Financial responsibility, which is more commonly known as auto liability insurance, is a basic requirement on all types of vehicles operated on US roads and highways. This means that every driver, whether he or she operates a car, a truck, a bus or a motorcycle, should be able to show evidence of financial responsibility whenever this is requested by a law enforcement officer, especially if he or she gets involved in a traffic collision, and whenever he or she is renewing his or her vehicle’s registration or driver’s license.
While all states mandate financial responsibility, only 48 states strictly require auto liability insurance. In the state of New Hampshire, drivers are simply required to demonstrate capability to provide sufficient funds in case of an accident which is their fault. Demonstrating financial capability may be done by posting a bond or cash equal to the amount of damages in a crash. In Virginia, drivers have the option to either purchase auto liability insurance or pay an uninsured motorists vehicle fee to their state’s Department of Motor Vehicles (if they choose to register their vehicle as uninsured).
In all other states, the type of liability coverage that drivers are required to have can either be the full tort insurance coverage or the no-fault insurance coverage. Tort states, which mandate the full tort coverage on drivers, allow victims of car accidents to file a civil lawsuit against the at-fault driver to determine the extent of damage they have been made to suffer and to seek compensation for all these damages. This compensation, which the at-fault driver’s insurance provider will pay by to the victim, usually covers cost of medical treatment, lost wages, pain and suffering. Payment of compensation may take time, though, and premiums may cost higher due to the lawsuit.
Payment of compensation is often much faster in no-fault states since no lawsuit needs to be filed anymore because compensation is paid to each driver by their respective insurance providers regardless of who is at fault in the accident. The no-fault coverage, also known as Personal Injury Protection (PIP) covers the driver and his or her passengers and medical and hospital expenses; in some states, coverage includes payment for lost wages, expenses for household-related services, such as childcare, and funeral expenses.
Car insurance coverage, though, is not the only requirement that states mandate on drivers; there are also the Uninsured Motorist Coverage, which is designed to pay for all economic damages and losses that victims may suffer due to accidents wherein the driver at-fault does not carry liability insurance or if the accident were a hit & run, or if the vehicle involved in the accident were stolen. Underinsured Motorist Coverage, on the other hand, is intended as a supplement to any inadequacy in the driver-at-fault’s policy limit, making the amount of his or her policy insufficient to cover all the damages suffered by the victim (this is usually the case if the at-fault driver carries only the minimum liability coverage set by his or her state.
All these required coverages make insurance too expensive for many drivers; however, as clearly explained by the independent car insurance company Insure on the Spot, not being insured can prove to be much more expensive. Besides, drivers and car owners can always seek assistance from independent car insurance companies for quotes which will give them the best deals that will not put a strain in their budget.