Car Insurance Coverage Types

Last modified: September 15, 2021

Every car owner is legally required to possess an insurance policy. There are various car insurance coverage types that not only provide financial assistance in case of accidents but also cover any injuries to passengers, other drivers, or pedestrians. In this blog, we will be discussing the six main different car insurance coverage types, namely:

  • Bodily Injury Liability (BI)
  • Property Damage Liability (PD)
  • Medical Payments or Personal Injury Protection (PIP)
  • Collision
  • Comprehensive
  • Underinsured/Uninsured Motorist

Six Types of Car Insurance Coverage

Bodily Injury Liability

  • What is bodily injury liability?

Bodily injury liability coverage allows you to cover medical expenses for a person injured in a car accident caused by you. It applies to you and anyone else listed as a driver on your policy. 

  • How much bodily injury liability do I need?

The minimum amount of bodily injury liability required varies by state. It can be as low as $10,000/person and $20,000/accident. However, you should go for more than a minimum if you can afford it. Generally, you will want enough insurance liability to cover your net worth. 

Property Damage Liability

Property damage liability covers the repair costs if you’re responsible for a car accident that damaged another person’s vehicle or a piece of property (like a parking front or fence). 

  • How much property damage liability do I need?

In addition to the minimum amount required by your state, you can opt for higher limits to protect your savings. 

Medical Payments or Personal Injury Protection (PIP)

  • What is medical payment or personal injury protection?

This car insurance type helps you cover the medical expenses if you or a passenger has been injured in a car accident. Moreover, you can also use personal injury protection insurance to cover the lost wages if you or an injured passenger is unable to work. In case someone dies as a result of the accident, personal injury protection will also cover the funeral costs. Moreover, PIP is applicable to all passengers in your car, even to those who do not possess health insurance. 

  • How much PIP do I need?

According to experts, every car owner looking to get an auto policy needs to secure at least $10,000 worth of PIP. This way, you can be sure that you will have coverage for at least the initial $10,000 for medical bills and lost wages. Naturally, if you can afford a greater amount, you should certainly go for it. 

Collision

  • What is collision coverage?

Collision insurance is yet another type of car insurance coverage. If your car collides with another vehicle or even an object like a street sign or garage door, collision coverage will help you pay for any replacements or repairs that your car might require. Unlike property damage coverage that pays for damage caused to another person’s vehicle, collision insurance covers your own car. 

  • How much collision coverage do I need?

According to consumer advocates, it is advisable to have a collision deductible of at least $500 (unless you possess significant on-hand savings). 

Comprehensive

  • What does comprehensive car insurance cover?

The comprehensive insurance coverage pays for replacing or repairing vehicles damaged by something other than rolling over or a collision. For instance, this insurance will cover any damage caused to a car due to theft, flood, fire, wind, hail, falling objects, hitting an animal, or vandalism. 

  • Is it worth getting comprehensive car insurance?

Comprehensive insurance provides vast coverage compared to third-party insurance. Furthermore, should you get into an accident, you can be assured that your insurance company will cover any vehicle damage. You might get compensation even in cases where the fault is not provable. 

Underinsured/Uninsured Motorist

  • What is underinsured/uninsured motorist coverage?

The underinsured/uninsured motorist coverage has been designed to cover you and other passengers present in your car at the time of a car accident caused by a motorist without insurance or with insufficient insurance amount. 

  • How much underinsured/uninsured motorist coverage do I need?

Most states that require underinsured/uninsured motorist coverage have a minimum ceiling of $25,000 for each person and $50,000 for each accident.

How Insurance Coverage Requirements Vary by State

Minimum Car Insurance

If you are the car owner, you will have to adhere to the minimum car insurance requirements specified by the state you are residing in. For this reason, it is essential to be aware of your state laws; in case of any confusion, you can discuss your queries with your insurance company as well. The main car insurance coverage types that your state might require have already been covered in the above sections. 

The liability coverage might be provided in the form of a number series where the numbers specify the bodily injury coverage per person, per accident, and property damage liability coverage per accident. For instance, the numbers $30,000/$50,000/$25000 (or 30/50/25) reflect:

  • Bodily injury coverage of $30,000/person.
  • Bodily injury coverage of $50,000/accident.
  • Property damage liability of $25,000/accident.

Does Every State Mandate Car Insurance?

Almost every state requires some degree of car insurance. Having said that, there are a few unique instances.

New Hampshire, for example, does not require the purchase of car insurance. Instead, should you end up injuring someone while driving, you can simply pay that person. Similarly, you have to make payments for any property damage caused by your driving. This means that if you decide to forgo buying car insurance, you will require considerable savings to cover any potential damages or injuries. New Hampshire residents who do purchase car insurance need a minimum of 25/50/25.

Virginia is another state that offers an alternative approach. Drivers can either maintain minimum car insurance of 25/50/20 or make a $500 payment called an Uninsured Motor Vehicle (UMV) charge. People who fail to go with either of the two options will end up losing their driving license. 

Minimum Requirements for Basic Car Insurance Coverage Types

Below are the specific car insurance requirements regarding the basic car insurance coverage types for a few major states.

These are the meanings of all the abbreviations:

BIL — Bodily Injury Liability 

PDL — Property Damage Liability

PIP — Personal Injury Protection 

UMC — Underinsured/Uninsured Motorist Coverage

Alaska

  • BIL: of $50,000/person,  $100,000/accident. 
  • PDL: $25,000/accident. 

California

  • BIL: $15,000/person, $30,000/accident
  • PDL: $5,000/accident. 

Florida

  • PDL: $10,000.
  • PIP: $10,000.

Georgia

  • BIL: $25,000/person, $50,000/accident. 
  • PDL: $25,000/accident. 

Hawaii

  • BIL: $20,000/person, $40,000/accident. 
  • PDL: $10,000/accident. 
  • PIP: $10,000.

Illinois

  • BIL: $25,000/person, $50,000/accident. 
  • PDL: $20,000/accident. 
  • UMC: $25,000/person or $50,000/accident. 

Massachusetts

  • BIL: $20,000/person, $40,000/accident. 
  • PDL: $5,000/accident. 
  • UMC: $20,000/person, $40,000/accident. 
  • PIP: $8,000.

Michigan

  • BIL: $50,000/person, $100,000/accident. 
  • PDL (for accidents that occur in a different state): $10,000.
  • PIP: $250,000 (opt-out or lower options are available for Medicaid and Medicare enrollees).

New Hampshire

  • BIL: $25,000/person, $50,000/accident. 
  • PDL: $25,000/accident. 
  • UMC: $25,000/person, $50,000/accident. 
  • Property damage coverage for uninsured or underinsured motorists: $25,000/person, $50,000/accident. 
  • Coverage for medical payments: $1,000.

New Jersey

  • BIL: $15,000/person, $30,000/accident. 
  • PDL: $5,000/accident. 
  • Bodily injury for uninsured motorist: $15,000.

New York

  • BIL: $25,000/person, $50,000 for every accidental death. 
  • PDL: $10,000/accident. 
  • Death liability: $50,000/person or $100,000/accident (for a minimum of two people). 
  • PIP: $50,000.
  • UMC: $25,000/person or $50,000/accident. 

Ohio

  • BIL: $25,000/person, $50,000/accident. 
  • PDL: $25,000/accident. 

Pennsylvania

  • BIL: $15,000/person or $30,000/accident. 
  • PDL: $5,000/accident. 

Texas

  • BIL: $30,000/person or $60,000/accident. 
  • PDL: $25,000/accident. 

Washington

  • BIL: $25,000/person or $50,000/accident. 
  • PDL: $10,000/accident. 

Washington D.C.

  • BIL: $25,000/person or $50,000/accident. 
  • PDL: $10,000/accident. 
  • UMC: $25,000/person or $50,000/accident. 

Wisconsin

  • BIL: $25,000/person or $50,000/accident. 
  • PDL: $10,000/accident. 
  • UMC: $25,000/person or $50,000/accident. 

Other Types of Coverage

Gap Insurance

Suppose you come across an accident that ends up badly damaging or totaling your car. In that case, Gap insurance will compensate for the difference between your current vehicle worth (which will be paid for by your standard insurance) and the amount that you actually owe.  

You should consider gap insurance if you have:

  • Put down at least 20% as a down payment 
  • Financed for a minimum of 60 months. 
  • Given your vehicle on a lease (gap insurance is usually required for a lease).
  • Bought a car that has a higher-than-average depreciation rate. 
  • Had any negative equity rolled over from a previous car loan to your current one. 

Personal Umbrella Insurance

You might need an umbrella insurance policy in cases where you find yourself facing a claim that is larger than what your vehicle insurance is willing to cover. For instance, you end up causing an accident involving 10 cars, and your regular auto coverage is not enough to pay for the replacement of all of them. Moreover, your bodily injury liability coverage is not significant enough to pay for the victims’ medical expenses. In such a case, an umbrella insurance policy might come to your aid. 

Rental Car Coverage

Rental car coverage can help cover your vehicle’s repairs after an accident or due to another covered incident. Remember that you cannot benefit from rental car coverage if your vehicle is undergoing routine maintenance. 

Full Glass Coverage

Many companies offer full glass auto coverage, a kind of optional car insurance policy that covers your car’s windows, windshield, and any other glass. So, if any of your vehicle’s glass gets damaged or totaled, full glass coverage will pay for the replacement or repairs. 

Towing Coverage

Towing coverage is another optional car insurance coverage that reimburses any towing expenses you might incur during a roadside breakdown. Towing companies usually have a per-mile charge, which means that towing coverage can spare you additional costs and frustration. You cannot include towing coverage in your policy unless you have comprehensive auto coverage. 

New Car Replacement Insurance

Suppose you end up totaling your car in an accident or for any other reason. In that case, new car replacement insurance will cover the cost of a brand new car (rather than the depreciated value of the totaled vehicle). Note that the new vehicle will be of the same make and model as the wrecked one. 

Excess Medical Payments Coverage

Also known as ‘excess Med-Pay,’ this coverage type will allow you to access medical payments that your health care insurance is not covering. 

What Happens if You Do Not Have Car Insurance?

What Happens if You Don’t Have Car Insurance and Get Into an Accident?

If you cause an accident without holding car insurance, you might be vulnerable to a lawsuit. The affected driver or their insurance company can sue you for the physical damages and injuries sustained due to the accident (in some cases, both the company and the driver might sue you).

What Happens if You Don’t Have Car Insurance and Get Pulled Over?

If you are not involved in an accident, the first-time penalty for driving without auto insurance will be a fine or a license suspension. 

How Long Can You Go Without Car Insurance Before Being Penalized?

Most states allow a grace period of 10-20 days to allow for any lapses in vehicle insurances. 

Shopping for Car Insurance

Best Car Insurance Companies

Company Tech Fundamentals Customer Satisfaction Price Competitiveness
USAA 5/5 5/5 5/5
American Family 5/5 3/5 4/5
Geico 5/5 3/5 4/5
Nationwide 5/5 3/5 4/5
State Farm 5/5 3/5 2.5/5
Progressive 5/5 3/5 2.5/5
Travelers 3/5 3/5 2.5/5
Allstate 5/5 3/5 2/5
Auto-Owners 2/5 5/5 2.5/5
Farmers 5/5 2/5 2/5
Erie Insurance 2/5 3/5 3/5
MetLife 3/5 2/5 2/5

Wondering how to find the right coverage for you?

Consider the following factors while choosing a car insurance company:

  • Coverage: Every company has different coverage plans, which is why you should carefully study each of them before selecting a particular company. 
  • Premium: Understanding the risk probability and car needs is essential for finding the ideal amount of premium. 
  • Insured Declared Value (IDV): IDV is the number calculated by deducting the car’s depreciated amount from its initial price. IDV plays a significant role in determining the amount of compensation. 
  • State guidelines: While the generic rules are identical across states, there are usually some additional state-specific guidelines. You should factor them in while shopping for insurance policies. 
  • Brand reputation: You need to make sure that your potential insurance provider has a spotless reputation. Conduct thorough research about the insurance company’s brand image and track record to ensure reliability. 
  • Exclusions: Particular situations or factors not covered under your insurance plan are known as exclusions. Do not forget to peruse the policy documents before sealing the deal to avoid any future surprises.
  • Add-on coverage: Add-on coverage helps protect against any financial losses. This coverage includes zero-dep coverage, engine protection, consumables, tire and key protection, and return-to-invoice (RTI). 
  • No Claim Bonus (NCB): This bonus is a percentage offered to an insured for not raising any claim requests during the year (certain limits apply). You can obtain it during your policy renewal. Such a bonus is only on offer for brand new cars; it does not apply to second-hand vehicles due to the ownership change. NCBs can help you reduce the amount of your renewed premium.

In Conclusion

We hope that this blog has helped enhance your understanding of the various car insurance coverage types out there. Among other things, it is vital to make sure that your insurance policy coverage follows your state’s minimum requirements. 

FAQs

How do I know how much coverage I need?

Depending on the coverage type, there are minimum required coverage amounts mandated by each state. Apart from that, you could go for higher limits to protect your savings and financial assets. Of course, if your financial situation allows. Moreover, you could look into some additional coverage options to enhance the protection.

There are many factors impacting the amount of coverage you need. The following is some essential information your insurance company should know to select the right policy for you.

  • If you use your car for business
  • If you travel out of state on a regular basis
  • If you’d like to include someone else on your policy
  • If you give your car on a lease
  • If you still pay for your car
  • If you own property
  • If you park your vehicle in the garage

Get in touch with an expert to help you choose the best policy for your needs.

Should I adjust my coverage when adding a teen driver?

Since your teen might use your car to learn how to drive, it is recommended to increase the liability coverage even prior to your teen’s getting a license. Generally, adding a teen driver to your insurance is pricey.  Your premiums can increase by 130%–140% after adding a 16-year old teen driver. Talk to your current insurance provider to know more details about the quotes. Alternatively, shop around for other insurance plans.