New York State law requires that motorists carry a minimum amount of liability insurance of $25,000 for bodily injury to one person, $50,000 for bodily injury to all persons, and $10,000 for property damage in any one accident. Mandatory "no-fault" coverage of $50,000 is also required. Many motorists carry higher liability limits and additional personal injury protection beyond these minimum limits required by law. The law also requires all auto insurance policies to provide uninsured motorists coverage (for bodily injury), subject to the same minimums. In addition, SUM (Supplementary Uninsured/Underinsured Motorists) coverage can also be purchased, in amounts up to the bodily injury liability limits of an insured's own policy. An insurer must offer SUM limits of $250,000 per person per accident and $500,000 per accident ($250,000/$500,000) if a person has bodily injury liability limits of that amount or higher. Insurers may offer higher SUM limits if they wish.

Such an increase is known as a surcharge. Surcharges are based on the fact that a driver who has previously been at fault in one or more accidents, or has a record of traffic convictions, has an increased likelihood of being involved in future accidents.

Insurers "classify" drivers according to criteria such as age of driver, geographical location, mileage and type of vehicle. To further refine those classifications, many insurers use "merit rating plans", a point system in which increases are applied according to an individual driver's record (traffic convictions and accidents).

Surcharges are applied to liability (bodily injury & property damage), collision and no-fault (PIP) coverages, and are only allowed for:

• Accidents involving bodily injury, or losses to property in excess of the accident reporting threshold ($2,000), where the insured driver is at fault,
• Convictions for certain violations which are chargeable under the Insurance Law.

A surcharge is used as a tool to properly price the exposure the insurer is writing, and not as a means to recoup payment made under a claim. The total dollar amount paid as the result of a claim does not affect the surcharge. An insured being surcharged for a particular accident will pay the same amount regardless if the damages were $2,000 or $50,000.

Insurance rates are based on the average experience of a group of persons with similar characteristics (classification). Young drivers historically have had poorer loss experience (both in the frequency of accidents and the cost of those accidents) than older drivers. By charging young drivers higher rates, those drivers pay their fair share of insurance costs and older drivers are not asked to subsidize them. In addition, rates are generally higher for males because, consistently, female drivers incur fewer and/or less severe claims than males.

An insurer is permitted to consider all resident operators of an insured vehicle in the rating of an automobile policy, including a child, although he/she may only have a learner's permit. This is because insurers are permitted to use classifications that reflect a possible exposure for liability on the part of the insurer, in the event that bodily injury or property damage occurs due to that child's operation of the vehicle. Such a "limited use" classification, however, reflects the reduced likelihood of an incident due to "occasional" operation by a youthful driver, and is rated lower than if that person were the "principal operator". In addition, children living away at school (over 100 miles) are generally eligible for a reduced rate.

A deductible is an amount that you agree to be responsible for in the event of a loss under the physical damage (collision or comprehensive) coverages of your policy. Deductibles are offered on some coverages to give insureds flexibility in the cost of insurance and the amounts they wish to be responsible for. You may reduce your auto insurance costs by raising the deductibles on physical damage coverages. You should review the amount of the deductibles you now carry on these coverages to determine whether it makes sense for you to absorb a larger portion of your loss in the event of an accident, in return for a lower premium charge. Under the law, your insurer is required to furnish you with information about how much you may save by adjusting your deductibles.