What Are My Car Insurance Coverage Options?

If you’ve ever been confused by all the terms thrown around in the car insurance world, you’re not alone. While exactly what type of policy you should purchase depends on your unique situation, the fact is that nearly every state requires at least some amount of car insurance, making it a necessary decision. To get you started, here’s a breakdown of the most common types of coverage to consider:

State Minimum Insurance

State minimum insurance requirements vary by state, but in general are meant to ensure that all drivers have some form of coverage in the event of an accident. In most states, liability insurance is the base requirement, as it pays for the other party’s injuries and property damages when you are at fault in an accident.

There are two parts of liability insurance:

1. Bodily Injury: this goes towards the other party’s medical bills, lost wages, and related costs.
2. Property damage: This pays for repairs of the other party’s vehicle and/or other property that was damaged in the accident.

Without liability coverage, you’d be expected to pay for these expenses yourself. To learn more about liability-only insurance, click here.

While most states require a minimum amount of liability insurance, no-fault states are a different story. In these states, it doesn’t matter whose fault an accident is -- drivers are reimbursed for damages by their own insurance. Since fault plays no part, these states typically require PIP coverage, which covers the policyholder’s medical costs and any lost wages resulting from an accident.

As state minimum is only the minimum you’re required to purchase, you can always opt for more coverage. State minimum insurance is usually the cheapest option, but may not entirely cover serious accidents, which can easily cost into the thousands. Most drivers should take into consideration the likelihood of a serious, expensive accident, and purchase beyond the minimum in coverage, but knowing the basic requirements in your state is a great starting point.

To view your state’s minimum insurance requirements, click here.

Full Coverage Insurance

Regardless of who was at fault in an accident, full coverage insurance pays to repair or replace your vehicle.

Despite the name, full coverage insurance is not a type of insurance on its own -- it’s an umbrella term for the following two types of insurance:

1. Collision coverage: If you are at fault or the victim of a hit-and-run driver, this pays to repair or replace your vehicle. It also covers you when your collision involves something other than another vehicle, including telephone poles, mailboxes, potholes, trees, etc.
2. Comprehensive coverage: This pays to repair or replace your vehicle when it is damaged by non-accident causes, including fires, storms, break-ins, etc.

While collision coverage is not required by law, it is generally required if you lease or finance your car. It’s a better idea to purchase collision coverage on your own, as auto lenders will often add it into your loan at inflated prices if you do not have it to begin with. Most insurance companies require that you have both liability and comprehensive coverage before allowing you to purchase collision coverage. However, it is possible to purchase comprehensive coverage without getting collision coverage if you decide that’s the right choice for you.

To learn more about full coverage insurance, click here.

Personal Injury Protection (PIP) Coverage

Personal Injury Protection, also known as PIP, pays the expenses for any injuries you or your passengers get in an accident, regardless of who is at fault. PIP also covers lost wages.

PIP is not an option in every state, though in some states it is a requirement for minimum coverage. Check your own state requirements to see if it’s legally required for you. For people who don’t have good health insurance to begin with, PIP coverage should be considered.

To learn more about PIP and which states require it, please click here.

Medical Payments Coverage

Medical Payments Coverage, or MedPay, is not available in every state, but it is a consideration for those who do not have good medical coverage to begin with. Similar to PIP, MedPay covers some of you and your passengers’ medical fees, regardless of who is at fault. However, unlike PIP, it does not cover lost wages.

Whether you choose PIP, MedPay, or neither, medical bills can be financially devastating without proper preparation. Always keep in mind your own health insurance coverage and consider how your injuries are likely to be covered in an accident.

Click here to learn more about MedPay.

Uninsured/Underinsured Motorist Coverage

Uninsured/Underinsured Motorist Coverage pays for your expenses when you are in an accident with a driver who either doesn’t have enough insurance or doesn’t have insurance at all.

When you are in an accident with an underinsured driver, their insurance will pay up to their maximum liability limits and your underinsured motorist coverage will then take over and pay off whatever’s left.

Although insurance is a requirement for most of us, there are a lot of underinsured or uninsured drivers on the road, making this type of coverage one you should definitely consider. In some states, it is required as part of the state minimum coverage.

To learn more about uninsured/underinsured motorist coverage, please click here.

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