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Alabama Automobile Liability Insurance Law

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Understanding Alabama Uninsured/Underinsured Motorist Insurance

What is uninsured/underinsured motorist (UM) insurance?

UM insurance provides protection in the event you are involved in a wreck or are injured by an operator of a motor vehicle who does not have liability insurance or has inadequate liability insurance.

Is UM insurance mandatory?

No. UM insurance is not mandatory, but you must intentionally waive UM coverage. 

Should I have UM insurance?

We recommend that everyone have UM insurance. Even though liability coverage is required, the number of uninsured drivers in Alabama is alarmingly high. Even when the at-fault driver has liability coverage, many times, the amount of liability coverage is not sufficient to reasonably compensate for serious injuries.

My car has been damaged, and I will be without a car. Am I entitled to rental car?

Yes. You are entitled to expenses reasonably related to the damaged vehicle.

What does a total loss mean?

My car has been declared a total loss. What does that mean? Ala. Code § 32-8-87(d).

We all have heard or experienced how a new car loses value the minute your drive it off the car lot. By some accounts, your new vehicle depreciates by more than 10% the second you drive it off the lot. By the end of the first year of ownership of a new car, you are likely to lose another 10% in value. Under Alabama law, if your car is a total loss, you are limited to the “fair retail value” of your car. Many times, the value to the car to the owner is much more than the fair retail value of a car. You may have an older car that you have kept well maintained and you plan on keeping for a long time. The fair market value of such a car would be substantially less than what it would take to replace this vehicle. 

·   What is a total loss? 

o  Under Alabama law, your vehicle is total loss if the cost of repairs exceeds 75% of the “fair retail value” of your vehicle.

·      What happens after my vehicle has been declared a total loss?

o  Either the at-fault driver’s insurance or your insurance (assuming you have collision coverage) will pay you the fair market value of your vehicle.

·      What if I owe more than my car is worth?

o  Unfortunately, you will be responsible for the difference between what you owe on the vehicle and the fair retail value your vehicle.

o  Gap insurance is optional insurance offered by some insurance companies that can be added to your policy. Gap insurance pays the difference between what you owed on your vehicle and what you were paid for your vehicle.  

·      Can I keep vehicle even if it has been declared a total loss?

o  Yes. The insurance company will pay you the fair market value of your vehicle less the salvage value. Typically, the salvage value of a vehicle is less than $1,000.00. 

o  You will be issued a salvage title. You cannot drive your vehicle on the public roads or have a valid license plate with a salvage title. Once you have your vehicle repaired and have it inspected, you will be issued a rebuilt title. A vehicle with a rebuilt title can be driven on the public roads. If you sell a vehicle with a rebuilt title, you must disclose this fact to the prospective purchaser. 

Understanding Liability Insurance

What is automobile liability insurance?

Liability car insurance pays for injuries and damages you cause. Practically all states require automobile liability insurance. 

What are the different types of automobile liability insurance?

Personal injury or Bodily injury coverage (PI/BI). Personal injury or bodily injury coverage pays for injuries suffered by others in a wreck you caused.  

Property Damage Coverage (PD). Property damage coverage pays for damage you caused to another person’s property in a wreck you caused.

Does Alabama require automobile insurance? 

Yes. Alabama law requires that you carry a minimum of $25,000.00 in personal injury coverage and $50,000.00 in property damage coverage. Ala. Code § 32-7-6.

Do I need to have proof of insurance with me in my automobile?

Yes. Every operator of a motor vehicle must carry proof of insurance. Several documents may serve as proof of insurance: (1) an insurance card issued by the insurer; (2) the current declarations page of an Alabama liability insurance policy; (3) an Alabama insurance binder; (4) a car rental agreement, which specifies the insurance coverage on the rental car; or (5) if you have purchased a motor vehicle within the last 20 days, a copy of the insurance card for the vehicle replaced by the new purchase. 

You may use a cell phone to display proof of insurance. If you use your cell phone to display proof of your insurance, this does not give law enforcement to access any other information on your cell phone. Ala. Code § 32-7A-6(j).

What are the penalties for not having automobile liability insurance?

Operating a motor vehicle without liability insurance is a Class C misdemeanor, § 32-7A-6. You can be fined up to $500.00 and, while unlikely for just a traffic violation, be sentenced a three-month jail sentence. In addition, failure to have insurance may result in the suspension of your driver’s license. Ala. Code § 32-7-6. 

Our experience has shown us that a significant percentage of drivers in Alabama have the minimum limits ($25,000.00) or no insurance at all. To protect yourself if you were in a wreck with an underinsured or uninsured driver, we recommend that you purchase UM insurance.