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In order for an American car insurance company to legally provide their services, they must abide by the rules and regulations set forth by the states in which they do business. Tort systems, liability minimums, and other requirements vary from state to state and all have an effect on car insurance rates.
First, the tort system varies slightly depending on which state you are in. Thirty-eight states follow standard tort procedures, and allow the victims of accidents to directly sue at-fault drivers. Twelve states follow different proceedings and are considered “no fault” states. Here at-fault drivers are indemnified and all liability is transferred to the insurance companies. In these states, insurance requirements on the driver’s parts are regulated more fiercely, and damages in excess of coverage maximums can be charged to the at-fault party him or herself. PIP, or Personal Injury Protection, is a requirement in these no-fault states. Three states, Pennsylvania, New Jersey, and Kentucky are choice no-fault/tort states, in which the driver is allowed to choose what kind of system he or she wishes to follow at the creation of the policy.
All states set a minimum requirement of bodily injury liability and property damage coverage. Bodily injury liability requirements can range anywhere from $10,000/person and up to $20,000/accident (as is the case in Louisiana) to $50,000/person and up to $100,000 per accident (as are the cases in Maine and Alaska). Typically the requirements for car insurance rates are $25,000/$50,000, with a smaller, but comparable amount for property liability damage. Two states, New Hampshire and Wisconsin, notoriously do not require liability coverage, but in order for a driver to be eligible for this they must show proof of assets in the amount of $50,000 to meet the $25,000/$50,000 liability coverage requirements. Very few residents elect this option.
As should be obvious, the liability coverage requirements in the United States are substantially lower than those in Canada and the UK, although the actual car insurance rates and policies are approximately the same in cost and coverage amounts.
