What are the laws regarding automobile insurance?

The laws vary by state, but most require basic liability coverage. States want to be sure that motorists have some financial backing in the event of a collision or any insurance-related incident. Most states require insurance to operate a vehicle in any circumstance, but there are a few exceptions:
Tennessee and Wisconsin do not require liability but legally expect drivers to prove adequate "financial responsibility" in the event of a collision. (Source: TN, WI DMV websites)
New Hampshire initially requires no insurance but does temporarily after a collision. (Source: NH DMV website)
Virginia is a rare exception, allowing a driver to pay a $500 Uninsured Motor Vehicle fee to legally operate without insurance at his/her own risk. However, the fee expires with the registration and must be renewed. Drivers in Virginia opting for insurance must meet the state's minimum coverage. (Source: VA DMV website; //www.dmv.virginia.gov/webdoc/citizen/vehicles/insurance.asp)
Drivers in these four states often still carry insurance as protection.

How is one protected from uninsured drivers?
By purchasing uninsured/underinsured motorist coverage. UM/UIM pays for medical bills if you and any occupants are hit by an uninsured motorist or one without enough insurance. Many states require this coverage by law.

How is a vehicle protected from uninsured drivers?
Uninsured/underinsured motorist property damage coverage pays for damage to your vehicle if hit by a driver without any or enough insurance. Some states offer this coverage in place of collision coverage.

Is coverage transferable from state-to-state in the short term?
Yes, if you have an insurance policy you're covered throughout the United States. Moving to a different state temporarily may require changing coverage, depending on the amount of time a state allows residency with out-of-state insurance.

What about long-term?
Moving for the long-term definitely requires switching insurance, although the time to do so can be somewhat variable. For example, a state may technically require changing after 90 days, but if you have two full months left on your current policy it would seem silly to switch prematurely. However, the "grey" period in between could prove problematic in the event of an incident.

What is an SR-22?
An SR-22 is a form that proves a driver has insurance or is financially responsible. High-risk drivers are often required to carry these forms for periods of 3 to 5 years, depending on their offenses.

What is liability insurance?
Liability covers bodily injury (including death) and property damage to others if you are determined responsible for an accident, even if you are not driving. Owning the vehicle and lending it to someone else constitutes responsibility. Liability coverage also pays for legal fees if you are sued as a result of an accident.

How does one decipher the numbers associated with liability?
Insurers will often represent liability coverage with three consecutive numbers; for example, 50/100/25. The first number stands for maximum amount payable for an individual bodily injury in an accident, in this case $50,000. The second number represents the available coverage for all injuries in an accident, or $100,000. Finally, the last number denotes maximum property damage liability for one accident, $25,000.

What are the minimum requirements?
Amounts of required coverage vary among states. Along the spectrum of minimum coverage, a low figure is 15/30/5 (California, New Jersey) while a high set is 50/100/25 (Alaska, Maine).

What is comprehensive insurance?
Comprehensive coverage pays for damage to your vehicle that is not caused by an accident with or without another vehicle. Natural events - fire, wind and flood - are included, in addition to theft and vandalism. Damaging encounters with animals are included as well. If a vehicle is stolen, comprehensive will reimburse you for any related expenses or losses. Some comp plans pay for the replacement of broken glass, often known as full-glass coverage.

What is collision insurance?
Collision pays for damage to your vehicle in the event of an accident, regardless of whether or not another vehicle is involved. This insurance also provides you coverage if you are driving a non-owned or rental vehicle.

What if the accident is my fault?
Several states have enacted "no-fault" policies that mandate your insurance company pay compensation for injury or damage regardless of who is to blame. These laws are meant to streamline the liability process while reducing injury fraud and lowering premiums.

How are insurance rates determined?
Many different factors contribute to the final insurance rate. Generally, these pieces fall into the following categories:
Personal information - name, address, date of birth, gender, marital status, home ownership status, employment, education, credit history, membership status to various organizations, social security number (in some cases), age at which a driver's license was first obtained and very importantly, your driving record.

Family information - other primary drivers, other occasional drivers and their driving histories.

Vehicle information- year, make, model, primary use (pleasure/work), how often the vehicle is driven to work or school, business use of the vehicle, how long you've owned the vehicle, factory safety equipment, presence of an alarm/immobilizer system, expected annual mileage and zip code at which the vehicle is normally parked.
Previous insurance information- name of previous insurer, length of previous insurance, lapses in insurance, previous liability limits and other coverage.
Previous insurance claims, accidents and moving violations - essentially an elaboration on your driving record, including dates and severity of the events and costs of repair.
Desired coverage - limits on liability and whether or not comprehensive and collision are chosen.

Why is the parking zip code required?
Insurance companies want to know where the vehicle is kept most of the time and if it garaged, driveway parked or street parked. Obviously, areas with higher crime will contribute to higher comprehensive rates than those with lower crime.

What is a premium?
A premium is just another name for a rate.

What is a deductible?
A deductible is a fixed amount of money you pay for each insurance claim. For example, choosing a deductible of $500 per accident means that for each accident you pay that amount before the insurance pays. If you chose to add comprehensive or collision you can vary your rate by adjusting your deductibles. High deductibles correspond to lower rates, while low deductibles often mean higher rates.

What if the claim is below the deductible?
You pay the full cost. If you carry a $1,000 deductible for collision and a minor accident causes $700 in damage, you're fully responsible for the cost.

What if a vehicle can be repaired for less than the paid amount?
Often a vehicle is repaired without using the entire insurance payment. Although different insurers maintain different policies, repairs are generally supposed to be documented to show the money went into the repair of the car. It's perfectly legal to keep part or all of the money and not fix the car, but in the event of another accident with the same vehicle an insurance company may reduce payment in accordance with the first payment. For example, if an insurance company pays $2,500 for an accident and only $1,000 is documented in repairs, the insurer will assume that the remaining $1,500 is still available and reduce the second payment by that amount.

What is a total loss?
Vehicles that are considered totaled are determined not suitable for repair. Insurers pay the cost of replacing the vehicle with a similar vintage make and model.

Are only certain shops allowed to perform the repairs?
No, most states allow the shop to be chosen at your discretion. Some body shops may not be approved by the insurer, in which case you might have to pay a little more.

Are aftermarket or OEM parts used for repair?
Depends on the parts' availabilities. You can request that factory authorized parts be used, although sometimes this costs a bit more.

How long does a policy last before needing renewal?
Generally speaking, policies run either six months or one year, at which point the rates may be adjusted to reflect differences in the driver's record, number of drivers, covered vehicles, etc.

What is a Declarations Page?
A Declarations Page is a report from your insurer stating your coverage and limits, drivers insured, vehicles covered and the cost of coverage. These reports usually arrive shortly after renewal or when beginning a new policy.

Tips for reducing insurance premiums
While reducing liability coverage and raising deductibles may lower premiums, there are other ways to lessen your rates without sacrificing any coverage.

Keep a clean record
Some insurers offer a discount to drivers who consistently prove to be safe drivers by not receiving moving violations or being involved in accidents. At the least, keeping a clean record will prevent extra surcharges from being added to your premium.

Maintain consistent coverage
Customers who do not lapse in their insurance often receive a better premium when applying for new coverage.

Take a defensive driving course
Drivers who participate in official courses in defensive driving may see reductions in their rates, especially if accidents or moving violations appear on their driving records.

Take a Driver Improvement course
For drivers over 55 years of age, these refresher courses can improve skills while reducing rates.

Choose a suitable vehicle
Certain vehicles are cheaper to insure depending on their characteristics. A basic Volvo and a powerful Chevrolet Corvette are likely to have very different rates.