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UPDATED: Mar 13, 2020
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Insurance companies of all kinds are regulated to protect the interests of both customers and the companies themselves. In the case of auto insurance, these regulations vary somewhat from one state to the next, so laws in one area may not be in place in all locations. Other laws are consistent across all insurance companies regardless of state. By understanding what regulations your insurance company has, you will have a clearer idea of why insurance companies handle things the way that they do.
State Coverage Laws
One thing that varies from one state to the next is what coverages are required by law. All states require drivers to carry liability insurance, but the limits of that coverage may vary from one state to the next. For example, the state minimum in one area may be $10,000, while in another that minimum will be $20,000. Because this figure is a limit, an insurance company will not pay more than the figure listed on the policy for any single accident; some people may choose to buy more insurance than the minimum as protection against potential lawsuits.
Nevertheless, it’s important that you never allow your insurance coverage to drop below the minimums in the state. Insurance companies are regulated in the coverages they offer, but an insured can manually override them and alter the policy online, resulting in insufficient coverage. This is then the insured’s responsibility to correct, and failure to do so could result in a suspended license.
In addition to liability limits, some states require all insurance policies to provide first-party medical coverage. This is only required in no-fault states where a driver’s own insurance is responsible for paying their medical costs and their ability to sue is limited. In other states, drivers can choose not to carry first-party medical coverages and sue for injuries, but only if they are not at fault.
Finally, laws govern the use of specific coverages in different states. For example, some states pay for hit-and-run accidents with uninsured motorist coverage, while others only allow this coverage to apply to accidents where the driver is known and proven uninsured. Other states do not offer uninsured motorist coverage at all. Similarly, some states allow for glass repairs to be completed without a deductible, while others require a deductible to apply. Your insurance agent can clarify any questions you may have about these situations.
Regulations for Insurance Behavior
Coverages aren’t the only thing regulated by state and federal insurance laws. Other laws protect the way that insurance companies settle claims so that the insured can be protected. For example, all insurance companies are required to begin the settlement process within 30 days of the claim being filed; this is why an insurer will push to have the vehicle inspected as soon as possible. If a claim stays open beyond this time without a well-documented reason, the insurance company will be fined.
Insurance companies are also unable to require that repairs be done at any specific auto body shop. The insurer may recommend various shops, but they must agree to pay for repairs regardless of the shop that’s chosen. This is true for all insurance companies across the country.
The laws for the definition of insurance fraud and regulating fraud investigations apply to all insurance companies as well. This serves to protect both the insured and the insurance company’s interests as well as provide a baseline of behavior for all insurance investigations.
Because car insurance can be very complex, adjusters must be licensed in the state where they work. This ensures that they are intimately familiar with the laws and regulations governing that particular state and can handle claims accordingly. Similarly, agents must go through training and be licensed to sell coverage in a particular state.
Any questions that you may have about insurance can be directed to a licensed professional in the field; they should be able to clarify your concerns and provide you with the information that you need. Depending on your circumstances, it may also be worthwhile to approach an attorney who is familiar with insurance law to consult on very specific questions about claims, fraud, coverage or other concerns you may have about your policy.