What You Don't Know About Auto Insurance May Cost You

By Tim Parker | April 29, 2012 AAA

Most of us believe that in order to drive an automobile in America, we have to show proof of auto insurance, and in most cases that's true. According to the Discovery Channel, there are approximately 6.2 million automobile accidents each year in America. On average, an accident involves two drivers and one passenger making the total amount of people involved close to 18.6 million. This means that there is a one in 16 chance that each of us will get into an accident in any given year.

SEE: When Things Get Awry, Insurers Get Reinsured

Having insurance is supposed to assure that if you're in an accident that isn't your fault, you aren't going to have to pay out of pocket or see your own rates rise because of something that was out of your control, but each state has a different idea of how to protect you.

No Fault States
There are currently 12 states that are considered partial no fault states. Those states include Florida, Michigan, New Jersey, New York, Pennsylvania, Hawaii, Kansas, Kentucky, Massachusetts, Minnesota, North Dakota and Utah. In no fault states, medical payments are paid from your own insurance up to the policy limit. You can then sue for additional damages that exceed the limits. No fault laws do not apply to property damage. This may be paid by either party's insurance company.

Studies show that insurance in no fault states is more expensive than in other states. When considering a move to a no fault state, research the auto insurance rates before making the final decision. Premiums are 19% higher in no fault states than in personal responsibility states.

The Minimums Might Not Be Enough
Arizona requires bodily injury coverage, but only $15,000 per person or $30,000 per accident. In a serious accident, the costs can far exceed these limits leaving the individual's insurance to cover the balance of the damages. Florida only requires $10,000 per person and $20,000 per accident in bodily injury coverage, but only for those people with a less than satisfactory driving history.

Driving Uninsured
In South Carolina, citizens can pay $500 in order to drive uninsured, but that $500 doesn't purchase any protection. In the event that you are in an accident with a person without insurance, he or she may be personally liable for the damages, but may not have the means to pay. This makes any judgment in your favor unlikely to produce financial relief. Because the $500 fee would pay for a minimum coverage in the state, very few people pay to be uninsured. In fact, in South Carolina only 41 people paid the fee.

SEE: Beginner's Guide to Auto Insurance

New Hampshire
New Hampshire doesn't require residents to hold liability insurance, but if they get into an accident they are required to immediately post a financial responsibility bond. What if they are unable to post the bond? There may be criminal consequences, but that doesn't help you to recover the damages.

Don't Count on Others
Although most states have laws requiring insurance, one study found that one out of every seven drivers doesn't have coverage. This makes it even more important to carry enough auto insurance to cover any damages that you would incur as a result of an accident. Don't count on somebody else's coverage even if it is his or her fault, and make sure you have uninsured motorist protection as part of your coverage.

The Bottom Line
If you're somebody who drives through multiple states, the laws governing auto insurance coverage may be drastically different from your home state. This makes it even more important to consider the maximum coverage limits that your insurance company offers. Luckily, upgrading the coverage limits is often not largely more expensive than the base policy.

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