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 American auto insurance providers are largely unregulated on the federal level, so mandates and minimum coverage determinations are handled almost exclusively by the states.  As a standard, nearly all states mandate a minimum coverage for bodily harm to an individual third party, and a minimum liability amount that can be paid out per accident.  In almost all cases, this is twice the amount of the first minimum (for example, the state of Montana requires drivers to carry a minimum of $25,000 of bodily damage liability, up to a maximum of $50,000.)  Property damage liability is usually another requirement, and it is often lower than bodily damage liability.

The amounts of these minimums range rather substantially, sometimes dependent on the driving conditions of the state.  Alaska and Maine, which have some of the most dangerous roads in the country, have the highest liability minimums at $50,000/$100,000.  However, required minimums do not necessarily cover all of the potential accidents that might befall a driver.  The state of Louisiana, for example, has the cheapest car insurance liability minimum of only $10,000 in personal liability coverage, which is only sufficient for the most trivial of accidents; drivers are generally wise to carry coverage in greater amounts.  In two states, New Hampshire and Wisconsin, drivers are not mandated to carry liability coverage, however this option can only be exercised if the driver shows proof of assets in excess of a $25,000 minimum.

Personal Injury Protection (PIP) may or may not be required, depending on the state in question.  If you are looking for the cheapest car insurance you can obtain legally, liability-only insurance is available in most states, but some, such as North Dakota and New Jersey, have minimums that are comparable to their liability requirements.

Minimum coverage requirements sometimes do not correlate very strongly with the average amounts of coverage in the state.  New York and New Jersey set surprisingly low liability coverage amounts so as not to prevent drivers from obtaining licenses altogether, but certainly do not provide the cheapest car insurance.  (Minimum coverage is generally a service provided only by smaller insurance companies.)

This Financial Services article was written by Mark Karavan on 10/14/2009

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