This coverage helps pay for the injuries or damages you cause in a car accident, including those of the other driver and their passengers. Car insurance is a significant cost of owning a car, but it's considered so important that most states require coverage by law. However, not all 50 states require coverage, and many offer alternatives to insurance company coverage. Nearly every state has some type of car insurance requirement.
Many states allow drivers to meet the minimum requirements in a variety of ways, including through a bond, deposits, self-insurance vouchers, or underwriting an auto insurance policy. New Hampshire doesn't require car insurance, but you must show that you can be financially responsible for the damage you cause before you give up a policy, and there are minimum limits if you decide to buy coverage. There are several states, such as Michigan, Minnesota and New Jersey, where drivers must have liability and personal injury protection coverage. Auto liability insurance is mandatory in 49 states and the District of Columbia.
New Hampshire, the only state that doesn't require liability insurance for cars, requires drivers to demonstrate that they can provide sufficient funding in the event of an at-fault accident (i.e., liability insurance generally pays for the other driver's medical, vehicle repair, and other expenses when the policyholder is the driver at fault in an accident). Covers (bodily injury (BI) per person and per accident and (property damage) (PD). Table 1 below lists the minimum limits of liability required in each jurisdiction. Many additional optional coverages are available, such as rent reimbursement, which pays for a car rental if the car is in the workshop after a covered claim, roadside assistance or towing insurance, and comprehensive glass coverage, which pays for the repair or replacement of broken window glass, with no deductible.
Car insurance with minimum coverage is usually cheaper than a full coverage policy, which provides additional protection for your vehicle, so it can be a way to save on insurance premiums. All insurance products are governed by the terms of the applicable insurance policy, and all related decisions (such as coverage approval, premiums, fees, and charges) and policy obligations are the sole responsibility of the insurance insurer. To find out the exact minimum coverage requirements in your state, visit the website of your state's insurance department or contact your auto insurer. It's also important to note that, unless your state requires property damage coverage for uninsured drivers, car insurance with minimum coverage doesn't cover the repair of your vehicle, whether you're at fault or not at fault.
These measures help cover the cost of injuries to you or your passengers if you are ever hit by a driver who doesn't have enough or no car insurance. However, keep in mind that giving up traditional car insurance is often a much more expensive option in the long term or if you're involved in an accident. The real problem comes when a driver has a car accident, or simply stops, and can't prove that they have car insurance or financial responsibility. This means that car insurance coverages and limits that work for a friend or family member who lives elsewhere might not be right for you.
However, you must confirm with your car insurance company or agent that you are covered in Canada before crossing the border. A number of states offer drivers the option of presenting proof of financial responsibility instead of car insurance. NerdWallet has put together the minimum requirements by state so that you can quickly and easily find the amount of car insurance you need to drive legally. For most drivers, it's simply easier to meet the state's minimum auto insurance requirements than it is to take out alternative insurance, and it's certainly less risky.