Six types of auto insurance coverage
A car insurance can protect you from financial loss if you are involved in an accident. Auto insurance policies consist of several types of coverage, often six in total. Depending on the state you live in, some of these coverages may be mandatory, while others will be optional.
Key points to remember
- Auto insurance can protect you financially if you are involved in an accident that results in property damage, injury, or the death of another person.
- Auto insurance policies are made up of different types of coverages that cover different risks.
- Some types of auto insurance coverage are required by state law, while others are optional.
- There are also other types of optional coverage that you can consider.
Six Types of Auto Insurance Coverage, Explained
The six main types of auto insurance coverage are:
- Liability for bodily injury (BI)
- Civil liability for material damage (DP)
- Medical Payments or Personal Injury Protection (PIP)
- Underinsured / uninsured motorist
Here’s a closer look at how each works.
Liability insurance for bodily injury (BI)
Personal injury liability insurance is designed to pay for another person’s medical expenses if you injure them in an accident where you are deemed to be at fault. This coverage may apply to you and anyone else listed as a driver on your policy.
Liability insurance for property damage (PD)
Property damage liability insurance also covers you in the event of an accident for which you are responsible. He pays for repairs to the other driver’s vehicle or other property you might damage.
Medical payments or injury protection insurance (PIP)
If you or a passenger in your vehicle is injured in an accident, medical payments or injury protection coverage can help pay the resulting medical bills. This type of coverage can also cover lost wages if you or an injured passenger are unable to work or funeral costs if someone in your vehicle dies as a result of an accident.
While property damage liability insurance covers damage to someone else’s vehicle or property as a result of an accident, collision coverage pays for damage to your own vehicle or property. This can include damage from a collision with another vehicle or hitting a stationary object, such as a tree or fence.
Full coverage reimburses you for loss, theft or damage to your vehicle caused by anything other than a collision. For example, this can include damage from fire, damage from hail and other falling objects, or damage from animals.
Coverage for underinsured / uninsured motorists
Coverage for underinsured motorists can protect you if you are involved in an accident where the driver at fault does not have sufficient insurance. Uninsured Motorist coverage is intended to protect you if you are involved in an accident with a driver who has no insurance.
If you are financing a vehicle, your lender may require you to purchase collision coverage and / or full coverage and keep it until the loan is paid off.
How Insurance Coverage Requirements Vary By State
Every state except New Hampshire requires that you have both personal injury liability insurance and property damage liability insurance. (New Hampshire drivers must meet certain financial liability requirements to waive liability coverage.)
In other states, there are also minimum amounts for the coverage you must purchase. Liability for bodily injury can have limits of two dollars: one per person and one per accident, while there is only one limit for property damage.
Coverage limits are usually expressed in your insurance policy as a sequence of numbers. So, for example, if your policy has a bodily injury liability limit of $ 25,000 per person, a bodily injury liability limit of $ 50,000 per accident, and a property damage liability limit of $ 25,000, your police would express it as 25/50/25.
It is important to note that the minimum coverage limits are just that: minimums. You can choose to purchase coverage above these limits, and it’s often a good idea.
Whether you are legally required to carry medical / PIP insurance, collision coverage, comprehensive coverage, or underinsured / uninsured motorist coverage depends on your state. And again, the minimum coverage amounts you must have for each may vary.
Other types of optional auto insurance coverage
Depending on the insurance company, you may be able to add other types of auto insurance to your policy in addition to the six listed above.
For example, this can include:
- Roadside assistance insurance
- New car replacement cover
- Gap insurance
- Towing and labor insurance
- Rental car reimbursement insurance
There are also scenarios that may require specialized insurance coverage. For example, if you have a classic or old car you may need an insurance policy that takes into account the age, value and how often you drive it. You can also purchase specialized coverage for a vehicle you leave in storage or if you use your car to provide ridesharing services.
What if you don’t have auto insurance?
No matter where you live, it’s illegal to drive a vehicle without auto insurance (or meet financial liability requirements, in the case of New Hampshire. Financial liability laws require you to provide proof that you can pay the damages yourself if you are involved in an accident.)
If you drive without insurance and an accident happens, several things can happen. First, you could be ticketed and / or charged with a traffic violation, according to your state’s laws and depending on the circumstances of the accident. At a minimum, your driver’s license can be suspended or revoked.
In addition, you could be subject to civil action if you are responsible for the accident and cause bodily injury or property damage. Without an insurance policy to pay for the damage, you could be held financially responsible for covering a person’s medical bills and / or repairing their vehicle. Depending on the extent of their injuries or property damage, this could be financially devastating.
Buy auto insurance
If you need auto insurance, it pays to research different companies and policies first. Then get quotes from several insurers. Pay close attention to policies’ bonuses and franchises so that you can make a fair comparison of the costs.