Mandatory Vehicle Insurance - Essay Example

Mandatory Auto Insurance s Introduction The invention of the motor vehicles in the 19th century came with disbenefits of the motor vehicle accidents. As the frequency of the motor vehicles’ accidents increased, it became necessary for the automobiles to be regulated by laws. As a result, the vehicle insurance was introduced. In the United States, vehicles need to be insured. The auto insurance is aimed at covering the risk of financial liability. Correspondingly, the vehicle insurance covers the loss of the automobile if the owner of the vehicle gets involved in an accident to lead to physical or property damages. Currently, the percentage of the insured drivers is at 14%. In 2014, a study conducted by the Insurance Research Council reported that the percentage of the uninsured automobiles reduced on a national scale from 13.9% in 2009 to 12.5% in 2012. The study also found out that Oklahoma had the highest number of drivers who were not insured, at 4.2 million. Various states have outlined the minimum insurance requirements for the motor vehicle owners. One acquires the insurance by seeking the services of an insurance broker permitted to sell insurance policies or working with an independent insurance agent. The owner of the automobile usually pays the insurers a fee every month. To that effect, the owner of the automobile pays the insurance premiums based on several factors, such as gender and age of the driver, vehicle type covered, the site where the automobile is mainly stored, and the driving history of the owner. Due to the significance of the auto insurance, drawing on a variety of sources the paper will discuss why it is fair mandate for all the 50 states to require that all the automobile owners to provide a minimum for an auto insurance so as to enjoy the state-guaranteed privilege of driving that vehicle within the state. Discussion Predicting the future is almost impossible. One cannot tell if he or she will get involved in an accident and extent of the damage that will be incurred. Therefore, it is fair for all the 50 states to have mandatory vehicle insurance for the automobiles. The vehicle insurance has been in existence in order to regulate the motor vehicle industry in order to provide an economic safety net for the people. In all the 49 states and the District of Columbia vehicle insurance is compulsory. For all the 50 states it is a must for the drivers to be in possession of auto insurance prior to being allowed to drive the vehicle within the state (Black, Black. Jr, & Rossi, 2001). According to a view shared by Sheldon and Sarason (1981), the drivers or owners of the motor vehicles need to purchase the vehicle insurance because it offers financial protection against bodily injury as a result of accidents as well as against any liability that could emerge. Proceeding further, to some extent the auto insurance can provide financial protection against vehicle theft together with possible damages to the vehicle. The auto insurance is fair because is covers the following significant items: the insured entity (medical payments), insured automobile (physical damage), third parties (bodily harm to people and property damage), fire and theft, injuries to people boarding the insured automobile, cost to rent a vehicle, the cost of towing the automobile to a fixing facility, and accidents involving uninsured motorists (Weber, 2011). The District of Columbia together with other 21 states needs either the uninsured motorist bodily injury coverage or underinsured motorist bodily injury coverage. The uninsured motorist bodily injury covers the medical expenses if the owner or any of the passengers are injured by an uninsured driver. The underinsured is activated when the driver who at fault is insured, yet his or her insurance limits are too low to pay for all the medical bills (Wickert, 2012). If the state has a ‘no-fault’ auto insurance law, Merkin and Stuart-Smith (2004) posit that the vehicle insurance policy is supposed to pay for all the medical bills irrespective of who caused the accident. Wickert (2012) adds that under the no-fault insurance coverage the policyholders are required to be paid for personal injuries as well as property damage the sustained in the traffic accident via their own insurance firm, irrespective of the fault. It also reduces fraud in claims. The consumers are protected by various coverage levels based on the type of insurance policy bought. Even though all the states have similar requirements, particular terms of the auto insurance vary according to the legal regulation in each state. In certain states, the drivers are obliged to carry compulsory auto insurance to make sure that the driver may meet the damage costs to property and other persons. On the other hand, states like Wisconsin have flexible financial proof responsibility requirements. In the same perspective, by law; the minimum coverage amount also varied by state. As an example, in the state of Florida, Maine, and Alaska among others the minimum requirements for bodily harm liabilities is in the range of between $20,000 and $100,000. On the contrary, the minimum requirement for the property damage is the range of $5,000 for 4 states to $25,000 for about 16 states (Boone & Kurtz, 2011). However, the Insurance Information Institute suggests that the minimum limits required by the state may actually not be enough. Therefore, one should carry a minimum of $100,000 of bodily protection for every person as well as $300,000 for every accident commonly known as the 100/300 (Wickert, 2012). As noted by Wickert (2012), the compulsory motor vehicle insurance is fair because it relies on the assumption that at any given time the individual who has caused an accident resulting in damage for the automobile, people, and even property may not be able to pay for the damages. Besides, the mandatory vehicle insurance has been in existence in various states for a very long time and very minimal studies have been conducted to prove the theory wrong. Studies have also demonstrated that in case of an accident, there is always a risk of non-payment (Lemaire, 2010; Wickert, 2012). Therefore, the mandatory auto insurance is a remedy for dealing with this risk. In the same way, there are inadequate personal financial responsibility statutes to prevent the risk of non-payment for the at fault drivers. The best way to make sure that drivers who are at fault pay for the damages they have caused is requiring them to acquire vehicle insurance prior to registration. The drivers who fault to meet this requirement are penalized. It is crucial for a motorist to purchase auto insurance because in case of an accident and you are at fault, you may be held legally responsible for the property and bodily damage as a result of the accident. If the injured party files a law suit, the court may order that the assets be utilized to pay for the subsequent damages. Besides that, the costs of defending oneself could be very high. Equally important, the mandatory vehicle insurance alleviates the user from the strain of repairing the automobile in case of traffic collision if they have no money at that moment (Wickert, 2012). The use of smartphone-based measuring system for the usage based insurance and monitoring of traffic not only reduces congestion, but also minimizes environmental effects. (Händel, Ohlsson, Ohlsson, Skog, and Nygren, 2013), As a consequence, it leads to favorable insurance premiums. Lemaire (2010) further observes that generally, the public supports the mandatory auto insurance because it not only guarantees their safety, but also encourages the drivers to drive sensibly and covers the lawsuits, including legal fees brought against the at-fault driver as the result of an accident. Conclusion In summary, it is reasonable to have all the 50 states put a requirement that all the automobiles to be in possession of vehicle insurance. This is because auto insurance for the various types of vehicles provides monetary protection against property or bodily harm due to motor vehicle collisions. The mandatory vehicle insurance is fair because it is the best way of dealing with the risk of non-payment in case of traffic collision. Furthermore, there are few personal financial responsibility regulation to avert the risk of non-payment for the at fault drivers. The drivers have to pay for the damage they cause due to their negligence in case of an accident. The coverage also averts the risk of incurring significant debts. Therefore, people should embrace the mandatory vehicle insurance since it provides an economic safety net for people. References Black, S. P., Black. Jr, S. P., & Rossi, J. P. (2001). Entrepreneurship and Innovation in Automobile Insurance: Samuel P. Black, Jr. and the Rise of Erie Insurance, 1923-1961. New York: Taylor & Francis. Boone, L., & Kurtz, D. (2011). Contemporary Business. New York: John Wiley & Sons. Händel, P., Ohlsson, J., Ohlsson, M., Skog, I., & Nygren, E. (2013). Smartphone-Based Measurement Systems for Road Vehicle Traffic Monitoring and Usage-Based Insurance, , IEEE Systems Journal, 23, 1-12. Lemaire, J. (2010). Automobile Insurance: Actuarial Models. Amsterdam: Springer Netherlands. Merkin, R. M., & Stuart-Smith, J. (2004). The Law of Motor Insurance. New York: Sweet & Maxwell. Sheldon, J., & Sarason, E. (1981). Automobile Insurance Availability Issues: Assigned Risk Plan Placement, Assigned Risk Plan Rates, Financial Responsibility Laws and the Uninsured Driver. New York: Research Institute on Legal Assistance, Legal Services Corporation. Weber, C. (2011). Insurance linked securities: The role of the banks. New York: Gabler Verlag. Wickert, G. L. (2012). Automobile Insurance Subrogation: In All 50 States. Huntington, New York: Juris Publishing, Inc. Read More