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In virtually all U.S. states, motorists are legally obligated to purchase bodily injury liability and property damage liability. A handful of states also require drivers to purchase extras, such as uninsured & underinsured motorist coverage and personal injury protection (PIP). Penalties for non-compliance range from small fines to suspension of license and/or registration, vehicle impoundment, and in some cases imprisonment.
Thirty-eight states are what is known as “fault” insurance states, whereby the driver who is at fault in an accident is legally responsible to cover damages through their bodily-injury and property-damage liability coverage. The remaining 12 states are “no-fault” states, whereby policyholders claim losses from their own insurance provider – regardless of which driver was at fault.
The best auto insurance companies in each state provide liability, comprehensive, collision, PIP, and uninsured & underinsured motorist coverage, plus a range of paid add-ons.
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If you’re feeling overwhelmed learning about all the different types of car insurance, know that you’re not alone. There are many types of vehicle insurance – and the laws, maximum levels of coverage, and definitions can vary from state to state. What’s the difference between collision and comprehensive? How does personal injury protection differ from medical payments coverage? Why would you need uninsured motorist coverage? And which state doesn’t require you to purchase any form of car insurance whatsoever?
To make it all easier to understand (and to save you the trouble of having to consult multiple sources), we produced this useful guide to the main types of vehicle insurance, complete with examples of which states mandate which forms of insurance.
Following are the 6 major types of car insurance:
When car insurance companies speak of liability coverage, they are actually referring to two types of coverage: bodily injury (BI) liability and property damage (PD) liability. BI covers expenses for injuries you cause to someone else. PD covers expenses for damage you cause to someone else’s vehicle or property (such as a fence).
Collision is the opposite of property damage liability, in that it covers you when your property is damaged or destroyed in an accident with another vehicle or object (such as a fence or pole). Collision coverage is always optional from a legal point of view, although some loans or leasing companies may require that you purchase it as a condition of your contract.
Known as “comp” for short, comprehensive coverage covers expenses not caused by collisions. This generally includes theft, vandalism, fire, natural disasters, falling objects, or hitting an animal. Comp coverage is generally more expensive than collision coverage. It is always optional from a legal point of view, but as with collision coverage, some loans or leasing companies may require that you purchase comprehensive coverage.
The exact definition of personal injury protection varies slightly depending on the state and insurance company. As a general rule, PIP covers a wide range of medical and non-medical expenses when the policy holder is injured in an accident. PIP is mandatory in a handful of states, including New York, New Jersey, Massachusetts, Florida, Michigan, Kentucky, Kansas, Minnesota, Oregon, Utah, and Hawaii.
Medical Payments (Med Pay) coverage offers narrower coverage than personal injury protection, and is not mandated by any states. Most insurers offer medical payments as an alternative to PIP, meaning they won’t allow you to purchase both.
One of the realities of driving in a country with more than 220 million other licensed drivers is that some of them don’t carry car insurance – even when it is against the law. To protect your vehicle from damage caused by uninsured or under-insured drivers (or hit-and-runs), insurance companies offer a cheap add-on to your regular insurance: uninsured motorist / under-insured motorist coverage. Uninsured / under-insured motorist coverage is mandatory in 15 states, and optional everywhere else.
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The following are common add-ons to car insurance policies:
Most car insurance providers offer emergency assistance as a voluntary add-on to the basic forms of coverage. The insurance provider teams up with a network of partners who provide coverage when your vehicle breaks down. Assistance generally covers, towing, flat tire, jump-start, fuel delivery, locksmith, and emergency extrication of your vehicle if it gets stuck.
This is an optional form of coverage on most vehicle insurance policies that has become more popular as car prices have risen. It pays out the difference between the money you owe on your car and what the car is worth at the time of an accident. Loan/lease coverage is similar to gap coverage, in that it covers drivers who have leased contracts.
A product of the sharing economy, this type of coverage insures drives who work for ride-sharing companies like Uber, Lyft, and Sidecar. It generally only applies when the driver has passengers in their vehicle.
Covers expensive vehicles such as vintage, classic, collector, and antique cars. Policy holders are generally required to park the vehicle in a garage (rather than on the street), to use it as a secondary vehicle (rather than using it to get to and from work) and to keep it in good working condition.
Covers the cost of hiring a rental car when your vehicle is in the shop as a result of an accident.
Covers the cost of replacing damaged or stolen equipment such as stereo systems or rims. Generally applies to any equipment added to the vehicle by the policy holder, as opposed to equipment built into the vehicle by the manufacturer.
Car insurance is a neccessary expense that comes with being a driver in the United States, but it doesn't have to be complicated or overpriced. It's essential that you choose a reliable insurer that you know will pay your claim if you ever need it, and comparing multiple insurers means that you will get the best rate possible for your driving needs.
You deserve the peace of mind of knowing you are fully protected when you're out on the road. See our in-depth reviews of the leading auto insurance providers to learn more about policies, plans, deductibles, and more.