Auto Insurance: Understanding State-Mandated Coverage Requirements

Auto insurance requirements vary from state to state in the US. While some states mandate car insurance, others don't. For instance, New Hampshire and Virginia are the only two states that don't require car insurance. However, drivers in Virginia can opt to pay an annual fee to the state instead of buying car insurance. On the other hand, nearly all states have minimum requirements for liability coverage, which covers the cost of any injuries or damages you cause in a car accident, including those of the other driver and their passengers. Other types of car insurance coverage that may be required in specific states include uninsured/underinsured motorist coverage, personal injury protection, and medical payments coverage.

Liability insurance

Liability coverage is typically divided into two types: property damage coverage and bodily injury coverage. Property damage coverage insures you against damage to another person's property caused by your vehicle. Bodily injury coverage provides payment for others injured in an accident.

The cost of liability insurance depends on several factors, including how much coverage you select. Higher coverage limits will cost more. Liability coverage limits are usually expressed as three numbers, such as 25/50/10. These numbers indicate the coverage for bodily injury per person, bodily injury per accident, and property damage per accident.

Most states require a minimum amount of liability insurance, but the required limits vary by state. For example, California requires a minimum of $15,000 for the death or injury of any one person, $30,000 total for the death or injury of more than one person in any one accident, and $5,000 for damage to the property of other people.

Even if your state does not require liability insurance, it is still a good idea to have it. If you are found to be at fault in an accident, you could be personally responsible for paying for any damage or injuries you cause.

Uninsured/underinsured motorist coverage

Uninsured motorist coverage will protect you if you are hit by a driver with no auto insurance, while underinsured motorist coverage will protect you if the other driver doesn't have enough insurance to cover the damages or injuries they caused. These coverages are usually offered together and can be crucial, as nearly 13% of drivers countrywide don't have auto insurance, and this number rises above 20% in some states.

In the 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 may not cover hit-and-run incidents in some states, so you may need collision coverage to cover vehicle repairs in those cases.

• Uninsured motorist bodily injury (UMBI) covers medical bills for you and your passengers if you're hit by an uninsured driver.
• Uninsured motorist property damage (UMPD) covers damage to your vehicle caused by an uninsured driver.
• Underinsured motorist bodily injury (UIMBI) covers medical bills for you and your passengers if you're hit by a driver with insufficient insurance.
• Underinsured motorist property damage (UIMPD) covers damage to your vehicle caused by a driver with insufficient insurance.

Some states may require a deductible for UMPD/UIMPD, but UMBI/UIMBI generally doesn't include a deductible. When deciding on your coverage limits, it's recommended to match the amount of your liability coverage.

While not all states mandate uninsured/underinsured motorist coverage, about half of the states require at least one of these coverages, and some may only require coverage for bodily injury. Even if it's not required in your state, uninsured/underinsured motorist coverage can provide valuable protection and peace of mind in the event of an accident.

Personal injury protection

PIP is a requirement in the following at-fault states:

• Kentucky
• New Jersey
• Pennsylvania

It is also required in the following no-fault states:

• Florida
• Hawaii
• Kansas
• Massachusetts
• Michigan
• Minnesota
• New York
• North Dakota
• Utah

In some no-fault states, drivers can opt out of their PIP coverage requirement. Additionally, some at-fault states make PIP coverage optional.

While not a requirement in all states, PIP can provide valuable protection for drivers and their passengers in the event of an accident.

Medical payments coverage

MedPay is not offered in every state, but states that don't offer it typically have personal injury protection (PIP) coverage available instead. PIP is required in some states and covers medical expenses for insured drivers and their passengers, regardless of fault. PIP may also cover lost wages or other benefits not covered by health insurance.

While MedPay is optional in most states, it can provide valuable financial protection in the event of a car accident. It can help cover medical expenses for you and your passengers, giving you peace of mind and potentially avoiding the financial burden of major medical expenses.

Comprehensive and collision coverage

While not required by law, comprehensive and collision coverage are typically required if you finance or lease your vehicle. This is because they protect your vehicle from physical damage, which is important for leased or financed cars. Additionally, if you live in an area with a high risk of vehicle damage due to factors like fallen branches or animal collisions, having both types of coverage is highly recommended.

The cost of comprehensive and collision coverage may vary depending on factors such as your insurer, location, and the value of your vehicle. Comprehensive coverage usually costs less than collision coverage, but you can adjust the cost by opting for a higher deductible. It's worth noting that the coverage limits for these policies are determined by the value of your vehicle and the deductible amounts you select. In the event your vehicle is totaled, the maximum payout will be equal to the actual cash value of your vehicle minus your deductible.

When deciding on comprehensive and collision coverage, consider factors such as the value of your car, your driving frequency and routes, your current savings, and the hazards of your location. While not mandatory, these coverages offer valuable protection and can provide peace of mind, especially in high-risk areas.

Frequently asked questions