Rachael Brennan has been working in the insurance industry since 2006 when she began working as a licensed insurance representative for 21st Century Insurance, during which time she earned her Property and Casualty license in all 50 states. After several years she expanded her insurance expertise, earning her license in Health and AD&D insurance as well. She has worked for small health in...

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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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Reviewed by Jeffrey Johnson
Insurance Lawyer

UPDATED: Jul 14, 2021

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In a nutshell...

Car insurance is a financial product with personalized pricing. Since everyone pays a different rate for their coverage, shopping the market to find the best rates is crucial.

By contacting agents or getting auto insurance quotes online, you’ll have the tools that you need to pay the lowest rate for your coverage.

It’s very important to get personal quotes but it’s also important to structure your policy properly. You can’t just simply buy any car insurance policy, you have to buy certain coverage options and list the appropriate people for your coverage to satisfy the law.

Enter your zip code above to compare car insurance rates from multiple companies at once!

Here’s what consumers who’re building their policies need to consider before getting quotes and filling out applications:

Find Out How the Insurance Industry is Regulated

Car insurance isn’t regulated at a Federal level. When the McCarran-Ferguson Act was passed in 1945, the states took over the responsibility of regulating insurance business that is conducted within state lines because it was best for public interests.

This means that state officials are appointed and they set the mandatory laws and oversee transactions.

Since it’s a state department that’s responsible for setting auto insurance rates, licensing insurance companies, licensing agents, and enforcing a consumer bill of rights for protections.

It’s very important that you know your rights when you’re buying your coverage so that you’re never taken advantage of.

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Mandatory Car Insurance Laws Vary By State

You don’t have any control over state insurance laws but you’re expected to be familiar with them. If you’re newly licensed, you’ve never owned a car, or you’re moving from one state to another, you might not be familiar with the insurance code in your state.

All drivers who own, lease, or finance a car should know the most up-to-date insurance laws in the state.

Insurance isn’t always mandatory but it typically is. In states where insurance isn’t mandatory, you have the option to either demonstrate proof of financial responsibility or buy insurance.

Buying insurance is almost always the most reasonable and legitimate choice, even when options are available.

Common Coverage Requirements

In states where auto insurance is required under vehicle code, you don’t have options to self-insure even if you’re wealthy enough to do so. Instead, you’ll have to carry the mandatory coverage that’s laid out in the law books.

Most of the time, it’s only motor vehicle liability insurance that’s required. Common mandatory state requirements include:

  • Bodily Injury Liability  a third-party coverage that will indemnify you by paying for medical bills, rehabilitation costs, and funeral expenses when someone is injured in an accident that you’re liable for
  • Property Damage Liability  a third-party coverage that will indemnify you by paying for vehicle repair bills and property replacement when you damage someone else’s stuff in an accident you’re liable for
  • Personal Injury Protection  a first-party coverage only required in no-fault states that will help you pay for doctor bills, hospital bills, rehab costs, and lost income after a vehicle-related accident
  • Uninsured Motorist  a first-party coverage that pays for your medical bills if you’re hit by an uninsured motorist

Who is responsible for buying auto insurance?

Not just any driver can insure a car. In order to insurance a car, you have to have some sort of interest in it. You might not have to be the title holder, but you certainly do you have to suffer some type of financial loss if the car is damaged.

In the insurance industry, this is called the insurable interest requirement and all insurers enforce it.

State laws work differently than the requirements enforced by the insurer. Insurers have a set of rules and then states have different requirements that all insurers licensed in that state must follow.

When it comes to who’s liable for complying with insurance laws, the state says that it’s the registered owner’s responsibility. That’s because it’s the registered owner who can be sued when there’s an accident.

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What is a named insured?

Since the state says that it’s the legal owner’s responsibility to buy insurance, it’s the legal owner who needs to be listed as the named insured on the policy.

A named insured is the person who owns the policy and who is authorized to make changes to the policy. It’s the named insured that has the insurable interest in the vehicles listed on the policy.

Do the named insured and registered owner need to match exactly?

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Some state officials have set much stricter laws than others. There’s no way to provide one answer and ensure it’s right when you’re wondering if your registration and insurance must have the same exact names.

You should always be a named insured on your policy if the car is registered to you, but there are a number of ways the policy can be structured.

If there are two owners listed on your registration, some states are fine when the insurance is purchased in just one of the owners’ names.

Other states want both the registered owners to be listed as named insureds exactly how your tags are.

If you co-own a vehicle with a parent and live with your spouse, this could present some issues when the state laws are very strict.

What could happen when your insurance and registration don’t match?

If you live in one of the state’s that’s a stickler for the rules, you could be penalized just for structuring your policy wrong.

When your registration and your insurance must be in the same exact name, with the same middle initial and all, a mistake in the way that you set up your insurance from the get go could cost you money.

Most of the time, when the issue is who is named on your policy, the state motor vehicle agency will penalize you just like you don’t have any insurance at all.

So even though you have at least the mandatory minimums and you’ve been paying your policy, you could face fines and some other harsh penalties that may include:

  • Suspension of your vehicle registration
  • Reinstatement of your registration after it’s been suspended
  • Citations for driving with a suspended registration
  • A requirement to file Proof of Financial Responsibility (SR-22)

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Some Companies Will Endorse the Policy to Fix the Issue

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If there is a typo and the spelling of your name is off, your insurance carrier might change the spelling on the policy back to the inception date.

When the insurer is willing to endorse your policy just to correct your name, they will report the change to the state and you shouldn’t have to pay any fees for owning an uninsured car.

How does the state verify that you have coverage in the right name?

You don’t have to be on the wrong end of an encounter with a police officer to get cited for having insurance in the wrong name. Nowadays, the details of your insurance can be verified electronically.

The company will send electronic notifications to the DMV when you buy coverage and cancel it. If the DMV sees something that’s not right, you’ll be contacted.

It’s best to follow the rules from the start so you’re not stuck fixing mistakes. Be sure to ask your insurer if the names have to match exactly or if there’s some flexibility.

After you do your homework, start to get quotes. Use an online tool to get quotes, and then you can find the lowest rate for your coverage.

Enter your zip code below to find the best rates on car insurance in your area today!