Rules for Car Insurance

Car insurance laws vary by state. New Hampshire and Virginia are the only states that do not have state minimum car insurance requirements. Compare quotes below and save up to $859 on car insurance.

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A former insurance producer, Laura understands that education is key when it comes to buying insurance. She has happily dedicated many hours to helping her clients understand how the insurance marketplace works so they can find the best car, home, and life insurance products for their needs.

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Joel Ohman is the CEO of a private equity backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Jo...

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Reviewed by Joel Ohman
Founder & CFP®

UPDATED: Jan 28, 2021

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Here's what you need to know...

  • You are required to have car insurance any time you’re behind the wheel
  • Each state has its own minimum requirement for car insurance coverage
  • If you live in a no-fault state, you will most likely need to carry PIP coverage as well

When it comes to car insurance, rules, policies, and guidelines may differ from state to state.

Car insurance rules are very important to understand. Policies and guidelines can affect how your benefits are handled and liability requirements can affect your rates.

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Although states unanimously require some sort of financial proof of responsibility for liability, the amount of coverage mandated varies from state to state. You need to know what the minimum requirements are so that you can be sure you have enough coverage.

Insurance companies have different policies that can affect your car insurance.

Some of the things to be careful about are termination policies and claims policies.

Guidelines are pretty general and are similar from state to state and within all of the insurance companies. For instance, all insurance companies agree that the minimum amounts required by state laws do not provide enough coverage.

Car Insurance Rules That Vary by State

As mentioned above, all states require a form of proof of financial responsibility.

This can be done by purchasing a surety bond or through the purchase of car insurance. Since car insurance does not require a massive amount of money to be paid up front, it is usually the method that is chosen.

Keep these facts in mind:

  • Every state has its own Department of Insurance that oversees all insurance companies to assure they meet with state laws. If you have any questions about an insurance company, you can call your state department. You can also report suspicious activity or fraudulent behavior.
  • If an insurance company is approved to sell car insurance in your state, they will have to abide by the various car insurance rules set forth by that state. For the consumer, the state also sets laws for you.

One such law is the amount of coverage you must carry for liability. Liability is when you are responsible for bodily injury or property damage caused to another party or parties.

Liability insurance is the only car insurance required by state law unless you live in a no-fault state.

The coverage limits for liability vary from state to state, but they are always broken out into three amounts. The three amounts of coverage pertain to bodily injury for a single person, bodily injury for multiple persons, and property damage.

If you live in a no fault state, you will also be required to carry Personal Injury Protection (PIP) insurance.

PIP is insurance for your own personal bodily injury that results from an accident regardless of who is at fault.

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Policies that Vary by Insurance Company

Car insurance policies vary not just from one insurance company to the next, but from policy to policy.

It is very important to read your policy thoroughly and understand exactly what your coverage entails:

  • The car insurance company can terminate your insurance for a variety of reasons, and these change based on each individual policy. One such reason could be a lack of payment. Another reason may be excessive claims.
  • It is also a good idea to find out what the cancellation policy is. If you decide to quit your insurance and switch to a different carrier, you need to know what is involved in canceling the policy and how your pre-funded premiums get reimbursed.
  • Every insurance company has procedures in place for claims handling. It is important to follow these policies completely in order to expedite your claim and to avoid any potential problems or rejections.

What are some car insurance guidelines?

Guidelines for car insurance are fairly general.

People typically recommend that you buy more coverage than the state requires for true financial protection. It is also considered a good idea to carry underinsured motorist coverage in case other people decide not to buy more than the state requires.

Uninsured motorist coverage is also an option to give you insurance for the motorists who break the car insurance rules and drive without any car insurance.

Other forms of optional car insurance are really a personal decision.

If your car has value and is hard for you to replace, then having collision and comprehensive insurance is necessary. Roadside assistance is good for some people but redundant for others, so you have to decide if it is beneficial coverage for you.

Since you have to buy liability insurance, it is a good idea to follow the guidelines and consider purchasing more than the state requires.

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