Auto Insurance Options: Understanding Your Coverage Choices

Auto insurance is a necessity for all drivers, but the specific type of insurance you need depends on several factors. There are several types of auto insurance, and each covers specific circumstances or events. The type of insurance you choose will depend on your state's requirements, the age and value of your car, and your personal financial situation.

Liability coverage

Property Damage Liability Coverage

Property damage liability coverage pays for damage to someone else's property resulting from an accident for which you are at fault. This includes repairs to the other driver's vehicle, a rental vehicle while the other person's car is being repaired, damage to buildings, fences, or other structures, damage to personal property such as electronics or belongings inside a vehicle, and legal fees if you're sued for property damage.

Bodily Injury Liability Coverage

Bodily injury liability coverage pays for damages for bodily injury or death resulting from an accident for which you are at fault. This includes injuries sustained by another person because of the accident and legal fees if you're sued for injuries you caused. States may have different requirements on who can file a bodily injury claim against you.

Customizing Your Liability Coverage

Collision coverage

When deciding on collision coverage, it is important to consider the cost of your car and the potential cost of repairs. If you opt for a higher deductible, you will pay less in monthly premiums. However, this also means that you will have to cover more of the repair costs yourself, which can be risky if you do not have the financial means to do so.

Comprehensive coverage

• Natural disasters (earthquakes, floods, hurricanes, tornadoes, and volcanic eruptions)
• Contact with animals such as deer or moose
• Theft (of the entire vehicle or parts of the car)
• Fallen objects such as trees, branches, ice, or projectiles
• Vandalism
• Civil unrest or riots
• Glass claims and windshield repair

The cost of comprehensive coverage varies depending on personal details such as age, gender, marital status, and driving record, as well as details about the vehicle and where you live. It is not required by state laws but may be required by your lender if you lease or finance your car.

When deciding whether to purchase comprehensive coverage, consider the value of your vehicle, your driving habits, and your financial situation. If your vehicle is damaged or totaled, comprehensive coverage can help avoid a financial headache by covering repair or replacement costs.

Personal injury protection

In the US, PIP is mandatory in 12 states: DE, FL, HI, MI, MA, KS, MN, NY, UT, OR, ND, and NJ. In other states, it is either optional or not available. For example, in Texas, PIP insurance is not mandatory, but drivers must sign a waiver if they want to decline the coverage.

PIP covers reasonable medical costs, including surgeries, X-rays, dental or eye treatments, prosthetic devices, and professional nursing. It also covers rehabilitation therapy, lost income resulting from the accident, and replacement of necessary services such as family care or household maintenance.

If you are injured in an accident and have lost wages due to being out of work, PIP can help cover those expenses. This benefit also applies if you are self-employed and need to hire temporary workers to perform tasks. PIP can also help pay for funeral, burial, or cremation expenses, and can replace lost income for surviving dependents if the policyholder passes away in an accident.

PIP does not cover everything. It will not cover the injuries of other drivers in a collision, any injuries sustained while committing a crime, or injuries sustained while being paid to drive. To ensure full coverage, additional policies such as bodily injury liability insurance and property damage liability insurance are recommended.

Uninsured/underinsured motorist coverage

Uninsured motorist coverage specifically applies when the other driver has no auto insurance. In this scenario, your uninsured motorist coverage may help compensate you for your injuries and property damage caused by the uninsured driver. This can include medical bills for you and your passengers, as well as repairs or replacements for your vehicle. Without this coverage, you could be left paying for these expenses out of your own pocket.

Underinsured motorist coverage, on the other hand, comes into effect when the at-fault driver doesn't have sufficient insurance coverage to pay for the damages or injuries they caused. This coverage can protect you from drivers who have insufficient insurance to cover your claim. It typically includes both bodily injury and property damage coverage, ensuring that your medical bills and vehicle repairs are taken care of.

In some states, uninsured and underinsured motorist coverage are combined, while in others they are separate or consist of up to four coverages. It's important to note that even if your state doesn't require this type of coverage, you still take a serious risk if you choose to drive without it. According to the Insurance Information Institute, nearly 13% of drivers countrywide are uninsured, and this number rises above 20% in certain states. Therefore, having uninsured/underinsured motorist coverage can provide valuable protection and help ensure that you're not left footing the bill for someone else's negligence.

Frequently asked questions