What is car insurance?

Auto insurance is an insurance for cars, trucks, motorcycles, and other road vehicles. 

Its primary use is to provide financial protection against physical damage or bodily injury resulting from traffic collisions and against liability that could also arise from there. Car insurance may additionally offer financial protection against as theft of the auto, and against damage to the car sustained from events other than traffic collisions, such as keying and damage sustained by colliding with stationary objects.

The regulations for car insurance differ in each of the 50 US states and other territories. Each U.S. state having its own mandatory minimum coverage requirements.

Coverage requirements

Each of the 50 U.S. states and the District of Columbia requires drivers to have insurance coverage for both bodily injury and property damage, but the minimum amount of coverage required by law varies by state. 

For example, minimum bodily injury liability coverage requirements range from $30,000 in Arizona to $100,000 in Alaska and Maine. Although minimum property damage liability requirements range from $5,000 to $25,000 in most states.

Coverage levels

Car insurance can cover some or all of the following items:

• The insured party (medical payments)
• Property damage caused by the insured
• The insured vehicle (physical damage)
• Third parties (car and people, property damage and bodily injury)
• Third party, fire and theft
• In some jurisdictions coverage for injuries to persons riding in the insured vehicle is available without regard to fault in the auto accident (No Fault Auto Insurance)
• The cost to rent a vehicle if yours is damaged.
• The cost to tow your vehicle to a repair facility.
• Accidents involving uninsured motorists.

Different policies specify the circumstances under which each item is covered. For example, a vehicle can be insured against theft, fire damage, or accident damage independently.

Car insurance in the United States

Car insurance in the United States is designed to cover risk of financial liability or the loss of a auto vehicle the owner may face if their car is involved in a collision resulting in property or physical damages. 

Most states require a motor vehicle owner to carry some minimum level of liability insurance. States that do not require the vehicle owner to carry car insurance include Virginia, where an uninsured motor vehicle fee may be paid to the state; New Hampshire, and Mississippi which offers vehicle owners the option to post cash bonds.

The privileges and immunities clause of Article IV of the U.S. Constitution protects the rights of citizens in each respective state when traveling to another. An auto vehicle owner typically pays insurers a monthly fee, often called an insurance premium. The insurance premium, which a car owner pays is usually determined by a variety of factors including the type of covered auto, the age and gender of any covered drivers, their driving history, and the location where the vehicle is primarily driven and stored. 

Credit scores are also taken into consideration. Most insurance companies offer premium discounts based on these factors.

Insurance companies provide a car owner with an insurance card for the particular coverage term which is to be kept in the vehicle in the event of a traffic collision as proof of insurance. 

Recently, states have started passing laws that electronic versions of proof of insurance can now be accepted by the authorities.