Understanding Car Insurance Codes and Laws

Auto insurance code refers to the laws and standards that govern car insurance. Since the code establishes minimum requirements, there is no state with standards covering an array of damage or liability. 

Each state has its own minimum car insurance requirements governing which coverage drivers need to purchase. Individual customers need to decide what coverage they require beyond the considered minimum. Understanding your local car insurance code and knowing what is covered will help you decide how much coverage to purchase from your insurance provider. 

Understanding Car Insurance Code

Insurance companies and drivers are governed by what each state considers the minimum coverage required for driving on public roads. These standards are set forth by law and collectively referred to as auto insurance code.

If law enforcement officials pull over a driver or if there is an accident, the state requires the driver to show proof of at least minimum coverage. So when purchasing car insurance, you need to know what the minimum is and what it will cover. 

Also note, that some states require drivers to show proof of insurance before registering their vehicle.

What happens when a driver doesn’t meet the minimum auto insurance codes?

Not meeting the minimum state requirements for auto insurance may result in various penalties, depending on your state. If you are caught driving without insurance, you may have to comply with one or more of the following:

• Payment of fines
• Suspension of driver’s license
• Impounding of your vehicle or suspension of its registration
• Serving jail time

It’s not worth receiving any of these penalties to save a few dollars on insurance. Drivers need to therefore purchase at least the minimum state-required insurance.

How does understanding car insurance code affect what policy I purchase?

Understanding auto insurance code goes beyond simply knowing the minimum requirements. It also means acknowledging that the minimum auto insurance will not cover all damages or liabilities. It’s up to each driver to decide what amount of coverage to purchase. 

Discussing state code and company policies with your agent is recommended, primarily because that’s the most effective way to ensure you have the best coverage for you and your loved ones, both when it comes to fulfilling state minimums and adequately covering your family’s needs.

If you are ever in an accident, your insurance company will pay for expenses covered under your policy. If you have purchased only minimum coverage, you will be liable for any expenses not covered by your insurer. For this reason, insurance companies offer policies that go beyond what the state considers minimum; be sure to compare the pros and cons of purchasing only basic car insurance.

Some examples are:

• Collision coverage. This covers the cost of repair or replacement if your vehicle is involved in an accident.
• Comprehensive coverage. This covers repair or replacement of a damaged vehicle where damage or loss is due to something other than an accident.
• High-risk insurance. High-risk drivers may need to pay for more expensive coverage to qualify for auto insurance. A person’s risk may be determined by their medical condition, driving habits, record, age, and demographics.
• Liability coverage. This covers damages to other people or their property in cases where you are at fault.
• Personal injury or medical coverage. This insurance usually covers medical expenses for the drivers and passengers, regardless of who is at fault.

Products and details can vary by state and provider, so discuss your options with your agent when comparing auto insurance coverage options.

Case Studies: Understanding Car Insurance Code

Case Study 1: John’s Minimum Coverage Incident

John resides in a state with minimum car insurance requirements. He decides to purchase only the minimum coverage to save on insurance costs.

Unfortunately, John gets into an accident where the damages exceed his coverage limits. As a result, he is held liable for the remaining expenses that his insurer does not cover.

Case Study 2: Mary’s Comprehensive Coverage

Mary lives in a state that has minimum car insurance requirements but also offers optional coverage. She decides to purchase comprehensive coverage in addition to the minimum required.

One day, her car is damaged due to a hailstorm. Fortunately, Mary’s comprehensive coverage includes protection against weather-related damage, and her insurance company covers the repair costs.

Case Study 3: Tom’s Uninsured Motorist Incident

Tom encounters an uninsured motorist who causes an accident and flees the scene. Luckily, Tom has uninsured/underinsured motorist coverage as part of his auto insurance policy.

This coverage ensures that Tom’s medical expenses and property damage are covered, even though the at-fault driver does not have insurance.

Auto Insurance Code: The Bottom Line

State minimums will not cover all types of damage, so it is up to each driver to determine what coverage they would like to purchase. Insurance companies also have qualifying factors in determining what type of insurance you can buy. 

Driving without at least the minimum auto insurance can result in fines, penalties, and even jail time. So shop around for car insurance, compare, and discuss your coverage options with your insurance provider.