• The law requires drivers to carry insurance to cover damage they may cause.car hotel disaster accident image by paul prescott from Fotolia.com
  
  Every hour of every day, car accidents occur and change lives. For some, the accident is life ending. For others, the accident can be financially devastating. Accident insurance not only helps to prevent financial disaster, but also provides financial relief for other drivers who sustain damage to their vehicle or who sustain bodily injury. Every state requires drivers to carry some form of accident insurance in order to demonstrate financial responsibility for any damage they may cause, whether to property or to other persons. The amount of insurance varies from state to state and can be higher when financing or leasing a vehicle.
  
  

Financial Responsibility

• In order to demonstrate financial responsibility, most states require drivers to carry at least a basic liability insurance policy. Liability insurance actually has two components---property damage liability, covering damage caused to other vehicles or property; and personal injury liability, covering bodily injury caused to other people. This basic coverage does not protect the driver's own vehicle or any persons in that vehicle.
  
  The actual legal limits vary depending on the insurance, but typically start at $10,000/$15,000/$10,000, which represent coverage for bodily injury, the limit per accident and the limit for property damage, respectively.
  
  

Assigned Risk

• When a driver has too many accidents or tickets to be insured through traditional methods, states provide "assigned risk" insurance pools, which are more expensive and typically the last resort for drivers to obtain insurance coverage. States require insurance companies to participate in an "assigned risk pool", where they are assigned high risk drivers at random.
  
  

Fault

• Some states mandate that drivers use their insurance to cover the costs of any damage or bodily injury for which they are at fault. Those are referred to as "fault" states. Other states mandate that drivers use their own insurance to cover the costs of repairing their vehicle up to a point, no matter who is at fault. Those are referred to as "no fault" states.
  
  

Financing Requirements

• What is typically referred to as "full coverage" is required when a consumer leases or finances a vehicle. Full coverage includes the basic liability required by the state, but also includes comprehensive, collision, fire, theft and uninsured motorist protection. The finance company has the right to repossess the vehicle if the buyer fails to maintain adequate insurance, since the vehicle is the actual collateral in a financing or lease agreement. The agreement is a legal contract between the finance company and the buyer.