It is mandatory in every state to be able to show financial liability, not every state requires you to do this by purchasing automobile insurance. Some states allow you to post a bond or financial certification in the same amount of the mandatory coverage in the state. But if you are purchasing automobile insurance there is some basic information to keep in mind.
Basic auto insurance coverage is pretty much the same in every state. The type and amount of liability insurance required is what is different in each state. The amount of your deductibles and the level of coverage you choose will all have a bearing on the premiums you will pay for your automobile insurance.
Automobile insurance consists primarily of six major areas of liability: Bodily Injury, Property Damage, Personal Injury Protection, Collision, Comprehensive, Uninsured Motorist, and Underinsured Motorist coverage.
It is the Insurance Commissioner in each state is usually who decides what coverage you must have to drive in that state as well as the levels of coverage you must carry. Some states allow you to ensure your financial responsibility through other means and Alabama is one of them. Instead of purchasing car insurance you can obtain a Motor Vehicle Liability Bond or a Certificate of Cash Bond in the minimum amount of $50,000.
While the state levels are usually at the low end, you may want to consider additional coverage as well as higher levels of automobile insurance. The minimum levels that are mandated by each state represent the highest amount of money that your insurance carrier will pay for medical and property damages per accident.
Your Bodily Injury liability pays for medical bills and loss of income for the person whose car you hit. Bodily Injury does not cover your medical expenses. That is where Personal Injury coverage comes in. Personal Injury coverage will pay your medical bills as well as any family members who were in the accident with you. Property Damage pays for the repair or replacement of property that was damaged or destroyed because of an accident where you were at fault.
If you have financed your vehicle and still owe money on it, your lender will require you to carry collision insurance on the car to cover its collateral. Do not let this insurance lapse as the lender will add the appropriate level of coverage to your monthly payment. The rate may not be the same as what you could have gotten through your own insurance company.
Comprehensive coverage will reimburse you for the value of damages that have been caused by anything other than an accident- weather damage such as flooding, if someone were to break into your car, and also if it were stolen.
Uninsured Motorist coverage and Underinsured Motorist coverage is not mandatory. In fact in some states you must check and initial that you are rejecting either of those forms of coverage. Uninsured Motorist coverage will pay your expenses if your vehicle is hit by someone who has no insurance coverage at all while Underinsured Motorist coverage will protect you if you were hit by a driver who didn’t have enough coverage to pay for your expenses.
If you aren’t sure exactly what you need to properly cover yourself and your family members, talk to an insurance professional and he or she will guide you through it.