10
Delaware 15/30/5 Mississippi 10/20/05 South Dakota 25/50/25
D.C. 25/50/10 Missouri 25/50/10 Tennessee* 25/50/10
Florida** 10/20/10 Montana 25/50/10 Texas 20/40/15
Georgia 25/50/25 Nebraska 25/50/25 Utah 25/50/15
Hawaii 20/40/10 Nevada 15/30/10 Vermont 25/50/10
Idaho 25/50/15 New Hampshire* 25/50/25 Virginia 25/50/20
Illinois 20/40/15 New Jersey (3) 15/30/5 Washington 25/50/10
Indiana 25/50/10 New Mexico 25/50/10 West Virginia 20/40/10
Iowa 20/40/15 New York (4) 25/50/10 Wisconsin* 25/50/10
Kansas 25/50/10 North Carolina 30/60/25 Wyoming 25/50/20
(1) The first two figures refer to bodily injury liability and the third figure to property damage liability. For example, 20/40/10 means coverage up to $40,000 for all persons injured in an accident, subject to a limit of $20,000 for one individual, and $10,000 coverage for property damage. (2) Low-cost policy limits for Los Angeles and San Francisco low-income drivers in the California Automobile Assigned Risk Plan are 10/20/3. This is a pilot program effective from July 1, 2000 until January 1, 2004. (3) Drivers may choose a Standard or Basic Policy. Basic Policy limits are 10/10/5. (4) 50/100 if injury results in death.

* Liability insurance not compulsory; limits are for financial responsibility.
** Only property damage liability is compulsory.

Source: Alliance of American Insurers, American Insurance Association, National Association of Independent Insurers, Insurance Information Institute.

STATE AUTO INSURANCE LAWS GOVERNING LIABILITY COVERAGE

State auto insurance laws governing liability coverage fall into four broad categories: no-fault, choice no-fault, tort liability, and add-on. The major differences are whether there are restrictions on the right to sue and whether the policyholder's own insurance company pays first-party (policyholder) benefits, up to the state maximum amount, regardless of who is at fault in the accident.

No-Fault: The no-fault system is intended to lower the cost of auto insurance by taking small claims out of the courts. Each insurance company compensates its own policyholders for the cost of minor injuries regardless of who was at fault in the accident. These "first-party" benefits, which are a mandatory coverage, vary by state with no-fault systems. In states with the most comprehensive benefits, a policyholder receives compensation for medical fees, lost wages, funeral costs and other out-of-pocket expenses. The term “no-fault” can be confusing because it is often used to denote any auto insurance system in which each driver's own insurance company pays for certain losses, regardless of fault. In its strict form, the term no-fault applies only to states where insurance companies pay "first-party" benefits and where there are restrictions on the right to sue.

Drivers in no-fault states may sue for severe injuries if the case meets certain conditions. These conditions are known as the tort liability threshold, and may be expressed in verbal terms such as death or significant disfigurement (verbal threshold) or in dollar amounts of medical bills (monetary threshold).

Choice No-Fault: In choice no-fault states, drivers may select one of two options: a no-fault auto insurance policy, usually with a verbal threshold, or a traditional tort liability policy.

Tort Liability: In traditional tort liability states, there are no restrictions on lawsuits. A policyholder at fault in a car crash can be sued by the other driver and the other driver's passengers for the pain and suffering the accident caused as well as for out-of-pocket expenses such as medical costs.

Add-On: In add-on states, drivers receive compensation from their own insurance company as they do in no-fault states but there are no restrictions on lawsuits. The term “add-on” is used because in these states first-party benefits have been added on to the traditional tort liability system. In add-on states, first-party coverage may not be mandatory and the benefits may be lower than in true no-fault states.


 

First-party benefits

Restrictions on lawsuits

Thresholds for lawsuits

"True" No-Fault

Compulsory

Optional

Yes

No

Monetary

Verbal
ColoradoX X X 
FloridaX X  X
HawaiiX X X 
KansasX X X 
KentuckyX XX (1)X (1) 
MassachusettsX X X 
MichiganX X  X
MinnesotaX X X 
New JerseyX XX (1) X (1,2)
New YorkX X  X
North DakotaX X X 
PennsylvaniaX XX (1) X (1)
UtahX X X 
Puerto RicoX X X 
       
Add-on      
Arkansas X X  
DelawareX  X  
D.C. XX (3) X (3)  
MarylandX  X  
New Hampshire X X  
OregonX  X  
South Dakota X X  
Texas X X  
Virginia X X  
Washington X X  
Wisconsin X X  

(1) “Choice” no-fault state. Policyholder can choose a policy based on the no-fault system or traditional tort liability. (2) Verbal threshold for the Basic Liability Policy and the Standard Policy where the policyholder chooses no-fault. The Basic Policy contains lower amounts of coverage. (3) The District of Columbia is neither a true no-fault nor add-on state. Drivers are offered the option of no-fault or fault-based coverage, but in the event of an accident a driver who originally chose no-fault benefits has 60 days to decide whether to receive those benefits or file a claim against the other party.

Source: American Insurance Association.

 

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Insurance content provided by the  Insurance Information Institute

 

 

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