Along with all other US states, Alabama has a financial responsibility law which requires drivers to be able to pay a reasonable amount towards the compensation of anyone injured in an accident. For those who have a large cash reserve, you can satisfy the responsibility by filing a bond of not less than $50,000 with the Department of Motor Vehicles. The mandatory liability coverage formula for Alabama as an at-fault state is 25/50/25, i.e. up to $25,000 to meet a personal injury claim by one person; $50,000 available to meet claims by multiple claimants; and $25,000 to meet claims for damage to property. There’s no obligation to buy more coverage, but people who drive with only the minimum are increasingly at risk as inflation reduces the value of the minimum amounts. Although $25,000 is not unreasonable to cover the cost of repairing the majority of motor cars, it’s often inadequate to pay for the medical treatment of anyone injured. If you have assets in your name, some savings, or a job with a good rate of pay, you should consider buying additional cover against liabilities. A review of your medical insurance is also a good idea.

Uninsured drivers

You should think what might happen if you are hit by someone uninsured or underinsured. Why? Because it’s estimated that 22% of drivers are uninsured. This makes Alabama the sixth worst state in America. In part, the reason for this failure is the number of people on or below the poverty line. It’s just too expensive for some people to pay the annual premium rates demanded. The irony is that, should the state actively enforce the mandate, the additional revenue coming into the auto insurance companies would enable them to reduce the premium rates for all. As the percentage of uninsured drivers falls, it would also reduce the need for honest drivers to buy uninsured driver cover. Over time, everyone benefits.

Proof of car insurance

Note that as from January 1, 2013 when OIVS a new online insurance verification system was introduced, you cannot get a license plate for a vehicle in Alabama without having to prove you have a valid car insurance policy in place. Similarly, if you are stopped and cannot produce proof your vehicle is properly insured, there is a fine of up to $500 and your driver’s license can be suspended. There is also a $200 fee to recover your license and you do have to produce proof of insurance for that application to proceed. For a second or subsequent offense, the fine is up to $1,000 and your driver’s license is subject to a mandatory four months suspension with a maximum of six months for more serious cases. The reinstatement fee is $400.

What to do if injured in an accident

So if you are involved in an accident, the responsibility for paying compensation falls on the driver who was the most immediate cause of the losses. This means the “victims” have the following options:

• if they have collision and comprehensive cover, they file claims with their own insurer — similarly, if there is health insurance, a claim can be made to cover the immediate cost of treatment;
• a third party claim can be made to the car insurance company representing the driver at fault;
• if there is no third party liability insurance or the amount of insurance is not enough to pay the claims, there is a right to sue the driver at fault (this will not be economic if the driver has no assets or savings).

Comparing car insurance rates

Drivers in different states pay different car insurance rates. The variations arise because of the differences in the number of people driving, the state of the roads and transport infrastructure, the level of crime, and so on. A recent survey compared rates for a hypothetical 40-year-old driver, placing Alabama as the 37th most expensive state in the US. The reason is the relatively low population with urban driving more limited. But driving up auto insurance quotes is the ingrained poverty of the state. With household incomes lower than average, people run their vehicles for longer and spend less on maintenance and repairs. This can make the vehicles more prone to breakdown and accidents.

The Alabama Department of Insurance gives consumers the chance to compare car insurance rates. The problem, as always, is that the rates are always different depending on your personal driving record, where you live, what make and model you drive, and so on. The comparisons are therefore based on hypothetical individuals:

• a single male aged eighteen with no tickets or claims, his annual mileage is 15,000, looking to insure a 2003 Toyota Camry LE for six months. The resulting chart is divided by zip codes with a high of $5,202 in Birmingham to a low of $1,077 in Gulf Shores.
• a single married female aged thirty, no driving violations or at-fault accidents, 15,000 annual mileage, looking to insure a 2006 Toyota Camry LE for six months: the high premium rate is $813 in Gulf Shores with a low of $278 in Dothan; and
• as above, a married male aged thirty with no multicar discount: the high premium rate is $795 in Montgomery with a low of $286 in Gulf Shores.

Alabama has graduated driver licensing which has had a positive impact on the number of accidents involving teen drivers behind the wheel. There’s some controversy because auto insurance premium rates do not seem to be significantly lower in this state than in states without GDL. If fewer claims are being made, the benefit should be passed on to younger drivers in lower annual premium payments. Unfortunately, the Insurance Commissioner is not inclined to investigate let alone intervene.