Auto Insurance In The United States
Auto insurance market in the United States is certainly the biggest in the world. This is due both to the fact that for many americans car is the most common and often the only means of movement, and that the auto liability insurance is mandatory. A car owner must have an insurance policy when his vehicle is licensing, is driving and when he extends of driving license. In the U.S. there is no general federal system for regulating the insurance industry, and each state carries out these functions independently, so in some states there is cheap auto insurance and in some states it’s expensive.
Today, most auto insurance policies are sold as a package of insurance services, covering a car and insurance payments to the third parties. The following types of insurance coverage are:
clash. The recoverable damages for injuries in a car accident (collision with another vehicle or object). This is typically the most expensive kind of insurance. It is a franchise, which usually amount varies from $50 to $1000;
overall coverage. The recoverable loss from damage to the car in all other cases, except those above, due to fire, theft, collisions with animals, falling objects, earthquakes, floods, etc. This type of insurance, like the previous one, in almost all states is voluntary;
physical harm. The recoverable damage caused to the health of persons affected by the fault car accident, including medical expenses and lost income. It is mandatory in most states;
damage to property. The recoverable damage to property of the third parties (the car, fence, house, etc.) in a collision at fault car. It is mandatory in most states;
medical expenses. Refunds are subject to medical expenses and funeral expenses for the owner of the car or its passengers, and sometimes - others. It is mandatory in some states;
personal injury ( “personal injury protection”, or “PIP”). This type of insurance is similar to previous, but it provides a wider range of costs. Coverage includes lost income and additional guarantees individuals affected by the accident. As a rule, is mandatory in states where insurance is practised “without fault”, which will be discussed below;
uninsured / insufficiently insured driver. The recoverable medical expenses, lost earnings and payments to non-economic (moral damage) in a collision with a driver with no insurance coverage or with its inadequate size. Provided protection and in case the driver of another car hides from the scene. This type of insurance is also compulsory in many states.
The rules of compulsory insurance exist in virtually all American states, but its species and limits of liability may differ significantly (see Table.). The differences stem from several factors: saturation state road, accident statistics, especially civil - legal regulation.
Civil liability car (responsibility for physical and property damage to the third parties) in the United States is the most common type of compulsory auto insurance. The minimum limit of liability for physical damage for each victim could be between $10000 up to $50000, more often - $15000 - $25000, for damage to property - $5000 up to $25000, in most cases - $10000. In many states it is also necessary to insure medical expenses of the car owner. This is done through such kinds of insurance, as “uninsured driver and PIP.
In 13 states, auto insurance is conducted on the basis of laws on insurance “without fault”. The insurance “without fault” means that every car owner receives damages from his insurer. This approach allows minimum insurance protection at cheap auto insurance, as well as reduce legal costs and loss of time, and it is very timely because civil law can oblige an individual to recover the damage caused to him only if he has committed an offence or the degree of his guilt was more than the victim. As a result, some damages require a thorough investigation of all circumstances of the case in a court of law, and that is expensive and not always possible. Often the legal costs for the parties are higher than the amount of damages.
To prevent cases of minor damage in court, in insurance “without fault” was used several approaches. First, set the minimum limit for amounts that are enforceable in the courts, for example $2000. Smaller amounts are compensated directly by insurer. Secondly, the types of damage for which offered legal action are limited. So it may be stipulated that the court order dealt only with cases of “serious damage”, which means physical harm leading to death or substantial loss of health. In some states there is choice between auto insurance system “without fault” and traditional insurance.
As an example,let us consider a system of auto insurance in New Jersey, which is one of the most difficult. Insurance Act “without fault” began operating on January 1, 1973 and had several changes since. The last of them is in force since 1999 in this state, drivers of motor vehicles are obliged to choose one of the two types of policies. The basic policy is a cheap auto insurance that provides the minimum protection with minimal quotes. The standard policy provides a wide range of insurance covers, some of which are lacking in basic policy.
The base and PIP policy had a standard franchise. Its size may be $250, $500, $1000, $2000 and $2500. Medical expenses in excess of franchises and up to $5000 are apportioned between the insurer and the insured in the following proportions: insurer - 80%, insured - 20%. Medical costs over $5000 are paid by the insurer. Thus, depending on the size of the maximum,the insured person own costs may be $1200 ($250 - franchise, $950 - 20% - to pay for medical expenses), $1400, $1800, $2600 and $3000.
By the standard insurance policy under PIP a supplementary package of services is attached, which includes: reimbursement uncollected income to $100 a week within the limit of $5200; additional payment for services that the victim is usually performed by his own (cleaning house, clearing snow, laundry, etc.) up to $12 a day within the limit of $4380, payment in the event of death, equal to the amount of uncollected revenues and additional services that would have been paid to him; costs for burial in the $1000. Insured may waive an additional package, and choose a higher level of insurance coverage.
To determine the reimbursement of medical expenses in New Jersey special lists are installed, which specify a maximum cost of each service. Invoices for more expensive medical services will not be paid. Recent changes in legislation provide for that purpose to use such forms as treatment protocols of typical cases, the list of diagnostic tests, as well as a list of medical expenses that are considered “acceptable”. Controversial issues relating to medical expenses can be directed to the special commission. Issues relating to the treatment will be considered by the independent medical organization.
The Organization of auto insurance in New Jersey provides for a special fund from which the reimbursement of their costs for insurers PIP is organised, exceeding $75000. In addition, a mechanism called “risk sharing” and intended to resolve the following situations is used. The driver, who has the insurance policy with the refusal of lawsuit submission, may be to blame for the collision with a driver, who has no such restrictions. In this case, the first driver’s insurer would have to pay damages to the second driver, including non-economic. “The exchange risk” of the insurer will provide reimbursement of part of its costs, which relate to non-economic damage. Funding is provided through the dispatch of the insurance premiums paid for policies that have no limitations to sue.
The law of Michigan, adopted in 1973, is acknowledged one of the most effective laws of insurance “without fault”. The unlimited reimbursement of medical expenses, damages caused to property of the third parties, up to $1000000 and the use of approach “without fault” for auto insurance against damage, are its hallmarks.
PIP Base package is valid for residents of Michigan, with their movements on the territory of not only their state but also the entire country, as well as Canada. The Insurance Act “without fault” is applied to all vehicles with more than two wheels. Motorcycles are not within its scope, but with a car accident motorcyclist will receive compensation insurance PIP, which pays the insurer, insured vehicle.
Insurers are obliged to offer three types of coverage. Standard clash - is a common type of insurance coverage used in other states. According to it, damages in connection with partial or complete loss of damage to the car in excess of the franchise, are granted.
The two other types of insurance coverage are used only in Michigan. The broad clash differs from the standard in this way: the franchise is not used if the insurer is “not guilty” in the accident. This type of coverage actually takes into account the guilty parties of the accident: in the states with traditional auto insurance franchise operates if the insurer is “guilty”. If the insurer is “not guilty”, his loss must be reimbursed by the insurer who is “guilty” without deducting franchise. A limited clash - is a clash with a franchise without compensation, if the insured is “not guilty”. If he is “guilty” in the accident, the compensation is not provided. This form of insurance coverage allows you to reproduce the situation in the states, where the traditional insurance is used: a driver may prefer not to purchase an insurance policy, but he has the right to sue for damages to the driver responsible for the accident.
Another feature of Michigan is the protection of small insurance companies from bankruptcy in paying unlimited medical expenses. At the state a special association is established, which is the official state reinsurer and which compensates damages in excess of $250000.
In the state of Colorado is set a high level of payments on insurance PIP, which is mandatory. The package includes the following types of PIP coverage: medical expenses up to $50000 within 5 years; rehabilitative services to $50000 for 10 years; lost income to $400 a week for 52 weeks; additional services to $25 per day for 52 weeks and benefit in fatal case in the amount of $1000 per person. Households with low incomes (less than $20000) may alternatively buy a basic policy providing for reimbursement of medical expenses up to $25000, missed earnings up to $5000 and payment for death of $5000 per person.
In many states in order to encourage the cheap auto insurance special measures to reduce the auto insurance quotes are taken. In some cases, lower premiums could be directly prescribed by law. For example, in Hawaii the minimum requirements of compulsory insurance include: PIP of $10000, physical damage of $20000 per person (40000 to one event) and the property damage of $10000. These requirements had been in force since 1998, when the insurers were ordered to reduce the auto insurance quotes with a minimum mandatory limit on 20 - 35%, and all the insurers that were licensed for cheap auto insurance in the state managed to do that.
Compulsory insurance does not even attempt to meet the specific needs of a particular car in insurance protection. To be protected, the car owner often requires additional voluntary insurance for more risk and in greater amount. For example, experts recommend to have the insurance coverage on the physical damage up to $100000 per person and $300000 for one event. The effect of the compulsory cheap auto insurance is demonstrated by its long experience: the relevant laws were adopted in many states some decades ago.