Arizona is an at-fault state
Only twelve US states have a no-fault approach to their financial responsibility laws. Arizona is one of the majority states which rely on the traditional law of tort to decide which driver is at fault. Once this decision has been made, that driver is financially responsible for paying compensation to all the others who have suffered loss and damage flowing naturally from the accident. That includes all the medical expenses for the treatment of the personal injuries sustained, damages for the pain and suffering endured, restitution of any pay lost, and the repair or replacement of all property damaged.
In theory, this is an efficient system because the courts offer a range of mechanisms to collect unpaid judgments, seizing property and assets held, and garnishing pay earned. But the use of the courts is only economic if the driver at fault has savings, owns property, and has a job with good pay. If the driver has nothing of value, all the money spent on court fees will produce nothing in return. Because of this, all US states have financial responsibility laws in place to make it mandatory for all drivers to have enough cash in hand before they get behind the wheel of a vehicle.
Financial responsibility laws
Almost all drivers in Arizona satisfy the minimum liability holding by buying car insurance. The mandate requires coverage of 15/30/10. This minimum is one of the lower amounts. In other states, legislation has been passed to increase the amounts to more realistic levels. Only $15,000 for the treatment of one person or $30,000 for multiple claims barely covers the cost of admission to hospital and basic diagnosis of the extent of the injuries. Having only $10,000 to pay for damage to property does not cover repair or replacement of the majority of newer vehicles on the road. That means the majority of Arizona drivers who only buy the minimum are usually underinsured, i.e. left with money still to pay when the insurer has made its payment on the claim. So, for example, if the total liability for medical treatment of one person was $70,000, you would be left owing $55,000 after the insurer had paid its contractual amount of $15,000. For this reason, most people who own their own homes or have 401k accounts, prefer to buy higher amounts of cover.
If you have cash available, you can self-insure. The Arizona Department of Motor Vehicles requires proof you have bought a bond of at least $40,000 to cover all liability claims. Note the requirement is either that the vehicle is insured, or that the driver has self-insured and can drive any vehicle. If you come from out-of-state, your auto insurance cover must be provided by an insurer who also has a licensed operation in Arizona.
Insuring your own losses
The financial responsibility laws only apply to claims by third parties. When it comes to your own losses, it is assumed you will either pay out of your own pocket, or buy appropriate car insurance cover. For your property claims, this means collision cover for all the losses flowing when you hit another vehicle or a static object. Comprehensive cover pays for repair or replacement if your vehicle is damaged by extreme weather events, is stolen, or is lost in some other way. If you do not have suitable health insurance, you may think it wise to buy Personal Injury Protection which pays for all your own medical treatment no matter who is at fault.
How much does it cost to insure?
If car insurance could be sold across state lines, the overall cost of policies would fall. Instead of having separate corporations established in each state with compliance problems based on different regulations, there would be one national corporation with claims spread across millions of policy holders. Sadly, the law empowers each sovereign state to regulate the sale of insurance inside its own borders. This means states with large urban populations pay more than essentially rural states with small populations. This is relatively good news for those living in Arizona. At an average of $1,280 it lies at 40th on the list where 1 is the most expensive. This is based on a survey of car insurance quotes for a hypothetical 40 year-old make driver for 100/300/50 liability cover.
The Insurance Commissioner has published some guidelines based on hypothetical individuals and married couples aged 18, 42 and 81. For the rates for an unmarried teen aged 18 driving a 2007 Honda Civic in Phoenix would vary between $1,005 and $10,501 (i.e. some companies prefer not to insure young teens). A married couple with a clean driving record and an average credit score would pay a low of $461 and a high of $3,695 for driving in Phoenix.
Examples of regulations
The Insurance Commissioner who oversees the Arizona Department of Insurance has been active. There is good news and bad news. An example of bad news is that Arizona law allows car insurance companies to impose a household or family exclusion to limit a claim by a family member against the driver. If this clause is in place, the family claims are limited to 15/30, i.e. the minimum mandatory amounts. If this exclusion has been written into your policy, you may think it good value to buy additional cover to make sure all family members being carried in the vehicle can claim all their medical expenses if they are injured. The good news, however, is that auto insurance companies are not allowed to increase the annual premium rates if their driver makes a claim but was not at fault.
Once in place, your car insurance policy can only be canceled if:
• you fail to pay the premium when due;
• the insurer discovers you were less than truthful when buying the policy; or
• the main or a named driver loses his or her license following a conviction for DUI or any accident involving death or some other serious moving violation, or becomes permanently disabled.