All States have a Financial Responsibility Law
You must show financial proof that you can pay for any damages caused by a collision if you own a vehicle. This applies regardless of whether you were at fault for an accident. You can be subject to penalties if you fail to produce the necessary proof. These include suspension of your driver license and revoking your vehicle registration.
An automobile insurance policy is the simplest and best way to comply with financial responsibility laws.
Liability Insurance Protection
Liability coverage is the most important component of auto insurance policies. It covers compliance with financial responsibility laws and limits. If you are responsible for an accident, liability insurance covers bodily injury and property damages. Each state sets minimum liability coverage limits. These limits are:
State-by-State Minimum Requirements
* Alaska 50/100/25* Alabama 20/40/10
* Arkansas 25/50/15
* Arizona 15/30/10
* California 15/30/5
* Colorado 25/50/15
* Connecticut 20/40/10
* Delaware 15/30/5
* Florida 10/20/10
* Georgia 15/30/10
* Hawaii 20/40/10
* Idaho 20/50/15
* Illinois 20/40/15
* Indiana 25/50/10
* Iowa 20/40/15
* Kansas 25/50/10
* Kentucky 25/50/10
* Louisiana 10/20/10
* Maine 50/100/25
* Maryland 20/40/10
* Massachusetts 20/40/5
* Michigan 20/40/10
* Minnesota 30/60/10
* Mississippi 25/50/25
* Missouri 25/50/10
* Montana 25/50/10
* Nebraska 25/50/25
* New Hampshire 25/50/25
* New Jersey 15/30/5
* New Mexico 25/50/10
* Nevada 15/30/10
* New York 25/50/10
* North Carolina 30/60/25
* North Dakota 25/50/25
* Ohio 12.5/25/7.5
* Oklahoma 10/20/10
* Oregon 25/50/10
* Pennsylvania 15/30/5
* Rhode Island 25/50/25/25
* South Carolina 25/50/25
* South Dakota 25/50/25
* Tennessee 25/50/10
* Texas 20/40/15
* Utah 25/65/15
* Virginia 25/50/20
* Vermont 25/50/10
* Washington 25/50/10
* Wisconsin 25/50/10
* West Virginia 20/40/10
* Wyoming 25/50/20
As you can see, liability coverage comes in three numbers. The policy limits for bodily injuries are the first and second numbers. If you are responsible for the accident, the first number represents the coverage that is available to cover medical expenses for the victim. If you are responsible for the accident, the second number indicates how much coverage is available to cover medical expenses for all other victims. The third number represents the amount that is available to cover property damage for all other parties.
An example: As you drive down a residential street, you become distracted (lost in thought or on your phone) and don’t see a stop sign. A second driver is also going through the intersection, and has the right-of-way. The speed limit is met, but you must stop if the other driver is following. You realize that you are about to hit another car and you brake. However, your momentum propels you into the other car.
Your insurance company accepts that you are responsible for the collision. Your policy would cover the medical expenses for injuries sustained in an accident to the other driver up to your policy limit (first amount). Your policy would cover the medical expenses of any passengers in the vehicle if the other driver was also at fault.
For this example, if you have Alaskan insurance, your company would pay up to $50,000 for the driver or $100,000 for the passengers for medical expenses.
Your insurance company would pay for the repairs of the vehicle of the other driver up to your property damage coverage limit (third number).
Your insurance company will defend you in court if you are sued. Liability coverage protects your assets.
It is your responsibility to determine the suitability of a liability only policy
A Liability Only policy can help you protect yourself from your responsibility towards others. However, it cannot repair or replace any property. Your medical expenses are not covered by a liability-only policy. You are not protected if you sustain damages if you are struck by an uninsured motorist. If you trade in your vehicle to finance a new one, a liability-only policy should be upgraded to include collision and comprehensive coverage.
It can be very difficult for an Insured who is covered by a liability-only policy to inform someone who has had their car damaged while they were parked that their policy doesn’t cover them in those situations.