Auto insurance isn’t a one-size-fits-all product. The rules governing auto insurance vary significantly from state to state, affecting everything from the type of coverage you need to how claims are handled after an accident. If you’re moving to a new state or just want to understand your local regulations better, here’s what you need to know.
Tort vs. No-Fault Systems
The most fundamental difference between states is whether they use a tort (fault) or no-fault insurance system. In tort states, the at-fault driver is responsible for paying damages. This means the injured party can file a claim against the at-fault driver’s insurance or sue them directly. In no-fault states, each driver’s own insurance pays for their injuries regardless of who caused the accident, and lawsuits are restricted to cases involving serious injuries.
Mandatory Coverage Types
While all states requiring insurance mandate some form of liability coverage, the additional required coverages vary considerably. Some states require uninsured motorist coverage, while in others it’s optional. Personal Injury Protection is mandatory in no-fault states but not available in many fault states. A few states require medical payments coverage, and some require property damage liability but not bodily injury liability, or vice versa.
Coverage Limit Requirements
The minimum liability limits required by each state reflect widely different perspectives on adequate coverage. Limits range from as low as 10/20/10 in some states to 50/100/25 in others. These differences mean that drivers moving from a state with low requirements to one with higher requirements may need to significantly increase their coverage.
Proof of Insurance Requirements
States have different methods for verifying that drivers maintain insurance coverage. Some states use electronic verification systems that automatically check insurance status. Others rely on random verification through mail. Many accept digital proof of insurance on a smartphone during traffic stops, while a few still require paper cards.
Rate Regulation
States take different approaches to regulating insurance rates. Some states, known as “prior approval” states, require insurance companies to get approval from the state insurance commissioner before changing rates. Others are “file and use” states where companies can implement new rates but must file them with the state. Still others are “open competition” states with minimal rate regulation.
These regulatory differences help explain why insurance costs vary so much between states. States with heavy regulation may have more stable rates but less competition, while lightly regulated states may see more rate volatility but also more options for consumers.
What to Do When You Move
If you’re moving to a new state, update your auto insurance policy within 30 to 90 days, depending on the state. Your current insurer may be able to adjust your policy for the new state, or you may need to find a new company. Get quotes from multiple insurers in your new state, as the most competitive companies often vary by region.
