Auto Insurance Coverage Basics

Auto Insurance Coverage Basics

When the unexpected occurs, it’s wise to keep your assets and finances protected through auto insurance. Besides helping you cover up the cost of liabilities incurred, a basic auto insurance policy should also be able to help you with medical bills and missed wages.

In most states, it is mandatory to purchase basic auto insurance coverage. Coverage options include bodily injury, property damage, and personal injury liability.

Confused about what kind of protection these terms offer? Here’s a detailed explanation of what a basic auto insurance policy should include and what it might cost you.

What Is Basic Auto Insurance Coverage? 

Before we move on to the coverage options, here’s something you must know about auto insurance.

There is no “one-size-fits-all” when it comes to auto coverage. Instead, the coverage options you choose depend entirely on what kind of protection you are looking for. Although most states require a minimum level of auto insurance, you can add additional coverage to fit your needs.

A basic auto insurance coverage is an auto insurance policy that provides basic protection to the vehicle. It generally includes the minimum auto insurance coverage options that are mandatory by law.

These minimum coverage options differ according to the states. Every state has different requirements when it comes to auto insurance. To legally drive in most states, you must have liability insurance that covers property damage and medical bills when the policyholder causes the accident.

Types of Auto Insurance Coverage

Considering buying different auto insurance coverage? Here are your options.

Bodily Injury Liability

Mandatory in most states, bodily injury liability is an auto insurance coverage that covers medical bills and lost income of the person injured if you caused the accident.

This coverage also pays the legal fees if you appear before the court.

If you are at fault for an accident, this auto insurance coverage can help you cover the following expenses:

Medical Bills

Bodily injury liability covers the medical expenses, including emergency services and hospital care of the person injured. The coverage also helps cover the cost of follow-up visits and buying medical supplies.

Lost Wages Due to Injuries

After the accident, the injured person might have to take physical therapy or call their workplace to take a few days off. In this case, bodily injury liability provides compensation to recover from the lost wages. However, your state might set some limits on this compensation.

Legal Fees

If you are at fault, you might be required to appear in front of the court, which may require legal counseling. Again, this coverage can help you cover up this cost.

Personal Injury Protection

Personal injury protection (PIP) covers the cost of injuries and healthcare in case you are injured in an accident. This coverage is mandatory in “no-fault” states.

In a no-fault state, the insurance policy of the person injured will cover all the medical expenses, no matter who is at fault for an accident.

PIP is mandatory in about 22 states, one federal city, and one territory. While the minimum coverage required differs according to the states, the maximum coverage offered in most states is $25,000.

It covers medical care, compensation for lost wages, child care, and funeral expenses. However, some no-fault states might only offer medical care.

Property Damage Liability

Property damage liability is an auto-insurance add-on that covers the damage caused by you to someone else’s property or vehicle, and it is mandatory in most states.

This coverage option covers the cost of damage caused if you are at fault for the accident. If you are looking to cover the cost of your vehicle, you can also get collision coverage.

Collision Coverage

Collision coverage helps you cover the cost of damages incurred by your vehicle if you hit another car, a stationary object, or someone hits your parked car. Deductibles for collision coverage can go up to $1,000. You should never forget that the higher the deductible, the lower the coverage offered. 

Another thing you might want to consider while getting this coverage is the car’s value. If the vehicle’s cash value is close to the deductibles, getting collision coverage might not be a wise choice.

Comprehensive Coverage 

Comprehensive coverage covers the damages caused to your vehicle by a cause other than collision. This includes causes like a break-in, vandalism, getting hit by an animal like a deer, fallen objects, natural disasters, and getting crushed by a collapsing garage.

The average cost of comprehensive coverage is $134 per year. Moreover, like collision coverage, you would also have to choose the deductible. If the deductible is near the vehicle’s cash value, it might not make financial sense to opt for either.

Getting comprehensive coverage might be a wise choice if you live in an area prone to natural disasters or frequent break-ins. However, you must note that this coverage won’t cover the cost of damage caused by potholes or cover the cost of any personal items stolen.

Uninsured Motorist Coverage 

Suppose your vehicle is damaged by a driver who is not covered by auto insurance. In that case, uninsured motorist coverage helps cover up the cost of these damages if another person is at-fault for the accident.

This add-on offers two types of coverage:

  • Uninsured motorist bodily coverage that covers the cost of medical bills, lost wages, and funeral expenses.
  • Uninsured motorist property coverage covers the damage caused to your vehicle by someone who is not insured.

Uninsured motorist coverage is mandatory in 18 states and Washington DC. However, in states like Virginia and New Hampshire, where this coverage is not compulsory, you would have to choose both types of coverage (motorist bodily coverage and motorist property coverage) in case you opt for this coverage.

What Is the Minimum Auto Insurance Coverage? 

Minimum auto insurance coverage differs according to the rules defined by different states. Except for Florida, all 49 states require drivers to obtain uninsured/underinsured motorist insurance, and only 15 states require personal injury protection.

How much car insurance coverage is required depends upon your personal needs. If you reside in an area prone to natural disasters and theft, it is recommended to get comprehensive coverage. Various other add-ons are mandatory in some states.

It’s recommended you check with the auto insurance provider while purchasing the car to know which insurance coverage you must buy.

Moreover, states like New Hampshire and Virginia do not require you to get auto insurance.

What Does Basic Auto Insurance Coverage Cost? 

According to Quadrant Information Services, the average cost of full coverage auto insurance in the US is $1,674 per year, around $139.50 per month. Cost for minimum coverage costs around $565 per year.

A full coverage auto insurance policy will cost you around $2,311 per year if you live in a no-fault state. However, compared to other states, Maine offers the cheapest full coverage insurance at the rate of $965 per year. 

USAA and Erie offer the cheapest full coverage at $1,225 and $1,233, respectively.

How Much Auto Insurance Coverage Do You Need?

The right auto insurance coverage depends upon your needs and where you live. While getting basic coverage is mandatory in most states, you can always opt for more, depending upon your needs.

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