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What Type of Insurance is Required by Law?

Vehicle accidents are the major reason why auto insurance exists and why there is a compelling need to purchase an insurance policy for a vehicle prior to using it in public roads. Vehicle insurance primarily covers the cost of medical expenses of the insured party, of physical damage to the insured car and of the third parties involved in the vehicular accident. Third parties include but not limited to other people who suffer property damages and bodily injury as a result of the automobile accident.

The law concerning automobile insurance in one state may be quite different from another because every state has different requirements for automotive coverage. That’s why it is very important to know and understand the different types of auto insurance so that you’ll be able to identify which one is considered a legal requirement in your state. But the question is, in all of the United States of America, what type of insurance is required by law?

The type of auto insurance which is mandatory in the entire United States is Liability Insurance. There are also other types of insurances which are optional such as Comprehensive coverage and Collision auto insurances. Uninsured Motorist and Underinsured Motorist Auto Insurance Coverage rely on individual state laws which means that not all but some state require this type of vehicle insurance coverage.

Liability Insurance coverage is mandatory in all states because it pays valid claims from damages to other persons, others’ cars and properties. When as a result of the insured party’s negligence, a vehicular accident occur causing injury to other people or damages to other peoples’ car or other properties, the at-fault driver’s liability coverage will pay for the medical bills, funeral costs in case of death, indemnification and other expenses necessary for repair of the damage property. If for example an insured driver runs into a telephone pole because of reckless driving, the insurance pays for the damage of the pole and other expenses associated with the damage like the service claim of the telephone company.

Collision coverage is an optional type of auto insurance which is subject to a deductible. It covers the payment for the repair of the insured party’s vehicle which is damaged due to collision incident or for the cash value of the vehicle if in case it can’t be repaired.

Another type of vehicle insurance which is optional is comprehensive coverage. Like the collision coverage, it is also subject to a deductible and covers damages of the car owned by the insured party. However this is only applicable to vehicular accidents which involve environmental phenomena and comprehensive losses such as theft, fire, weather conditions and impact with animals.

Uninsured Motorist and Underinsured Motorist Auto Insurance Coverage apply when the at-fault driver of a vehicular accident lacks liability or has insufficient coverage to pay for the damages caused to other people. This insurance policy covers all the damages that the aggrieved party might suffer in a vehicular accident in the event that the driver at fault fails to pay for the damages or has no insurance coverage. Uninsured motorist insurance covers bodily injury and property damage liabilities of the driver responsible for the accident who has no insurance coverage. Underinsured Motorist Auto Insurance Coverage cover claims in case the driver at fault has insufficient insurance coverage to pay the full amount of damages.

Uninsured Motorist and Underinsured Motorist Auto Insurance Coverage also covers the lost wages which one can suffer from being out of work due to the injury suffered from a vehicle accident in case the other driver has no liability insurance and can’t fulfill the financial responsibility imposed upon him.