Who Is Covered by a Car Insurance Policy?

An explanation of automobile coverages and requirements.

While almost every state requires drivers to have car insurance, there are no federal mandates. Each state is a little different, but generally, a driver must have insurance coverage of at least:

  • $25,000 bodily injury per person
  • $50,000 bodily injury per accident, and
  • $20,000 property damage per accident.

Some states require Personal Injury Protection (PIP) coverage and some allow alternatives to standard insurance. So, it's important to make sure your policy conforms with your state-specific requirements.

Failure to provide and display valid insurance (in other words, not have proof of insurance in your vehicle) is usually a minor offense that carries a fine and possible license suspension. But driving without adequate auto insurance coverage is generally a more serious offense. In many states, driving without insurance is a misdemeanor and carries fines, possible jail time, traffic violation demerit points, and possible license suspension.

Who Does a Car Insurance Policy Cover?

Car insurance is generally believed to be for the benefit of the injured person, but insurance policies are truly intended to protect the policyholder. Essentially, any time a vehicle owner or operator could be held liable for damages, the insurance policy is intended to shield the policyholder from unexpected costs and burdensome civil judgments.

As a vehicle owner can sometimes be liable for any family member or friend who borrows the car, insurance policies generally cover anyone who is authorized to operate the insured vehicle.

What Does Liability Insurance Cover?

Generally, the at-fault party is responsible for paying the costs of an accident. Of course, there are sometimes disputes about who was at-fault and the amount of damaged caused. But once these issues are ultimately resolved, the party with damages submits his or her claims to the at-fault driver's insurance company. Depending on the situation, damages might include medical bills, lost wages, vehicle repairs, and the like.

If the driver's insurance coverage isn't adequate to cover the damages, the at-fault driver may be personally liable to pay the balance.

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