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Automotive insurance, in the United States and elsewhere, is designed to cover risk of financial liability or loss a motor vehicle owner may face if their vehicle is involved in a collision resulting in property or physical damages. Some states require a motor vehicle owner to carry some minimum level of liability insurance. States that do not require the vehicle owner to carry car insurance include Virginia, where an uninsured motor vehicle fee may be paid to the state; New Hampshire, and Mississippi which offers vehicle owners the option to post cash bonds. The privileges and immunities clause of Article IV of the U.S. Constitution protects the rights of citizens in each respective state when traveling to another. A motor vehicle owner typically pays insurers a monthly fee, often called an insurance premium. The insurance premium a motor vehicle owner pays is usually determined by a variety of factors including the type of covered vehicle, the age and gender of any covered drivers, their driving history, and the location where the vehicle is primarily driven and stored. Many insurance companies offer premium discounts based on these factors. Insurance companies provide a motor vehicle owner with an insurance card for the particular coverage term which is to be kept in the vehicle in the event of a traffic collision as proof of insurance.
Consumers may be protected by different levels of coverage depending on which insurance policy they purchase. Some states require drivers to carry at least liability insurance coverage to ensure that their drivers can cover the cost of damage to other people or property in the event of an accident. Some states, such as Wisconsin, have more flexible "proof of financial responsibility" requirements.
In the United States, automotive liability insurance covers claims against the policy holder and usually any other operator of an insured vehicle; provided they do not live at the same address as the policy holder and are not specifically excluded on the policy. Drivers living at the same address must specifically be covered on the policy. Thus it is necessary, for example, when a young adult reaches driving age that they be added to the policy. Liability insurance sometimes does not protect the policy holder if they operate any vehicles other than their own. When you drive another person's car you are not necessarily covered under their policy. Non-owners policies are also available. These policies insure drivers on any vehicle they drive, even if it belongs to someone else.[citation needed] This coverage is available only to those who do not own their own vehicle and is sometimes required by the government for drivers who have previously been found at fault in an accident.[citation needed] Non-owners policies are also known as Named Operator Policies.[citation needed] The policies are useful for people whose driver’s license has been suspended and they have to have insurance for their license to be reinstated.
Liability coverage is offered for bodily injury (BI) or property damage (PD) for which the insured driver is deemed responsible. The amount of coverage provided (a fixed dollar amount) will vary from jurisdiction to jurisdiction. Whatever the minimum, the insured can usually increase the coverage (prior to a loss) for an additional charge.
An example of property damage is where an insured driver (or 1st party) drives into a telephone pole and damages the pole; liability coverage pays for the damage to the pole. In this example, the drivers insured may also become liable for other expenses related to damaging the telephone pole, such as loss of service claims (by the telephone company), depending on the jurisdiction. An example of bodily injury is where an insured driver cause’s bodily harm to a third party and the insured driver is deemed responsible for the injuries. However, in some jurisdictions, the third party would first exhaust coverage for accident benefits through their own insurer (assuming they have one) and/or would have to meet a legal definition of severe impairment to have the right to claim (or sue) under the insured driver's (or first party's) policy. If the third party sues the insured driver, liability coverage also covers court costs and damages that the insured driver may be deemed responsible for. If a state requires liability coverage, both parties are usually required to bring and/or submit copies of insurance cards to court as proof of liability coverage.
