Car insurance requirements when moving to another state

Chris Kissell

If you pack up and move to another state, make sure to leave one thing behind: your preconceptions about car insurance requirements.

Chances are good that the car insurance rules in your new state will differ from those of the state you’re leaving. Insurance is regulated at the state level, and rules are not the same across the country, says Lori Conarton, a spokeswoman for the nonprofit Insurance Institute of Michigan.

According to the Insurance Information Institute, the four major U.S. liability insurance systems for car insurance are:

  • No-fault. A policyholder’s covered injuries and damages are paid by his or her own insurance company, regardless of who’s at fault in the crash. The ability to sue for severe injuries is restricted in such states.
  • Tort liability. A policyholder’s covered damages are paid by the at-fault driver’s insurance company. There are no restrictions on lawsuits in these states.
  • Add-on. Drivers receive compensation from their own insurers as in no-fault states, but have unlimited right to sue as in so-called tort liability states.
  • Choice no-fault. Drivers in these states may select one of two options: a no-fault car insurance policy or a tort liability policy.

Additional differences can be found inside the systems themselves. For example, 12 states and Puerto Rico have no-fault car insurance laws, according to the Insurance Information Institute. To be eligible to sue for damages, the severity of a motorist’s injuries must meet certain conditions known as “thresholds.”

Five states – Florida, Michigan, New Jersey, New York and Pennsylvania – have a “verbal threshold” that is expressed in verbal or descriptive terms. Examples of such terms would be “death” or “significant disfigurement.”

By contrast, seven states – Hawaii, Kansas, Kentucky, Massachusetts, Minnesota, North Dakota and Utah – use a “monetary threshold.” Under this arrangement, someone’s right to sue depends on the dollar amount of his or her medical bills. 

Meeting minimum requirements

In nearly every case, moving to a new state will require you to adjust your car insurance to meets that state’s requirements, according to Lynne McChristian, Florida representative for the nonprofit Insurance Information Institute. “Most states require a minimum amount of auto insurance coverage,” she says.

State minimums focus on two types of liability coverage:

  • Bodily injury liability. Covers injuries that you cause to others. Minimum amounts are expressed in two numbers: the amount of coverage you have for one person injured in an accident, and the amount of coverage you have for all people injured in an accident.
  • Property damage liability. Covers damage you cause to others’ property.

The minimum liability requirements in the five biggest states (by population) are as follows:

State

Bodily injury liability,  one person

Bodily injury liability, all  people 

Property damage liability

California

$15,000

$30,000

$5,000

Texas

$30,000

$60,000

$25,000

New York

$25,000

$50,000

$10,000

Florida

$10,000

$20,000

$10,000

Illinois

$20,000

$40,000

$15,000

Many states also require you to buy minimum levels of uninsured and underinsured coverage. Uninsured coverage protects you if you’re hit by a driver who lacks insurance, while underinsured coverage protects you if the driver who hits you lacks adequate insurance to pay a claim.

Finally, if you live in a no-fault state, you’ll need to buy a minimum amount of personal injury protection (PIP) coverage, which pays for treatment of injuries to the policyholder and his or her passengers.

The law requires you to buy only the amount of minimum coverage mandated by the state. But buying the minimum is risky, McChristian says.

“If you only buy the minimum, you may not be properly protected,” she says.

For example, if you live in California and have just $5,000 in property damage liability, won’t have nearly enough money to cover significant damage you cause to a $40,000 Porsche. Or if you live in Florida and severely injure or even kill someone, your $10,000 in minimum bodily injury liability will be woefully inadequate if you’re sued for $1 million.

Some states have other unusual rules. What follows are a few examples.

Born to be wild

In most states, two-wheeled riders are required to buy motorcycle insurance. But that isn’t the case in Hawaii, Montana, New Hampshire and Washington.

New Hampshire takes this a step further. The state with the motto “Live Free or Die” does not require you to buy liability insurance on any vehicle, including cars. If you decide not to carry insurance in New Hampshire, you do have to prove that you have the financial resources to pay for damage you cause in a crash.

No credit, no problem          

Your credit score generally may be used to determine your car insurance rates. But that is not true everywhere, including California.

Although studies have found a link between people with low credit scores and a higher incidence of car insurance claims, California’s Proposition 103 banned the use of credit scores in the setting car insurance rates. Hawaii and Massachusetts have similar laws, and Congress is considering legislation that would place a nationwide ban on the practice.

Medical benefits: The sky’s the limit in Michigan

Michigan law places no lifetime limits on medical and rehabilitation benefits provided through a car insurance policy.

As a result, all drivers in Michigan are required to buy an unlimited amount of personal injury protection (PIP) coverage. “Michigan is the only state in the country that requires drivers to purchase such a high level of medical benefit,” Conarton says.

Critics say the generosity of Michigan’s no-fault law has driven up insurance costs overall. A recent study by the Michigan Chamber of Commerce found that state auto insurance premiums soared 31 percent over a 10-year period, compared with a rise of just 14 percent nationwide.

Michigan lawmakers are looking at overhauling the PIP requirements.

Finding out more

With so many different rules governing each state, where should you turn to find out more about car insurance requirements in your new home?

“Your current auto insurance company is the first place to learn how things may change when you make a move,” McChristian says.

Most insurance agents and insurance companies are licensed to operate in several states, she says, so “they have the resources at their fingertips to let you know how to comply with state requirements.”

Other good sources of information include state-run websites that explain car insurance laws, such as sites operated by state motor vehicle departments. A state’s financial services division or insurance regulator also may offer car insurance information for newcomers.

 

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