Find the answers to frequently asked car insurance questions
Car insurance can offer peace of mind, helping to ensure that you won’t be personally liable if you cause a car accident. Unfortunately, your peace of mind might evaporate when we tell you that an estimated 19.5% of Alabama drivers are uninsured according to the Insurance Information Institute.
In this article, we’ll discuss Alabama insurance laws, including what insurance is required and what penalties exist for those who fail to comply.
Alabama’s fault-based insurance system
The vast majority of states have adopted either a no-fault or fault-based insurance system that determines how insurance claims are handled:
- No-fault insurance system. In states with no-fault insurance systems, all drivers who are involved in an accident—regardless of who’s at fault—turn to their own insurance policies to cover the damages.
- Fault-based insurance system. In states with a fault-based insurance system, the person responsible for causing a car accident is responsible for paying the damages.
Alabama has a fault-based insurance system.
This means that if another driver causes your accident, you have 3 options to recover damages:
- File an insurance claim with the at-fault driver’s insurance (this is called a “third-party insurance claim”),
- File a claim with your own insurance company (your insurance company will then pursue reimbursement from the at-fault driver’s insurance company), or
- File a personal injury lawsuit against the at-fault driver (assuming there’s coverage, the at-fault driver’s insurance company will step in and represent the at-fault driver).
Minimum car insurance requirements in Alabama
All motorists in Alabama are required to maintain the state’s minimum amount of liability insurance coverage, which is:
- $25,000 for bodily injury for the death of 1 person
- $50,000 for bodily injury for the death of 2 or more people in any one accident
- $25,000 for damage for the destruction of property in one accident
This type of liability coverage is commonly referred to as “25/50/25 coverage.”
Before we go any further, it’s important to understand 2 things about Alabama’s minimum car insurance requirements:
- Liability insurance covers bodily injuries and property damage caused by the insured individual and sustained by someone other than the insured individual. In other words, your liability insurance won’t cover your own injuries or damages.
- This is the minimum amount of coverage required, but you always have the option to purchase additional coverage.
Penalties for driving uninsured in Alabama
If you’re caught driving a motor vehicle (this includes automobiles, motorcycles, and other self-propelled vehicles) without insurance in Alabama, you can be fined up to $500 for the first conviction. For subsequent convictions, you can be fined $1,000 and/or have your license suspended.
Although these penalties may not seem too harsh, the real cost of driving while uninsured is the fact that you’ll be personally liable for any damage or injuries you cause.
Not worried about being held personally liable because you don’t have any money in the bank?
If you don’t have the money to satisfy a judgment, the injured party may be able to garnish your wages, take your assets, and even take your home.
Optional Alabama insurance coverage
The minimum liability insurance required may not be enough to cover a serious car accident, leaving you personally liable for the amount of damages that exceed your policy limits. For this reason, many people purchase additional liability insurance.
Along with additional liability insurance, drivers in Alabama can purchase the following optional coverage:
- Comprehensive coverage provides coverage for losses other than those caused by a collision (vandalism, falling objects, fire, tornado, hail, etc.).
- Collision coverage provides coverage for damage to your vehicle caused by an accident with another vehicle or an object (such as a fire hydrant).
- MedPay provides coverage for medical expenses incurred by you and your passengers regardless of who is at fault.
- Uninsured motorist (UM) coverage provides coverage for bodily injury and property damage sustained by you or the passengers in your vehicle as a result of an accident involving an uninsured driver.
- Underinsured motorist (UIM) coverage provides coverage for bodily injury and property damage sustained by you or the passengers in your vehicle as a result of an accident involving a driver with insufficient insurance to cover the damages.
Alabama car insurance FAQs
We’ve covered some of the basics of car insurance law in Alabama, so now let’s address a few more questions you may have:
How much does car insurance cost?
Auto insurance rates vary considerably depending on many factors, such as your:
- Marital status
- Place of residence
- Type of car
- Driver history
- Claims history
- Policy limits
- Credit score
What’s more, different companies charge different rates for the same coverage, so it’s a good idea to shop around for coverage for the best deal.
If another party caused my accident and I file a claim with my own insurance company, can I recover my deductible?
Yes. Your insurance company is responsible for collecting your deductible from the at-fault party’s insurance company. If your insurance company fails to do so, you can file a claim in small claims court to recover the amounts owed, or you may try to retrieve your deductible by contacting the at-fault driver’s insurance company.
Does my insurance company have to notify me before canceling my policy?
Yes. Your car insurance company must give you 10 days’ notice before canceling your policy for nonpayment. For any other reason, your car insurance company must give you 20 days’ notice.
What happens if a friend or family member borrows my car and causes an accident?
Liability insurance typically follows the vehicle in Alabama, not the person. In other words, if you let someone borrow your car and they cause an accident, your liability insurance should pay for the damages to the other driver and their passengers. Similarly, comprehensive and collision coverage typically follows the vehicle.
What happens if I total my vehicle and my insurance company doesn’t give me a fair settlement?
Your car insurance company will base your settlement on the actual cash value of your car at the time of the loss. You can ask to see the vehicle evaluation report your insurance company uses, and check it against other available resources, such as Kelley Blue Book. If you still don’t believe your insurance company is offering a fair settlement, you can attempt to negotiate with the insurance company or hire an attorney.