State auto insurance minimum levels of coverage are set by each jurisdiction. The type of coverage required will vary, depending on whether the state follows a tort or no-fault system.
In a tort system for car insurance, people who have been injured in a motor vehicle accident have the right to sue the at-fault driver to collect damages. The at-fault driver is also responsible for paying for the cost of repairs to the other driver’s vehicle and any public property damaged in the accident. Bodily injury and property damage liability coverage is used to pay for these types of damages following an accident.
Third party liability (bodily injury and property damage) coverage is also required in a no-fault car insurance state. With this type of system, injured people are compensated by their own insurance provider for their medical bills incurred as the result of an accident. Liability insurance is required because accident victims do have the right to sue if their level of injuries meets a threshold set by the state.
Under a no-fault system, a driver is required to have a certain level of Personal Injury Protection (PIP) coverage in place. This coverage is used to pay for the policyholder’s injuries and damages.
Car insurance buyers can choose a policy with a higher limit than the state auto insurance minimum required by law. A policy with a low limit may not be enough to pay for damages caused in an at-fault accident.