Auto Insurance Guide

Auto Insurance Coverages Explained

The Car Insurance Industry is heavily regulated so although various components of any automobile insurance policy exist they are standard throughout the nation in terms of how they are defined. Most states have minimum mandatory auto insurance requirements (which are many times much less than you actually need) but these laws vary from state to state which you can find in our state minimum car insurance requirements section here.

What are the main types of Auto Insurance Coverages?

Liability Insurance:   Liability insurance is the type of car insurance required by most states. Liability insurance provides coverage for accidents you are in causing damage to either (a) other vehicles or (b) your vehicle where the fault is not with another car. Although many states have no fault car insurance laws it’s important to understand that liability insurance is not a blanket protection from litigation. How it does help is reduce the need for a lawsuit. Minimum liability insurance limits are generally based on the average cost of a vehicle so in the event of an accident no further claim from vehicle damage is usually needed since the liability coverage can usually cover the cost of any damage. Where people get in trouble and often become exposed to personal liability is when the damage exceeds the policy limits (often the case with luxury cars or due to the high cost of medical expenses). Always consider more than state minimum car insurance requirements.

Bodily Injury Liability:   Bodily injury liability coverage is also usually a mandatory minimum car insurance requirement in most states. This component provides coverage for the medical expenses of the driver and passengers of the other vehicle if you are involved in an auto accident (to preset amounts as outlined and limited within your insurance policy)

Property Damage:   Required by almost all states, property damage insurance is another version of liability insurance aimed at providing coverage for damage to physical property in a car accident owned by others.

Collision Insurance:  Protection for “road-related” damages. For example if you strike another car while operating the vehicle on the road or vice versa. The typical definition of a car accident applies the most to collision coverage.

Comprehensive Insurance: is a critical type of car insurance to protect your vehicle however it is almost never required by law. The logic behind this is having comprehensive car insurance is more of a self-insurance rather than coverage to protect other drivers. Comprehensive car insurance provides coverage for items such as car theft, storm damage, key scratching and items which cause damage to the car and contents inside.

Personal Injury Protection (PIP):   An optional policy feature or rider (one which most states DO NOT require but every vehicle owner should consider) is Personal Injury Protection (PIP). Personal Injury Protection provides insurance coverage to pay hospital bills relating to a car accident for the policyholder.

Underinsured and Uninsured Motorist Coverage (UIM):     Due to the overwhelming number of uninsured and underinsured drivers on the road many states have car insurance laws requiring all drivers to have some form of UIM coverage. This type of car insurance kicks in when you are involved in a car accident where the party at fault does not have any or enough insurance coverage to cover the costs associated with the accident.

These types of auto insurance coverages make up almost every car insurance policy available however many optional riders like GAP (residual debt) Car Insurance, Rental Car Coverage, Medical Payments, Uninsured / Underinsured Motorist Coverage and more are available.