In the United States, auto insurance covering liability for injuries and property damage done to others is compulsory in most states. Auto insurance is governed by the state instead of by the federal government. For example, the state of New Hampshire does not require motorists to carry liability, while Virginia residents must pay the state a $500 annual fee per vehicle if they choose not to buy liability insurance. North Carolina requires that a driver hold liability insurance before a license can be issued.

Penalties for not purchasing auto insurance vary by state, but often involve a substantial fine or license suspension along with possible jail time in some states.

Usually, the minimum required by law is third party insurance to protect third parties against the financial consequences of loss, damage or injury caused by a vehicle.

A deductible is a fixed contribution you must pay each time your car is repaired through your car insurance policy. Typically the payment is made directly to the place that is doing the repairs. If one’s car is declared to be a “total loss” or a “write off”, the insurance company will deduct the excess agreed on the policy from the settlement payment it makes to you.

If the accident was the other driver’s fault, and this is accepted by the third party’s insurer, you’ll be able to reclaim your excess payment from the other person’s insurance company.