Understanding The Fundamentals Of Auto Insurance Coverage

Basic auto insurance, also known as minimum coverage or liability insurance, is the minimum insurance required to drive. It covers the cost of damages to other vehicles and property, as well as injuries to other people, in the event of an accident. While specific requirements vary by state, basic auto insurance typically includes bodily injury liability, property damage liability, personal injury protection (PIP), and uninsured/underinsured motorist coverage. This type of insurance is cheaper than full coverage but offers fewer benefits.

Bodily injury liability

Basic auto insurance, also known as minimum coverage or liability insurance, is the minimum insurance you need to drive. It is usually cheaper and has fewer benefits than a full-coverage policy. Most basic auto policies consist of six types of coverage: bodily injury liability, personal injury protection, property damage liability, collision, comprehensive, and uninsured/underinsured motorist.

The liability limits on your insurance policy will typically be presented as three numbers, such as "100/300/100." The first number refers to the per-person bodily injury liability coverage, the second number refers to the per-accident bodily injury liability coverage, and the third number refers to the per-accident property damage liability coverage. For example, if you have bodily injury insurance limits of 100/300, your policy will cover up to $100,000 per person and $300,000 per accident for bodily injury liability claims.

While bodily injury liability coverage is not required in every state, it is necessary for many reasons and is legally required in most states. It is a good idea to know the minimum coverage requirements in your state and consider purchasing more coverage than the state-mandated minimum to protect yourself financially in the event of an accident.

Property damage liability

Basic auto insurance, also known as minimum coverage or liability insurance, offers drivers the minimum insurance required to drive. This type of insurance is cheaper than full coverage and has fewer benefits. While the specific mandates for auto insurance vary from state to state, most basic auto insurance policies consist of six types of coverage: bodily injury liability, personal injury protection, property damage liability, collision, comprehensive, and uninsured/underinsured motorist.

If the cost of damages exceeds the amount of your coverage, you are responsible for the remaining cost. Therefore, it is important to ensure that you have sufficient coverage to protect yourself in the event of an accident. You can choose a higher limit for this coverage, which will increase the amount you are covered for in the event of an accident. When choosing your level of coverage, it is worth considering whether you own a home or other expensive items, whether you usually travel in high-traffic areas, and whether there are a lot of expensive vehicles in your area.

In addition to property damage liability, bodily injury liability insurance is another important component of basic auto insurance. This type of insurance covers the medical expenses of other people when you injure them with your car. It can also help cover lost wages if the injured person is unable to work due to their injuries. Together, property damage liability and bodily injury liability insurance provide essential protection for drivers, helping to cover the costs of accidents and ensuring that those affected can receive the compensation they need.

Personal injury protection (PIP)

Basic auto insurance policies vary from state to state, but they typically include liability protection and, in some states, uninsured/underinsured motorist protection and comprehensive coverage. One component of basic auto insurance is personal injury protection (PIP), also known as "no-fault insurance". This covers the medical expenses of the policyholder and their passengers in the event of a car accident, regardless of who is at fault. PIP can also cover lost income, childcare, and funeral expenses.

Personal injury protection is designed to cover the medical costs related to an accident, regardless of who is at fault. This is different from bodily injury liability coverage, which provides coverage for medical expenses related to someone who is injured when the policyholder is at fault. PIP is available primarily in no-fault states, where a policyholder's insurance pays for their medical care after a car accident, regardless of who caused the accident. In a no-fault state, policyholders with PIP coverage can receive benefits even if the other driver is uninsured. PIP coverage is required in 15 states and Puerto Rico, and it is offered as an optional add-on in other states.

The specific benefits of PIP coverage vary by state. In New York, for example, basic no-fault auto insurance includes reasonable and necessary accident-related medical and rehabilitation expenses, 80% of lost earnings up to a maximum of $2,000 per month for up to three years from the date of the accident, and up to $25 per day for up to a year to reimburse other reasonable and necessary expenses such as household help and transportation to medical appointments. A $2,000 death benefit is also included in New York's basic no-fault coverage.

While PIP covers medical expenses and other related costs, it does not cover property damage. It is important to note that each type of coverage in a basic auto insurance policy is priced separately, so there is variability in policy limits and pricing.

Uninsured/underinsured motorist coverage

Basic auto insurance, also known as minimum coverage or liability insurance, is the minimum insurance you need to drive. It is a cheaper alternative to full coverage and typically includes liability protection. This covers the cost of damage and injuries you cause to others in an accident, including medical bills and car repairs.

There are two types of uninsured/underinsured motorist coverage:

Uninsured motorist coverage: This protects you if you are hit by a driver with no insurance. It includes:

• Uninsured motorist bodily injury (UMBI): Covers medical bills for you and your passengers.
• Uninsured motorist property damage (UMPD): Covers damage to your vehicle.

Underinsured motorist coverage: This protects you if you are hit by a driver whose insurance is insufficient to cover the damages or injuries they caused. It includes:

• Underinsured motorist bodily injury (UIMBI): Covers medical bills for you and your passengers.
• Underinsured motorist property damage (UIMPD): Covers damage to your vehicle.

In some states, a deductible may be required for UMPD/UIMPD, but UMBI/UIMBI generally does not include a deductible. Additionally, uninsured motorist coverage typically covers hit-and-run incidents, although this may vary by state.

Collision coverage

It is important to note that collision coverage does not apply to collisions with animals, which are covered under comprehensive coverage, nor does it cover medical expenses or damage to another vehicle.

Frequently asked questions