Vehicle Insurance: What insurance is required
Vehicle Insurance is legally mandated as it provides financial protection in the event of accidents and emergencies. Discover which insurance policies are compulsory in your state.
In the US, Vehicle Insurance regulations are determined by individual states, each with laws and requirements regarding mandatory coverage.
Generally, three types of insurance are required in nearly all states:
- Auto Vehicle Insurance
- Motorcycle Vehicle Insurance
- Workers’ compensation Vehicle Insurance
While health insurance is no longer federally mandated, it’s important to note that certain states may impose tax penalties for not having coverage. This underscores the importance of being aware and cautious about your health insurance status.
Refer to Insurance Business’s comprehensive state-by-state guide for detailed information on each state’s legal Vehicle Insurance requirements.
Vehicle Insurance
Vehicle Insurance, also known as Vehicle Insurance, is designed to offer financial protection in the event of an accident or vehicle theft. This insurance typically includes three types of coverage:
- Liability Coverage: Pays for injuries and property damage you cause to others.
- Property Coverage: Covers damages or losses to your Vehicle Insurance.
- Medical Payments Coverage: This covers medical expenses for you and your passengers and may also include compensation for lost income and funeral costs.
Vehicle Insurance is mandatory in every state except New Hampshire and Virginia.
In New Hampshire, drivers must prove they have the financial means to cover any damages or injuries they cause in an accident.
In Virginia, drivers can forgo insurance if they can demonstrate financial responsibility. Those who choose not to carry insurance must pay the Department of Motor Vehicles a $500 uninsured motor vehicle fee.
- Bodily Injury (BI) Liability Coverage covers medical and legal expenses for injuries or deaths for which you are found responsible.
- Property Damage (PD) Liability Coverage: Compensates other drivers for damage or loss caused by an accident you are responsible for.
- Personal Injury Protection (PIP) Coverage: This type of coverage is designed to provide immediate medical expense coverage for you and your passengers, regardless of fault in the accident.
- Uninsured/Underinsured Motorist (UM/UIM) Coverage: This coverage covers injuries and property damage for you and your passengers if you are involved in an accident with a driver who lacks adequate Vehicle Insurance.
- Comprehensive Coverage: This type of coverage is designed to protect against a comprehensive range of risks, including both man-made events and natural disasters.
Motorcycle insurance
Motorcycle insurance is legally required for anyone operating a motorcycle on public roads. Except Florida, nearly all states mandate this coverage.
Vehicle Insurance is a shield that protects riders from financial liability in the event of an accident involving their motorcycles. It also provides a safety net for the costs of repairs or replacement if the bike is damaged or stolen, offering peace of mind to the riders.
The primary legal requirement for Vehicle Insurance is liability coverage, compensating others for injuries and property damage caused by the policyholder.
Liability coverage
Vehicle Insurance offers a range of coverage options beyond the basic legal requirement of liability coverage. These include collision, personal injury protection (PIP), uninsured/underinsured motorist (UM/UIM) coverage, and guest passenger liability, providing riders with a comprehensive and flexible insurance plan.
Motorcycle insurance policies must meet minimum liability limits, which vary by state but are generally comparable to car insurance requirements.
For more detailed information on motorcycle insurance and its requirements, check out this thorough guide in the US.
Workers’ compensation insurance
Workers’ compensation is a form of business insurance designed to cover medical expenses and a portion of lost wages for employees who become ill or injured while performing their duties.
Except for Texas, all states mandate that employers with a certain number of employees maintain workers’ compensation insurance. Each state has its Workers’ Compensation Board responsible for handling claims, deciding on benefit amounts, and overseeing payouts.
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Employees with valid claims can choose between a lump-sum payment or ongoing weekly or bi-weekly benefits from their employer’s insurance provider.
State-specific regulations govern workers’ compensation, so for detailed information on the laws in your state, please refer to the links provided below.
Professional indemnity insurance
Professional indemnity insurance covers businesses against claims arising from alleged or actual negligence while delivering professional services. The name of this crucial insurance varies by industry:
- Errors and Omissions (E&O) Vehicle Insurance: Used in real estate
- Professional Liability Insurance (PLI): Common in construction
- Malpractice Insurance: Applies to the medical and legal professions
This insurance covers legal and settlement costs related to mistakes or oversights in professional services, such as:
- Breach of contract
- Budget overruns
- Incorrect advice
- Misrepresentation
- Negligence
- Personal injury claims like libel or slander
- Incomplete work
Professional indemnity insurance is designed to protect both the business and its employees. Some industries mandate this insurance by law or professional standards, and specific clients may require proof of coverage before engaging in business.
Here are some professions where professional liability insurance is not just a choice but a legal requirement:
Medical professionals
Medical malpractice insurance is legally mandated for various medical professionals, including:
- Dentists
- Doctors and physicians
- Nurses
- Occupational, physical, and speech therapists
- Psychologists
- Other healthcare providers
This insurance protects medical practitioners against claims of negligence that may lead to patient injury or death.
Lawyers
Only two states legally mandate legal malpractice insurance: Oregon and Idaho. However, almost half of the states in the US have implemented disclosure rules that require lawyers to inform clients about whether they have malpractice coverage.
In the real estate industry, errors and omissions insurance is required for agents and brokers in various states.
Minimum coverage requirements for real estate agents and brokers differ by state. For example, Colorado and Nebraska must obtain a policy with an annual aggregate limit of at least $300,000. Meanwhile, Iowa and Mississippi have a lower minimum limit of $100,000.
Insurance professionals
Certain states mandate insurance agents and brokers to carry errors and omissions (E&O) coverage. Requirements vary by state. For instance, in Rhode Island, insurance professionals must have a policy with a minimum aggregate limit of $500,000; in Tennessee, the minimum limit is $100,000.
Government contractors
The Federal Acquisition Regulation (FAR) mandates that businesses engaged in government contracts obtain professional liability insurance. This coverage is intended to safeguard businesses against risks associated with their work. The regulation applies to various types of companies, including:
- Construction firms
- IT professionals, such as consultants and cybersecurity experts
- Pharmaceutical and healthcare service providers
- Professional services firms, including financial and public relations agencies
- Transportation and logistics companies
For more details on how professional indemnity insurance functions, consult this comprehensive guide.
Health insurance
Health insurance is intended to alleviate the high costs of medical care by covering part or all of the expenses related to healthcare and hospital services.
The Affordable Care Act (ACA), enacted in 2010 and commonly known as Obamacare, required nearly all Americans to have health insurance. A significant element of this law was the individual mandate, which obligated eligible American citizens and permanent residents to maintain basic health insurance, also known as minimum essential coverage (MEC). This mandate was a significant step towards achieving universal health coverage in the US.
Internal Revenue Service (IRS)
From 2014 to 2019, individuals without insurance faced tax penalties from the Internal Revenue Service (IRS), which could amount to $695 per uninsured adult or 2.5% of income, whichever was more significant.
In 2017, Congress eliminated the federal penalty for not having health insurance. Although the legal requirement for insurance remains, repealing the penalty, effective in 2019, rendered the individual mandate largely obsolete.
However, some states have introduced their mandates, which include tax penalties for non-compliance. These states are:
- California
- District of Columbia
- Massachusetts
- New Jersey
- Rhode Island
