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An Explanation of the Types of Coverage on Your Auto insurance policy

Most people think of car insurance as a single, solid, monolithic thing. They know they need it, and they know it’ll pay out some money if something bad happens to their car, but beyond that, it’s a mystery for most people. The truth, however, is that an auto insurance policy is more like a Mr. Potato Head toy: it has a solid base that everyone needs to start with (known as “mandatory state minimums”) and other various components you can choose to add, leave out entirely, or adjust the size to your preference. Below, we’ll talk about the Mr. Potato Head nature of auto insurance, the eyes and ears, and whether or not you should go for big hands, small glasses, or leave his mustache in the Toy Bin where it belongs.

Mandatory Auto Insurance Coverage

Just like how you can’t play with a mr. Potato Head unless you start with a potato shaped lump of plastic with holes in the right places, you cannot drive (legally) without some form of auto insurance coverage. 499 percent of drivers, this means carrying an insurance policy which covers at the very least, the state-mandated bare minimum forms of coverage. But since different states have different insurance laws, we can’t specifically say what those would be for a driver in Florida versus someone in Georgia. When you cross state lines, you cross into different territory as far as the bare minimum auto insurance coverage you’re required to purchase. And we will jump into the finer details of those now.

Liability Coverage: Property Damage and Bodily Injury Liability

“Liability only” is one of the most common ways to describe an auto insurance policy that contains the bare minimum coverage you need to drive legally in most States. Specifically, liability coverage includes two subsets of coverage which pay out claims based on different situations.

  • Property Damage Liability: If you are partially, mostly, or completely responsible (depending on state laws) for causing an accident in which someone else’s property is damaged, your auto insurance company will pay out on the injured party’s claim up to the limits of your policy. Any extra money will be 100% your responsibility. So if, for example, you cause $12,000 worth of damage to the other driver’s vehicle in an accident, and the property damage liability limit on your policy is $10,000, you will owe that driver $2,000 out of pocket.
  • Bodily Injury Liability: Again, if you are found partially, mostly, or completely responsible for causing an accident in which someone is physically hurt and requires medical attention, your insurance company will pay out on the injured party’s claim up to the bodily injury liability limits on your policy. For example, if you cause an accident and someone is physically injured to the tune of $30,000 in medical bills, but your policy only covers $25,000, you are responsible for the remaining $5,000 (assuming the other party doesn’t have some form of medical insurance).
  • If you are not at fault: If you are deemed 0% at fault in an accident, or if you live in a state where claims are paid out based on partial/shared fault, your car insurance provider will not pay you any money from your liability coverage limits. Instead, either you or your insurance company (on your behalf) will file a third party claim against the at-fault driver’s insurance company. The liability limits on your policy only pay out in the event that the fault is partially or completely yours.
Liability Only Auto Insurance Premiums Legend: Liability Only Auto Insurance Policy Texas California Colorado Missouri Georgia 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100 $53 $100 $41 $61 $94

Personal Injury Protection

Personal injury protection is a type of insurance coverage that pays for any medical bills you incur as the result of an auto accident. Your insurance company will pay out on such claims regardless of who was at fault and up to the coverage limits of your policy. Most car insurance policies in states where personal injury protection is needed (also known as “no-fault” states) come with about $10,000 worth of PIP coverage. Depending on the laws in your state, you may be able to purchase higher limits.

The only states where PIP coverage is mandatory are:

  • Florida
  • Arkansas
  • Hawaii
  • Kansas
  • Kentucky
  • Maine
  • Massachusetts
  • Minnesota
  • New York
  • North Dakota
  • Oregon
  • Pennsylvania
  • Utah
  • New Jersey
Minimum Mandated Coverage: Liability + PIP Legend: Minimum Mandatory Coverage in PIP States Florida Oregon Kansas New York Utah 10 20 30 40 50 60 70 80 90 100 110 120 130 $72 $77 $39 $136 $74

Uninsured/Underinsured Motorist Bodily Injury

Uninsured/Underinsured Motorist coverage (UM/UIM) is a type of insurance that pays out claims not necessarily based on fault, but instead picks up the slack in the event that you are involved in an accident with a driver who has no insurance, doesn’t have enough insurance, or If you are involved in a hit and run accident. Much like liability insurance, UM/UIM is divided into two subclasses: bodily injury, and property damage. In the vast majority of states where UM/UIM coverage is required, most insurance companies only mandate that you purchase bodily injury coverage. The only states which require both bodily injury and property damage UM/UIM coverage are South Carolina, Vermont, West Virginia, and Washington, DC. Bodily injury alone is required in Connecticut, Illinois, Kansas, Maine, Massachusetts, Minnesota, Missouri, Nebraska, New Hampshire, New York, North Dakota, South Dakota, Wisconsin, and Oregon.

Optional Auto Insurance Coverage

Now that we’ve discussed the types of insurance coverages you are legally required to purchase, we can move on to optional coverage. Most of these coverages are designed to either make roadside disasters less inconvenient for you, less expensive for you, or both. Furthermore, the following coverages pay out independent of fault.

Comprehensive/Collision

If you decide to add comprehensive and collision coverage onto your insurance policy, the two are a package deal. It is extremely rare and difficult to find a car insurance provider who will sell you one, but not the other. However, most companies make up for this by assigning each type of coverage its own separate deductible and letting you adjust them independently of one another. Adjusting your collision deductible will have the most significant impact since collision claims are not only more frequently filed than comprehensive claims, but they are usually more expensive, too. You can still save a bit of money by raising your comprehensive deductible if you need to squeeze a little extra wiggle room into your budget, though.

Car Insurance Premiums: Liability Only vs. Collision/Comprehensive Legend: Without Collision/Comprehensive With Collision/Comprehensive Texas California Colorado Missouri Georgia 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150 160 $53 $108 $100 $165 $41 $90 $61 $128 $94 $165

Other optional auto insurance coverages include:

  • Gap coverage – Protects a driver from ending up upside-down on the financed purchase of a new automobile
  • Roadside assistance – Provides services Which help you get back on the road if you need your doors unlocked, a flat tire changed, if you run out of gas, if you need a battery jump, if you need to tow your vehicle to the nearest body shop, and more
  • Rental reimbursement – Sometimes also referred to as “loss of use” coverage, this helps you pay for alternate transportation while your damaged vehicle is either being repaired or replaced (up to a certain amount)
  • Glass repair – A glass repair company (approved by your insurance provider) will repair damage to the windows or windshield of your car regardless of the severity of damage and provide an extended warranty for as long as you own the vehicle
  • Rideshare – If you make some or all of your income working as a freelance driver for a rideshare company (like Lyft or Uber), depending on your state laws, you may be required to add rideshare coverage to your auto insurance policy
  • Customized equipment coverage – Have you customize your vehicle with a sick stereo, a deluxe body kit, or other accessories which are not factory? Then your comprehensive coverage may not payout on claims if they are damaged or stolen. But customized equipment coverage will
  • Personal liability umbrella insurance – Your auto insurance company will only extend you a certain amount of liability coverage (usually capped at around $100,000/$300,000/$100,000). If you want or feel as though you need more liability coverage than that, you can ask your insurance agent if you qualify for a personal liability umbrella insurance policy which can extend your liability coverage to $1 million dollars or more
  • Forgiveness insurance – Some car insurance companies try to attract new business by offering things like Accident Forgiveness automatically on a policy; other providers require that you purchase this as a separate form of coverage. Accident forgiveness applies to any claim you file against your comprehensive or Collision coverage. Incident Forgiveness applies to other unfortunate happenings such as a speeding ticket or a failure to yield citation. Either way, your monthly auto insurance premiums will not go up after the first occurrence

Full Coverage vs. Mandatory Minimums: it All Depends on Your Needs

Carrying full coverage auto insurance represents one extreme side of the spectrum, whereas the mandatory state minimum represents the other. Obviously, it would be silly to carry full coverage insurance on something like a 2002 Dodge Neon. Likewise, it would be equally foolish to carry the state mandatory minimum on a brand new Escalade fresh off the dealership showroom. But for everyone in between, choosing what type of coverage to carry and in which amounts is a little bit more muddled.

The newer your vehicle is and the more expensive your vehicle is, the more you are going to want to skew your policy towards full coverage. For example, if you buy a brand new vehicle and it gets totaled in an accident, the amount of money your insurance company will pay out on that claim will almost always be less than what you still owe on your auto loan. Not only does this mean that you still owe your bank money even though you no longer have the vehicle that you purchased with their assistance, but you don’t have a single penny to put towards a replacement vehicle, either. Many full coverage policies, especially those meant to cover a brand new vehicle, include something called “gap coverage”, which pays out a little extra money to cover the financial gap between the MSRP of your vehicle brand new and what your insurance says it’s worth at the time of a total loss accident. Yes, this will cost you a little bit more money on your monthly premiums, but it’s a lot better then suddenly finding yourself without a vehicle and in debt on top of that. Furthermore, repairs related to comprehensive or collision damage are usually much more expensive on a newer vehicle than an older one. Carrying a full coverage insurance policy (or something close to it) will protect you from an undue financial burden if the worst happens.

On the other hand, older, used vehicles don’t necessarily need every single coverage option. And they don’t necessarily need you to carry the highest coverage limits, either. The only real exception to this rule is your liability coverage. Since your liability coverage pays out damages to others caused by you or your reckless driving, it has nothing to do with the age or the cost of your vehicle. And if you have financial assets to protect from civil lawsuits, then you should carry the highest amount of liability coverage you can afford. Outside of that, if you choose to purchase optional coverages for an older, used vehicle, make sure you perform a cost-benefit analysis of how much it would cost you to pay out-of-pocket versus how much money you might end up saving by purchasing extra coverage and filing a claim. Odds are that those out-of-pocket expenses will probably cost you less than purchasing an overloaded car insurance policy – and if you never even have to file a claim against one of your optional coverages, then that’s just wasted money you will never get back.

No matter how much insurance coverage you wish to purchase, or what type of coverage options you want, we can help you get a better deal on it. Our sophisticated quote generator can get you 3-5 reliable quotes from the top insurance agencies near you in a matter of minutes. All you need to get started is your zip code.

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