Auto Liability Insurance: Mandatory Minimums And Your Rights

In the United States, auto liability insurance requirements vary from state to state. In Florida, for example, a minimum of $10,000 in both personal injury protection and property damage liability coverage is required to register a car. Virginia and New Hampshire are exceptions, as they do not require drivers to have insurance. However, in Virginia, there is an annual $500 uninsured motorist fee. Liability insurance covers harm to others and their property in accidents caused by the policyholder, but it does not cover injuries or damage to the policyholder's property.

Liability insurance

In the United States, each state has different auto insurance requirements, with most states mandating a minimum level of liability coverage. For example, Florida requires a minimum of $10,000 in both personal injury protection and property damage liability coverage, while New York mandates a minimum of $25,000 for bodily injury and $50,000 for any injury resulting in death. Virginia and New Hampshire are the only states that do not require car insurance, although Virginia drivers must pay an uninsured motorist fee.

When purchasing auto insurance, it is essential to understand the different types of coverage available. Liability insurance is typically broken down into three components: bodily injury coverage per person, bodily injury coverage per accident, and property damage coverage per accident. Experts recommend carrying more than the minimum liability insurance coverage, as the minimum may not be sufficient in the event of a serious accident.

In addition to liability insurance, some states require additional coverages such as uninsured/underinsured motorist coverage and personal injury protection. It is important to review the specific requirements for your state to ensure you are complying with the law.

Uninsured/underinsured motorist coverage

Uninsured motorist coverage can pay for lost wages if you're unable to work due to your injuries, as well as pain and suffering compensation. It's important to note that this coverage is for you and your passengers, not for the driver who was uninsured. In some states, you can also purchase uninsured motorist property damage coverage (UMPD), which pays for repairs to your car if it's damaged by an uninsured driver. However, collision coverage, which is available in every state, can also cover these repairs.

Underinsured Motorist Coverage

Underinsured motorist coverage (UIM) is similar to uninsured motorist coverage but applies when the at-fault driver doesn't have enough insurance to cover all your medical bills and other expenses. UIM is sometimes packaged with uninsured motorist coverage, but they are separate types of coverage.

If your state requires uninsured motorist coverage, you must purchase at least the minimum amount mandated by the state. This minimum amount typically matches your liability coverage amounts. For example, if your liability limits are $100,000 for injury to one person and $300,000 for injuries in one accident, you would need to buy the same limits for your uninsured motorist coverage.

Even if your state doesn't require uninsured motorist coverage, it's worth considering adding it to your policy. If you have good health insurance, you may feel that you don't need it to cover medical bills. However, uninsured motorist coverage can provide benefits that health insurance doesn't, such as compensation for lost wages and pain and suffering. Additionally, if you have a high-deductible health insurance plan, uninsured motorist coverage can help cover the high out-of-pocket costs associated with a hospitalization.

In states where uninsured motorist property damage coverage is available, you may not need it if you already have collision coverage, as collision insurance will cover repairs to your car regardless of who was at fault. However, it's important to note that uninsured motorist coverage can also provide benefits beyond just property damage, such as lost wages and pain and suffering compensation.

Personal injury protection

In a no-fault state, if a policyholder is injured in a car crash, their policy pays for their medical care, regardless of who caused the accident. Policyholders with PIP coverage can receive benefits even if the other driver doesn't have insurance. PIP also covers medical expenses for people in the policyholder's vehicle, regardless of who caused the accident.

In addition to medical care, PIP often provides payments for lost income, childcare, and funeral expenses related to the accident. The number of states that require PIP or offer it as an optional add-on varies. As of September 2023, PIP was required in 15 states and Puerto Rico, with minimum and maximum coverage limits set by state governments and insurance companies, respectively.

The benefits of PIP include:

• Medical and hospital expenses: PIP covers reasonable and necessary medical and hospital expenses for each person injured in an auto accident, typically up to a certain amount per person and per accident.
• Wage loss: PIP provides income replacement coverage for a limited time after an accident, helping to cover lost wages if the injured person is unable to work.
• Loss of services: PIP can help pay for non-family members to perform household chores or other tasks that the injured person would normally do.
• Funeral expenses: PIP includes a death benefit paid to the family of the deceased if the accident results in a fatality.

It's important to note that PIP doesn't cover all situations and has certain exclusions, such as injuries caused by recreational vehicles, motorcycles, or intentional injuries by the insured person. Additionally, PIP doesn't cover damage to your vehicle or property; separate coverage is needed for those instances.

Medical payments coverage

MedPay covers the cost of doctors, hospital stays, surgeries, X-rays, health insurance deductibles and co-pays, prosthetics, and ongoing medical services. It can also cover ambulance fees, chiropractic, dental, and funeral expenses. It is important to note that MedPay does not cover childcare expenses, wage reimbursement, medical costs for injuries to other drivers, or any medical treatments unrelated to the auto accident.

The cost of medical payments coverage is generally quite low, and it is mandatory in some states. It is similar to Personal Injury Protection (PIP) coverage, which is mandatory in "no-fault" states and covers wage reimbursement in addition to medical expenses.

Collision and comprehensive coverage

Comprehensive coverage helps cover the cost of damages to your vehicle when you're involved in an accident that's not caused by a collision. This includes losses like theft, vandalism, hail, and hitting an animal. For example, if you hit a deer while driving, comprehensive coverage would cover the damage. It's worth noting that comprehensive coverage doesn't apply if you swerve to avoid the deer and hit a tree, as this type of accident is considered a collision with an object. Comprehensive coverage is sometimes referred to as "other than collision" coverage.

On the other hand, collision coverage applies when you collide with another vehicle or object, regardless of fault. For instance, if you rear-end someone and need to replace your bumper, collision coverage would come into play.

While neither comprehensive nor collision coverage is required by state law, they are typically required for a car loan or lease. If you finance or lease your vehicle, your lender will likely require you to carry both types of coverage.

Both types of coverage have deductibles, which are the amounts you agree to pay before the insurance company starts paying for damages. Typically, the deductible for both comprehensive and collision coverage ranges from $100 to $2,000.

When deciding on deductibles, consider how much you're willing to pay out of pocket if your car is damaged. Setting higher deductibles will lower your insurance premiums, while choosing lower deductibles will result in higher premiums.

In terms of cost, comprehensive coverage usually costs less than collision coverage, though this may vary depending on the insurer, your location, the value of your vehicle, and other factors.

Ultimately, both comprehensive and collision coverage are important for protecting your vehicle from physical damage. It's recommended to choose the coverage that fits your budget and needs.

Frequently asked questions