What Are the Most Important Types of Car Insurance Coverage?The average cost of an auto insurance policy varies across states and according to several factors. However, your level of coverage will have the most impact on the cost of your policy.
LiabilityLiability coverage pays for the third party’s bodily injuries, death, and damaged property resulting from an auto accident. It is mandatory in states with at-fault policies—those responsible for the incident are liable for the damages. The minimum required coverage ranges from $25,000 to $50,000 to cover an injured person’s medical expenses, lost wages, destroyed property, and in some cases, funeral costs. Without liability coverage, you must settle these costs out of pocket instead of having them paid by your insurance company.
CollisionCollision coverage pays for damage to your vehicle stemming from an accident, regardless of fault. It won’t cover the other party’s damaged vehicle in a crash you’re responsible for—that’s where liability insurance kicks in. If your vehicle is under financing or lease, this insurance is usually required by the financier or lessor as a way to protect the asset in case of a collision.
ComprehensiveAlthough comprehensive insurance includes collision coverage, it also reimburses repair expenses for damage to your vehicle due to causes other than collision. For example, comprehensive coverage can cover damage caused by:
- Severe weather disturbances
- Animal attacks
- Events outside your control
Personal Injury Protection (PIP)In no-fault states, personal injury protection is required in place of liability insurance. Your insurance carrier will compensate you for your injuries, no matter who’s responsible. PIP covers your and your passenger’s medical expenses following an accident. In addition to hospital bills, it can pay for:
- Doctor visits
- Laboratory exams
- Medical devices
- Lost earnings
- Funeral expenses
Medical Payments CoverageWhile similar to PIP, medical payments insurance is more limited in coverage. It only reimburses accident-related medical expenses, no more. However, you can also use it to supplement your existing health insurance and PIP.
Uninsured/Underinsured Motorist CoverageLike the name implies, this type of insurance protects you from both uninsured and underinsured motorists. It pays for your medical expenses and vehicle repairs when an at-fault driver without auto insurance or with insufficient liability coverage hits you. Such coverage is mandatory in some states. Adding one to your policy is financially savvy if you don’t have PIP and collision coverage; otherwise, it’s redundant.
SR22SR22 is not insurance coverage; rather, it is an endorsement from your insurance company confirming you’re carrying the required minimum liability coverage on your policy. An SR22 is only required for high-risk drivers, such as those who:
- Have a history of traffic infractions
- Have a suspended or revoked license
- Are found at fault for accidents without insurance
- Are convicted of driving under the influence or while intoxicated