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In the United States, as in many other countries, it is a compulsory requirement of all those purchasing vehicles to avail themselves of automobile insurance, covering liability for injuries and property damage inflicted on others. The issue of insurance is slightly more complex in the US than in some other countries, however, due to the fact that specific requirements and enforcement of the personal liability law regarding insurance vary from state to state. The penalties for failing to purchase auto insurance also vary by state; however, such penalties often incur a substantial fine, the suspension or revocation of the motorist’s registration, and, in some states, actual jail time.
The usual minimum requirement under US law is third-party insurance in order to protect third parties against the costs and inconveniences caused by road traffic injury.
The compulsory nature of automobile insurance means that consumers face a myriad of commercials, as well as print and Internet advertisements by companies promising ‘cheap’ and often ‘comprehensive’ packages. As insurance requirements (and, indeed individual needs on top of this may vary considerably), consumers are also faced with the often frustratingly obscure and oblique industry terms that can serve to obfuscate even the most seemingly simple of transactions.
Firstly, what exactly is meant by ‘comprehensive’? Secondly, why do prices vary so wildly-even for apparently similar policies? For the first question, consumers can consult the Automobile Insurance Guides, which provide a full overview of the coverage and limitations of automobile insurance.
The answer to the second question is directly linked to the structure of the industry itself.
Many companies determine automobile insurance rates by a ‘tier’ system, and place drivers in a tier relating to various criteria. The most common system employs three tiers-preferred, standard and substandard, and drivers are charged according to which of the tiers they fall into. As an example, a preferred driver might have been insured with the same company for more than three years and made no claims in that time, whilst also having no license endorsements. By contrast,to become a substandard driver, you might only need one discrepancy, having more than six penalty point endorsements, for example. Often, the price differentials between different companies depends on how many tiers are in each of their systems and what factors are considered when determining which category a driver should fall into.
A driver’s credit rating will also have a bearing on the cost of their automobile insurance, and drivers would be well-advised to ensure that their credit history is accurate and up-to-date to guard against iniquities.
Drivers should also ensure that they understand the coverage and limitations of the policies they are considering. Finally, it is recommended that drivers compare the number and nature of complaints against various companies in order to help determine which is the best. The best place to search for this information is online at various search engines that specialize in insurance.
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Source: http://ezinearticles.com/?United-States-Auto-Insurance-Overview—Basic-Info-to-Help-Your-Understand-the-Industry-Better&id=3262044
