Car Insurance Coverage: A Guide to Insurance and the Law

If you own a car, you probably already have insurance coverage or you are at least shopping around for it. The reasons for this are that the government requires it, the finance company that is helping you afford your car may require it as well, and of course, you want the peace of mind that you get when you know you and your car, and all others on the road, are protected.

But the most glaring motivator of getting car insurance right from the get-go is probably the law. Thus, if you plan to abide by it, there are few key things you must understand about auto insurance coverage regarding the legal system and the government. Because even if you have a policy, you still may only be an insured driver – not a legal driver! Here is a guide to the law so that you can make sure both you and your insurance company are following it.

1. You may not actually be required to have car insurance!

It seems strange to begin with this, but car insurance isn’t compulsory in every state. However, those states that do not require that you have a policy do require that you are financially responsible enough to handle the costs of damage and injury in the case of a car accident and the like. Still, usually the only way to achieve that is to have an insurance policy.

2. Your state’s insurance department has the final word on the rates you pay

If you feel your insurance policy is charging you outrageous rates, make sure this is legal. Insurance companies do answer to a higher governmental power and they are required to keep their rates below a certain number (that varies). Generally, if you’re curious as to how your insurance company tallies its rates, ask your state’s department about it!

3. Your insurance company has the right to cancel your policy

There are different things that are required of you as an insurance policy customer and if you do not fulfill these requirements, your insurance company is not legally bound to keep insuring you. Firstly, and most obviously, if you don’t pay your premium, you can be dropped from your policy. As well, if you lose your driver’s license, your policy can be cancelled. And lastly, if you were deceitful in the application process for your policy, you can and most likely will be dropped – in fact, a claim already being processed can be found null and void in this case. If you failed to disclose facts about your lifestyle, personal history, or the type of vehicle you drive, that make you more at risk for getting in an accident, etc, then an insurance company is by no means committed to you. For example, perhaps you failed to inform the company about your drunken driving arrest! But other than these things, your state legally requires your insurance company to fulfill its contract with you. However, there is a major caveat here. No company has to renew your policy – if it finds your driving record makes you a bad risk, it doesn’t have to keep you as a customer. More alarmingly, if things out of your control change around you – the statistics about your neighborhood change, etc – a company can choose not to renew.

4. You only have to have third party coverage

By law, you are only obligated to have enough financial backing to cover the costs of damage and personal injury that you cause to another driver and/or vehicle. You don’t have to have coverage that takes care of theft, vandalism, natural disasters, etc. Also, you don’t have to be able to pay for damages to your own vehicle or injuries to yourself. So even thought the law requires you get a policy, you don’t have to go broke getting the most comprehensive coverage possible.