Auto Insurance Basics: What's Covered?

Basic auto insurance typically includes liability protection, which covers damage to other people and their property. This includes medical bills, repair or replacement of property, and legal fallout. While the specific requirements vary by state, basic auto insurance can be broken down into two main types of liability insurance: personal injury and property damage.

Personal injury liability covers injuries that you cause to others in an auto-related accident. This includes reimbursement for hospital bills and lost wages. Property damage liability, on the other hand, covers the repair and replacement costs of damage to another person's belongings in a car accident. This can include not only another driver's car but also fences, mailboxes, and public property.

In addition to personal injury and property damage liability, basic auto insurance may also include medical payments or personal injury protection (PIP) coverage, comprehensive coverage, collision coverage, and uninsured/underinsured motorist coverage.

Bodily injury liability

In addition to bodily injury liability coverage, basic auto insurance policies typically include property damage liability coverage, medical payments or personal injury protection (PIP), collision coverage, comprehensive coverage, and uninsured/underinsured motorist coverage.

Personal injury protection (PIP)

In addition to medical expenses, PIP can cover lost wages, rehabilitation costs, replacement services (such as childcare and house cleaning), and funeral expenses. PIP is designed to provide prompt payment for car accident injuries, so claims are paid regardless of who caused the accident. This means there is no waiting for a liability lawsuit to be resolved before receiving compensation.

While some states require drivers to have PIP as part of their auto insurance, it is optional or unavailable in others. PIP coverage amounts also vary by state, with minimum coverage set by state governments and maximum coverage set by insurance companies.

Overall, PIP can provide valuable financial protection in the event of a car accident, helping to cover medical costs, lost income, and other related expenses.

Property damage liability

For example, if you have a property damage liability limit of $10,000 and cause $4,500 worth of damage to another vehicle in an accident, your insurer will cover all the repair costs. However, if you cause $10,500 worth of damage, your insurer will only pay up to your policy limit, leaving you responsible for the remaining $500.

Most states require a minimum amount of property damage liability coverage, and buying more than the state's requirements offers more financial protection. The cost of property damage liability insurance depends on factors such as your location, vehicle, driving record, age, gender, insurance options, and coverage amounts.

While property damage liability insurance covers damage to other people's property, it does not cover repairs to your own vehicle or your medical expenses. For that, you would need additional coverage, such as collision and comprehensive insurance.

Uninsured/underinsured motorist coverage

Under this coverage, there are two main components: uninsured motorist coverage and underinsured motorist coverage. Uninsured motorist coverage safeguards you in the event of an accident with an uninsured driver, while underinsured motorist coverage applies when the at-fault driver's insurance is insufficient to cover the damages or injuries they caused. These coverages are often offered together and are mandatory in many states.

Uninsured motorist bodily injury (UMBI) and underinsured motorist bodily injury (UIMBI) cover the medical expenses of both you and your passengers. This includes hospital bills and lost wages resulting from injuries sustained in the accident. On the other hand, uninsured motorist property damage (UMPD) and underinsured motorist property damage (UIMPD) cover the costs of repairing or replacing your vehicle if it is damaged in the accident. It's important to note that some states may require a deductible for UMPD/UIMPD, but UMBI/UIMBI generally doesn't include a deductible.

When considering uninsured/underinsured motorist coverage, it's essential to understand the specific requirements and options available in your state. While some states mandate this coverage, others may only require bodily injury coverage or give you the option to purchase it. Additionally, the coverage limits and pricing can vary, so it's advisable to consult with your insurance provider to ensure you have adequate protection.

Collision coverage

If you own your vehicle outright and choose not to carry collision coverage, you will be responsible for paying for any repairs or replacements out of pocket if you are involved in an accident. However, if you are at fault in an accident, the other driver's liability coverage will typically pay for the damage to your vehicle.

It's worth considering the value of your vehicle and your ability to pay for repairs or a replacement out of pocket when deciding whether to opt for collision coverage. Collision coverage provides peace of mind and financial protection in the event of an accident.

Frequently asked questions