The US System
Since traffic regulations in the USA aren’t part of federal law, but are in the hands of each state on its own, the states don’t only differ in how they award driving licenses, but also regarding motor vehicle insurance. Many of the states have similar liability insurance regulations to those in Germany. In some of those states, car owners may have to pay a yearly fine of several hundred dollars if they are not insured.The biggest insurance companies, Allstate, Progressive, Geico and State Farm, offer rates similar to those of the German system. They usually distinguish between ‘standard cover’ and ‘extra risks cover’, the basic insurance package and one that covers a greater number of risks. Depending on the rate, there is often the option of getting legal protection, passenger insurance etc. Furthermore, US insurance companies also make a distinction between bodily injury and material damage, and the insurance holder can choose what he wants to be covered to which extent. Therefore, one is not obligated to first insure damage to third parties and then damage to oneself.
The general estimate of the insured sum is in no way comparable to the standards common in Germany. Especially considering the huge claims for compensation made in the USA, one will understand that what with such broad coverage, premiums are accordingly high. Recurring talks have been led about introducing tags, valid for the duration of one year, which insurance companies should hand out to identify insured road users.
Compulsory / Mandatory State Insurance
When one reads about the U.S. motor vehicle insurance system, one encounters the terms “compulsory state insurance” or “mandatory state insurance” more than once. This labeling already says something about the regulations of motor vehicle insurance here: In most states, at least basic car insurance, which in its main features is similar to the German one, is compulsory. This obligatory insurance (third-party risk insurance) covers, like the German car liability insurance, damage done to third parties up to the amount of 50.000 U.S. dollars. This is noteworthy especially since costs for accidents involving bodily injury, in which a person loses their life or suffers from consequential sanitary damage can easily go over the one million margin – it is not for nothing that the German law prescribes obligatory insurance with a coverage of at least 7.5 million Euros. Consequently, this means that in the USA, where good medical care is expensive, everything which cannot be covered by those 50.000 dollars needs to be paid out of one’s own pocket, which of course someone who causes an accident will not always do willingly and sometimes not even voluntarily. This is how the many lawsuits concerning bodily injury, in which high amounts of indemnification are usually agreed upon, can be explained.If one cannot bring proof of insurance as a car owner, a fine of over 500 dollars impends; if the offence is repeated, the fine doubles and one loses one’s driver license or, in extreme cases, a custodial sentence is decided upon. Even so, statistics show that a good 15% of drivers are not insured. Unlike in Germany, in fact, when buying and registering a car, proof of insurance must not necessarily be provided. This leads to those people who cannot afford the high premiums driving without insurance protection.