How Car Insurance Works in The United States

The main types of insurance in the United States are life and car insurance. Auto insurance is mandatory in most US states. If the car is not insured, it cannot be registered. Therefore, in this article, we will discuss its main aspects.

The concept of compulsory insurance was born in America at the beginning of the 20th century and is continually evolving. It is governed by the laws of each state individually. In New Hampshire, Tennessee, and Wisconsin, it is optional. In other states, the differences in the rules are connected to the types and minimum coverage of compulsory insurance. For example, car insurance for a bad driving record may vary in some states.

Types Of Car Insurance In The USA

There are five basic types of car insurance in the United States. The first two types are the most important. Therefore, they are mandatory for everyone.

Coverage for physical harm and property damage

These are liability insurance for physical harm and property damage caused to a third party in case of a traffic accident. Each state determines the minimum coverage for accidents. Three numbers are used for this. For example, in California, the following parameters are accepted: 15/30/5. This means that the car owner is required to have a policy with minimum liability insurance for personal injury and property damage at the rate of 15 thousand dollars if one person was injured. Also, he or she should have 30 thousand dollars if more than one person suffered, and 5 thousand dollars to cover property damage. Since this insurance is the most important, it is recommended to visit such professionals as to get it.

Personal injury protection

The third type of insurance is personal injury protection. It covers medical expenses and financial losses as a result of temporary disability of the policyholder and the passengers who were in a car during an accident. Such a policy is important if a person has low coverage for his medical insurance or does not have it at all. If medical insurance is expensive and provides high coverage, then you can refuse the third type of car insurance.

Collision and comprehensive policy

The first is collision insurance, which covers material damage caused to the car of the policyholder through his or her fault as a result of a collision with another car or stationary object. This can be a pillar, fence, tree, etc. The second one is comprehensive insurance. It covers damage caused by floods, fires, hurricanes, earthquakes, and vandalism.

Although collision and natural disaster insurance are not mandatory under all state laws, these types of policies work most often.


There are many insurance companies in America that offer a large number of a different proposition. At the same time, they take into account the following information:

  • The age of a driver;
  • The area of the city where the car is kept at night;
  • The approximate daily mileage;
  • The main purpose of using the car;
  • The number of traffic violations occurred over the past five years;
  • The car manufacturer year.

All these data are used to calculate the optimal size of insurance coverage and the corresponding insurance premium.

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