Insurance Policies: State Law Vs. Insurance

Auto insurance laws vary from state to state in the US, but all states require some form of car insurance or proof of financial responsibility. While some states are tort states, others are no-fault states. In tort states, drivers are not restricted by their state's auto insurance laws in what they can sue another driver for if that person causes a collision. In no-fault states, drivers are restricted in the nature of their lawsuits as they cannot sue for damages such as pain and suffering under every circumstance.

Liability insurance

The specific requirements for liability insurance vary from state to state. For example, in Rhode Island, the minimum coverage limits for bodily injury liability are $25,000 per person and $50,000 per accident. On the other hand, Texas law requires that automobile insurance policies include personal injury protection (PIP) and uninsured motorist protection (UM/UIM) unless the policyholder rejects this coverage in writing. Understanding the specific requirements of your state is essential to ensure you have adequate coverage.

It is important to note that liability insurance does not cover damages to your own property or injuries you sustain in an accident. Instead, it focuses on protecting you from financial liability for the other party's damages. Therefore, it is recommended to consider additional coverages, such as comprehensive and collision insurance, to ensure complete protection.

Uninsured/underinsured motorist coverage

Uninsured motorist coverage comes into effect when you are hit by a driver with no auto insurance. This coverage will protect you by paying for your injuries, your passengers' injuries, and damage to your vehicle. Underinsured motorist coverage, on the other hand, is applicable when the at-fault driver doesn't have enough insurance to cover the damages or injuries they caused. This type of coverage usually goes hand in hand with uninsured motorist coverage.

In the unfortunate event of a hit-and-run accident, you can file a claim against your uninsured motorist coverage. However, it's important to note that uninsured motorist coverage for property damage (UMPD) may not cover these incidents in some states, and you would need collision coverage to cover the damage to your vehicle.

While not all states mandate uninsured and underinsured motorist coverage, about half of them require at least one of these coverages. Some states may only require you to purchase coverage for bodily injury. For example, Illinois requires both types of coverage, while New Hampshire mandates them on every policy where car insurance is chosen as a way to demonstrate financial responsibility. Other states, like Massachusetts and South Carolina, only require uninsured motorist coverage.

It's worth noting that some states may require a deductible for UMPD/UIMPD, but UMBI/UIMBI typically doesn't include a deductible. When deciding on the amount of coverage, consider matching the limits of your liability coverage or choosing identical limits. This will ensure that you have sufficient protection in case of an accident.

Personal injury protection (PIP) insurance

In addition to medical care, PIP often covers lost income, childcare, and funeral expenses related to the accident. PIP is required in 15 states and Puerto Rico, including Delaware, Florida, Hawaii, Kansas, Kentucky, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Dakota, Oregon, Pennsylvania, Utah, and Puerto Rico. Some no-fault states offer medical payments coverage, but it typically has lower limits and does not cover these additional costs.

The minimum coverage requirements for PIP are set by state governments and can vary, while the maximums are set by insurance companies, usually not exceeding $25,000. For example, in Florida, the minimum required PIP coverage is $10,000. If an accident results in medical treatment costing $15,000, the policyholder's PIP would cover $10,000.

It is worth noting that PIP is different from liability insurance. While PIP covers medical costs for the policyholder and their passengers, regardless of fault, liability insurance covers medical costs for third parties if the policyholder is at fault. Liability insurance is required in all states, while PIP is only mandatory in select states.

Medical payments coverage

MedPay covers medical bills, health insurance deductibles and copays, ambulance fees, chiropractic, dental, prosthetics, and funeral expenses. It does not cover childcare expenses, wage reimbursement, medical costs for injuries to other drivers, or any medical treatments unrelated to the auto accident.

The benefits of MedPay are similar to those of personal injury protection (PIP) coverage, which is mandatory in no-fault states. PIP is more comprehensive than MedPay, as it covers wage reimbursement and other qualifying non-medical or work-related losses.

The cost of MedPay is generally quite low, and it can provide financial peace of mind in the event of an accident, especially for those without health insurance or with high-deductible plans.

Comprehensive and collision insurance

Comprehensive insurance covers damage to your vehicle from non-collision incidents, such as theft, animal damage, fire, hail, vandalism, and natural disasters. It also reimburses you for car theft and damage from collisions with animals. For example, if a fire in your garage damages your car or a tree falls on your car during a storm, comprehensive insurance will cover the cost of repairs.

Collision insurance, on the other hand, covers damage to your vehicle resulting from a collision with another vehicle or object. This includes accidents with other vehicles, single-car rollovers, and collisions with stationary objects like road signs and guardrails. If you accidentally back into a pole or need to replace your bumper after a collision, collision insurance will cover the repairs.

Both types of insurance are important for protecting your vehicle, and some insurers may require you to purchase them together. When deciding whether to opt for comprehensive and collision insurance, consider factors such as the value of your car, your driving frequency and location, and your current savings. If you live in an area with a high risk of vehicle damage or have a high-value car, these coverages may be particularly important.

Frequently asked questions