This page gives detailed information about the most common automobile insurance coverage options that you must choose when selecting your automobile insurance. Insurance coverage requires a complicated legal set of requirements and agreements that vary for every state.

• Liability
• Medical Payments
• Personal Injury Protection
• Uninsured & Underinsured Motorist
• Full Coverage
• Collision
• Other Than Collision (comprehensive)
• Towing & Transportation
• Insurance Requirements by State
• Money Saving Strategies

 

Liability Coverage is required in all 50 states in the U.S. It is designed to cover other people's medical bills and property in the event that you are negligent behind the wheel. No one anticipates causing an accident, yet there are hundreds of accidents daily. Liability Coverage is required to help ensure that you and others will not be left "high and dry" if you are on the receiving end of an accident. There are two parts to Liability Coverage.

Bodily Injury

"Bodily injury" is defined to include bodily harm, sickness, disease, and death. The bodily injury has to be physically manifested and tangible.

In most Automobile Insurance policies, Bodily Injury is listed as a split limit of coverage. The first number is the amount your insurance will cover "per person" in an accident, and the second number is the amount your insurance will cover "per accident." Most policies look something like this:

The first number ($25,000) is the maximum amount your insurance company will pay for one person if Bodily Injury needs to be paid.

The second number ($50,000) is the maximum amount your insurance company will pay for the total amount of bodily injury in one accident.

Example: You are involved in an at-fault accident where two people are injured and need to go to the hospital. Each person sustains injuries amounting to the totals below.

In this Scenario, Person One would get all of his medical bills paid for, because his total was under the $25,000 per person limit. Person Two, however, sustained injuries that were above the limit your insurance company is liable to pay ($25,000). The total amount that your insurance company would pay in this situation would be: $14,000 + $25,000 (maximum amount for Person Two) = $39,000. If Person Two wanted to get the rest of the money for his hospital bills, he would probably have to sue you.

Property Damage

Property damage is defined as physical injury, destruction, or loss of use of tangible property. In most Automobile Insurance policies, Property Damage can be seen on the tail end of the Bodily Injury section, or in its own section. For example, many times it can look like this:

The final number ($25,000) is the maximum amount your insurance company will pay for property damage if you were deemed at-fault in an accident. Other times Property Damage is listed alone:

Example: You are involved in an at-fault accident where you cause $17,000 of damage to a different car, and $7,000 damage to your own car. Your automobile insurance would cover the full $17,000 for the damage to the other car because it is below the $25,000 limit. As far as coverage for the $7,000 damage to your car, that depends on whether or not you have "Collision Coverage." That will be discussed later.

The purpose of Medical Payments coverage is to pay for relatively small amounts of medical expenses on a no-fault basis. Medical Payments coverage eliminates the need of eligible persons to sue to recover for minor injuries, resulting in a reduced likelihood of lawsuits. As previously mentioned, the amounts of medical payments you can purchase has a large range, normally beginning with $1,000 per person and can go well over $10,000 per person, depending on how much you purchase.

Example: You, as the insured, add Medical Payments Coverage to your automobile insurance with a limit of $5,000 per person. You are involved in an accident that isn't your fault, and three people in your car sustain the injuries listed below.

Regardless of fault, your insurance company will pay up to $5,000 per person. Person One and Person Two will get their medical bills paid in full. Person Three will have $2,000 of medical bills remaining after Medical Payments coverage is exhausted.

If you wish to collect on this insurance, it needs to be done within three years of the accident.

Medical Payments Coverage does not just cover medical payment costs when riding in an automobile, its coverage is much more extensive. It will cover you while doing pretty much anything relating to a car or on a public road. A few examples are:

Example: You and a friend are jogging on a busy street. While jogging, a car gets too close to the shoulder and hits you. You go to the hospital as a result, and you sustain $5,000 worth of injuries. If you have Medical Payments coverage of $5,000 per person, your medical bills would be all paid for!

Personal Injury Protection is a coverage that is very similar to Medical Payments coverage. Although it can vary significantly depending on what state you live in, Personal Injury Protection (or PIP) is designed to, regardless of fault, cover you and all those riding in your vehicle for:

The largest difference between Medical Payments and Personal Injury Protection is that PIP goes a step beyond what Medical Payments coverage will cover you for. PIP will not only pay medical expenses per person in the car (up to the amount you specify in the policy), but it will also pay for expenses like lost wages you incur as a result of being in the hospital.

Example: You are in a serious accident where fault is undetermined and you have $10,000 Personal Injury Protection coverage on your vehicle. You sustain physical injuries that cost $5,500 and as a result you can't work for a month. In a normal month you make $5,000. In this scenario, your Personal Injury Protection would pay all your medical bills ($5,500), but you would only be reimbursed for $4,500 of lost wages, because your maximum amount collectible is $10,000 per person with your PIP.

Just like Medical Payments, Personal Injury Protection can be added onto your policy in various dollar amounts ranging from $1,000 per person on up. Some states even require it. Minnesota, for example, requires every Automobile Insurance Policy to carry at least $40,000 in Personal Injury Protection!

The purpose of Uninsured/Underinsured Motorist coverage is to protect you as the insured from financially irresponsible people who, despite state laws and regulations, have not purchased automobile liability insurance and who do not have the financial capability to compensate people they injure in an auto accident. Like Medical Payments, there are certain states that require all drivers to carry not only Liability Insurance, but also Uninsured/Underinsured Motorist coverage.

Uninsured/Underinsured Motorist only applies if a driver that doesn't have insurance (uninsured) or has too little insurance (underinsured) hits you and causes bodily injury or property damage. If you hit a driver that is uninsured, the liability portion of your policy kicks in. If you want to make a claim under Uninsured Motorist, you must demonstrate that the uninsured motorist was at fault.

If the uninsured motorist is deemed at-fault, then your Uninsured Motorist acts as a Liability coverage for the uninsured driver, protecting you and your property against compensatory damages. Compensatory damages are damages that will only compensate you for your injury sustained, whether that be tangible (doctors' bills, hospital bills, etc) or intangible (pain and suffering, disfigurement, etc.). Just like Liability coverage, Uninsured/ Underinsured Motorist often has split limits. An example is below.

The first number is the maximum amount your insurance will pay for bodily injury "per person" in an accident involving an uninsured motorist.

The second number is the maximum amount your insurance will pay for bodily injury in any one accident.

The third number is the maximum amount your insurance will pay for any property damage incurred.

Some states (Utah, for example) will separate Uninsured and Underinsured Motorist into two separate optional coverages. Although they are separate, it is always smart in these states to make sure you are covered for both types of irresponsible motorists.

When people refer to their auto policy as having "full coverage," they are referring to the fact that they have not only Liability coverage (required by law) but also Physical Damage coverage. Although "full coverage" isn't a real insurance term, it has come to mean that the automobile is covered for:

We have already discussed in depth Liability Coverage, and will now discuss the benefits of Collision coverage and Other Than Collision coverage. We will also discuss two common coverages that fall under the Physical Damage Coverage umbrella, which are Transportation Expense and Towing & Labor.

The technical definition of Collision is "the upset of the named insured's covered auto or its impact with another vehicle or object." In simpler terms, Collision coverage will pay for the damage done to your vehicle when you are declared at-fault in an accident. If the accident is deemed the other driver's fault, then their Liability Coverage (or your Uninsured Motorist Coverage if they have no insurance) should cover the costs to repair your vehicle.

With Collision coverage, you do not have to run into another vehicle to have coverage. Collision also includes a vehicle striking a fixed object (for example, a bridge) and a vehicle overturning.

Collision coverage is always subject to a deductible. The deductible is the amount you will have to pay in an accident before your insurance company starts paying. Deductibles for Collision can range from $0 to $5,000 or more depending on the company you have your car insurance with. The higher your deductible, the less expensive your policy but the more you have to pay if you get in an at-fault accident.

Unlike Liability, there is no "maximum" amount that applies to your Collision coverage. Your insurance company will pay you the lesser of the amount that it costs to repair your vehicle (less the deductible) or the amount that it would cost to replace the vehicle.

Example: You as the insured get into a serious at-fault accident. A repair shop estimates to repair your vehicle would be $20,000. The value of your vehicle (including depreciation) is $19,000. After you pay your deductible, your insurance company has to make the decision to either repair or replace your vehicle. In this scenario (and in almost all scenarios) your insurance company would probably opt to pay you the lesser of the two options, or in this case $19,000 to replace your vehicle as opposed to $20,000 to repair your vehicle.

Other Than Collision, or Comprehensive coverage, is the 2nd part of Physical Damage coverage. Collision is meant to cover any collision that your vehicle experiences that is your fault. Other Than Collision is meant to cover your vehicle from anything else that could possibly happen to it. A few examples of what Other Than Collision covers are listed below. This is not an extensive list, but is meant to provide you an idea of what this coverage can do for you.

Just like Collision, a deductible applies to Other Than Collision. That deductible can range from $0 to $5,000 and more. Also like Collision Coverage, the higher the deductible, the cheaper the price, but the more you have to pay out for a claim.

Also like Collision, there is no maximum amount that you can collect with Other Than Collision. Whether you have a Dodge Neon or a Lamborghini Diablo, if your car gets stolen or damaged your insurance will pay to either repair or replace the vehicle!

Example: You leave your car outside in a terrible hailstorm. You have Other Than Collision (Comprehensive) coverage with a $500 deductible. After the hail storm you take your car into the shop and the assessed cost to repair the damage is $4,000. How much will your insurance pay? Answer: $3,500, which is the difference between your deductible and the amount of damage done to the vehicle.

Transportation Expense or Rental Reimbursement is a coverage that can only be purchased if Collision coverage is purchased. It is meant to provide you with an automobile to drive while your car is being repaired. It can only be purchased if you have Collision coverage because the only time you could "collect" on this type of insurance would be if you cause an accident and need a vehicle while your vehicle is in the shop. If the accident is not your fault, then the at-fault driver would be responsible for paying for your rental car. If the at-fault driver does not have insurance, then your Uninsured Motorist Coverage would pay for your rental car.

It is important to note that with most companies, rental car is on a "reimbursement" basis. What that means is you are originally responsible for paying for the rental car, and later on your insurance company will reimburse you, or cut you a check for the amount you spent.

The minimum amount that is offered by most companies is coverage for $20 a day for a rental car. That coverage can typically be increased to as high as $50 a day.

Most companies have a maximum amount they will allow you to get reimbursed for. Most companies set that amount to equal about 30 days of rental car coverage. In most policies, Transportation Expense looks like this:

The first number is the amount of coverage you have for a rental car per day, or in this case $30. The second number is the maximum amount that your insurance company will pay for rental car coverage, or $900.

As discussed previously, there is no real definition for the term "full coverage," so be sure to find out whether or not Transportation Expense is included in your coverage.

Towing & Labor is also an additional coverage that you can add to your policy. This can typically only be purchased if you have Collision coverage, and it is meant to pay for part or all of the expenses you incur to tow your vehicle to a body shop or mechanic after an at-fault accident. The average amounts you can receive for Towing & Labor in an auto policy range from $25 all the way up to $150 and above per incident.

The Towing & Labor coverage is designed to only be used after an at-fault accident. However, most insurance companies will pay your towing and labor expenses (up to the limit of this coverage in your policy) even if your car had a mechanical breakdown along side the road! The reason for this is that most insurance companies would rather pay $50 or so to tow your vehicle to a nearby body shop than have your vehicle sit by the side of the road where it is very susceptible to both Collision and Other Than Collision damages.

Many companies have started upgrading their Towing & Labor coverage to be Roadside Assistance packages that will not only cover for towing, but also for things like locking your keys in the car or you running out of gas alongside the road. This is a fairly new development, but as time goes on, you will probably see less Towing & Labor and more Roadside Assistance packages being offered to drivers.

Every state in the United States of America has minimum required limits of liability that everyone who owns a vehicle needs to have. Many states also require other coverage that has been discussed previously like Uninsured Motorist and Personal Injury Protection. Below is a list of each state and what the minimum state requirements are. As you can see there is quite a range. In New Jersey, for example, the state minimums are only $15,000/ $30,000/$5,000. If someone in New Jersey has the state minimum requirements and gets into an accident resulting in more than $5,000 worth of property damage, then things are going to start to get ugly. Take a look at your state and see what it requires.

Alabama: Liability Coverage: $25,000/$50,000/$25,000 Alaska: Liability Coverage: $50,000/$100,000/$25,000 Arizona: Liability Coverage: $15,000/$30,000/$10,000 Arkansas: Liability Coverage: $25,000/$50,000/$25,000 California: Liability Coverage: $15,000/$30,000/$5,000 Colorado: Liability Coverage: $25,000/$50,000/$15,000 Connecticut: Liability Coverage: $20,000/$40,000/$10,000 Connecticut: Uninsured Motorist: $20,000/$40,000 Delaware: Liability Coverage: $15,000/$30,000/$10,000 Delaware: Personal Injury Protection: $15,000/$30,000 District of Columbia: Liability Coverage: $25,000/$50,000/$10,000   District of Columbia: Uninsured Motorist: $25,000/$50,000 Florida: Liability Coverage: $25,000/$50,000/$25,000 Florida: Personal Injury Protection: $10,000 Georgia: Liability Coverage: $25,000/$50,000/$25,000 Hawaii: Liability Coverage: $20,000/$40,000/$10,000 Hawaii: Personal Injury Protection $10,000 Idaho: Liability Coverage: $25,000/$50,000/$15,000 Illinois: Liability Coverage: $20,000/$40,000/$15,000 Illinois: Uninsured Motorist: $20,000/$40,000 Indiana: Liability Coverage: $25,000/$50,000/$10,000 Iowa: Liability Coverage: $20,000/$40,000/$15,000 Kansas: Liability Coverage: $25,000/$50,000/$10,000 Kansas: Uninsured Motorist: $25,000/$50,000 Kansas: Personal Injury Protection $4,500/$900 Work Loss Kentucky: Liability Coverage: $25,000/$50,000/$10,000 Kentucky: Personal Injury Protection: $10,000 Louisiana: Liability Coverage: $10,000/$20,000/$10,000 Maine: Liability Coverage: $50,000/$100,000/$25,000 Maine: Uninsured Motorist: $50,000/$100,000 Maine: Medical Payments: $1,000 Maryland: Liability Coverage: $20,000/$40,000/$15,000 Maryland: Uninsured Motorist: $20,000/$40,000/$15,000 Maryland: Personal Injury Protection: $2,500 Massachusetts: Liability Coverage: $20,000/$40,000/$5,000 Massachusetts: Uninsured Motorist: $20,000/$40,000 Massachusetts: Personal Injury Protection: $8,000 Michigan: Liability Coverage: $20,000/$40,000/$10,000 Michigan: Property Protection Insurance: $1,000,000 Michigan: Personal Injury Protection: Medical & Work Loss Minnesota: Liability Coverage: $30,000/$60,000/$10,000 Minnesota: Uninsured Motorist: $25,000/$50,000 Minnesota: Personal Injury Protection: $40,000 Mississippi: Liability Coverage: $25,000/$50,000/$25,000 Missouri: Liability Coverage: $25,000/$50,000/$10,000 Missouri: Uninsured Motorist: $25,000/$50,000 Montana: Liability Coverage: $25,000/$50,000/$10,000 Nebraska: Liability Coverage: $25,000/$50,000/$25,000 Nevada: Liability Coverage: $15,000/$30,000/$10,000 New Hampshire: Liability Coverage: $25,000/$50,000/$25,000 New Hampshire: Uninsured Motorist: $25,000/$50,000 New Jersey: Liability Coverage: $15,000/$30,000/$5,000 New Jersey: Uninsured Motorist: $15,000/$30,000/$5,000 New Jersey: Personal Injury Protection: $15,000 New Mexico: Liability Coverage: $25,000/$50,000/$10,000 New York: Liability Coverage: $25,000/$50,000/$10,000 New York: Uninsured Motorist: $25,000/$50,000 New York: Personal Injury Protection: $50,000 North Carolina: Liability Coverage: $30,000/$60,000/$25,000 North Carolina: Uninsured Motorist: $30,000/$60,000/$25,000 North Dakota: Liability Coverage: $25,000/$50,000/$25,000 North Dakota: Uninsured Motorist: $25,000/$50,000 North Dakota: Personal Injury Protection: $30,000 Ohio: Liability Coverage: $12,500/$25,000/$7,500 Oklahoma: Liability Coverage: $25,000/$50,000/$25,000 Oregon: Liability Coverage: $25,000/$50,000/$10,000 Oregon: Uninsured Motorist: $25,000/$50,000 Oregon: Personal Injury Protection: $15,000 Pennsylvania: Liability Coverage: $15,000/$30,000/$5,000 Pennsylvania: First Party Benefits (PIP): $5,000 Rhode Island: Liability Coverage: $25,000/$50,000/$25,000 Rhode Island: Uninsured Motorist: $25,000/$50,000 South Carolina: Liability Coverage: $25,000/$50,000/$25,000 South Carolina: Uninsured Motorist: $25,000/$50,000/$25,000 South Dakota: Liability Coverage: $25,000/$50,000/$25,000 South Dakota: Liability Coverage: $25,000/$50,000 Tennessee: Liability Coverage: $25,000/$50,000/$15,000 Texas: Liability Coverage: $25,000/$50,000/$25,000 Utah: Liability Coverage: $25,000/$65,000/$15,000 Utah: Uninsured Motorist: $25,000/$65,000 Utah: Personal Injury Protection: $3,000 Vermont: Liability Coverage: $25,000/$50,000/$10,000 Vermont: Uninsured Motorist: $50,000/$100,000/$10,000 Virginia: Liability Coverage: $25,000/$50,000/$20,000 Virginia: Uninsured Motorist: $25,000/$50,000/$20,000 Washington State: Liability Coverage: $25,000/$50,000/$10,000 West Virginia: Liability Coverage: $20,000/$40,000/$10,000 West Virginia: Uninsured Motorist: $20,000/$40,000/$10,000 Wisconsin: Liability Coverage: $25,000/$50,000/$10,000 Wisconsin: Uninsured Motorist: $25,000/$50,000 Wyoming: Liability Coverage: $25,000/$50,000/$20,000

Quick Reminder:

This means each person in that state is required to have Bodily Injury amounting to $25,000 per person with a maximum payout per accident of $50,000. The final number is Property Damage, which in this case is $25,000.

It is important to understand the different types of insurance each state requires, and exactly what each type of insurance will cover you for. The idea behind showing you the mandatory amounts of insurance each states offers isn't for you to lower your coverage as low as you possibly can. Saving money in a hard economy is, however, very important. Here are a few tips to think about that don't necessarily affect your coverage.

Strategy #1: Know All Available Discounts and Use Them

Most car insurance companies will have a variety of discounts they can offer you to keep your premiums lower. Below is a list of many discounts that are available to you. If you qualify for any of these, make sure that they are put on your policy.

Strategy #2: Raise Your Collision Deductible

This strategy is only recommended for those drivers who have a lot of driving experience and rarely if ever get into at-fault accidents. Remember, your Collision deductible only applies if you are at-fault in an accident. If you are a very careful driver, you can save money on your insurance by raising your Collision deductible to $1,000, and if you don't get into an at-fault accident in a few years, you've more than made up the money you've saved if you ever do get into an at-fault accident. Before you attempt this strategy, however, make sure you have the financial capability of paying out $1,000 or more if you get in an accident

Strategy #3: Don't Call Your Insurance Company to Report an Accident Unless You Have To

You might not be aware that even not-at-fault accidents and $0 payout claims can significantly affect your insurance premiums. I have seen rates go up by more than 30% just because someone had a not-at-fault, $0 claim on their record. When you call your insurance company to report an accident, it goes on your record as a claim even if it was not your fault. If at all possible, try to settle a claim where it is clear the other driver is at-fault without involving your insurance company. Many times this is not possible, but try to keep your insurance out of the picture to avoid $0 payout claims on your policy.

Strategy #4: Drive Older Vehicles, Less Expensive Vehicles

The newer and more expensive the car, the higher the insurance premiums will be. If your insurance premiums are through the roof, then try to drive a car that is older or less expensive.

Strategy #5: Avoid Tickets and Accidents at All Costs

Tickets and accidents do serious damage to your insurance premiums upon renewal. If you get a ticket or into an accident in a state you don't reside in, it will still show up on your record. Tickets and accidents follow the driver's license numbers, and thus will always be pulled up on your driving record, regardless whose car you were driving and where you were. Avoid tickets and accidents at all costs, because nothing raises premium more quickly then a few tickets and accidents.

Strategy #6: Fill Out an Online Quote, and Allow Agents to Shop For You

This is the best strategy to finding the least expensive auto insurance rates out there. This site was created for two reasons, (1) help people better understand what their policy covers, and (2) allow them to shop their rate with a variety of the top carriers in the nation to find the least expensive policy. Up until this point, we have taught you almost all there is to know about car insurance. Now is your chance to shop your insurance premiums and see if you can get a better rate. Click here to shop your auto insurance and save!