What Are the Different Types of Car Insurance?

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Of the 6.73 million motor vehicle crashes in the US in 2018, 71.4% (4.8 million) resulted in property damages only. Crashes with non-fatal injuries accounted for 28.1%, for a total of 1,894,000. The remaining 0.5% (33,654) resulted in fatalities.

Throughout history, though, property damage only collisions made up the bulk of crashes. Still, those with non-fatal injuries have dropped by at least 3% from 1988. However, fatal crash rates have been consistent at 0.5% since 2013.

Because of these, at least two different types of car insurance are mandatory in most US states. After all, the property damage they cause can already cost an average of $4,500 per vehicle. Each disabling injury also has a mean economic burden of $96,200.

What are these mandatory auto insurance coverage types, though? What about the optional ones; are they still a smart investment?

We’ll get to the bottom of all these questions, so be sure to read on.

The Most Common Mandatory Types of Auto Insurance Coverage

Bodily injury liability and property damage liability are both liability coverage types. These two are mandatory in almost all states. No-fault states also require motorists to purchase Personal Injury Protection (PIP).

There are two states wherein getting car insurance isn’t a legal requirement. In New Hampshire, you only need to prove financial responsibility. You can bypass auto insurance in Virginia so long as you pay the $500 Uninsured Motor Vehicle (UMV) fee.

Bodily Injury (BI) Liability

This protects you against liabilities that may arise due to a motor vehicle crash you cause. It helps cover the medical costs of another person that you may injure in a car accident. It may also cover you if the crash you cause results in another person’s death.

Property Damage (PD) Liability

This coverage helps pay for damages you cause to someone else’s property. In most cases, it covers the cost to repair another motorist’s vehicle. However, it may also help pay to fix a damaged structure (such as a gate or fence), or another’s property.

Personal Injury Protection (PIP)

Several states follow the “no-fault” system when it comes to motor vehicle collisions. In these states, the required auto insurance coverage is “Personal Injury Protection” (PIP). It pays for the insured person’s medical expenses following a car accident.

The following are the states wherein PIP is a legal requirement:

  • Florida
  • Hawaii
  • Kansas
  • Kentucky
  • Massachusetts
  • Minnesota
  • New Jersey
  • New York
  • Pennsylvania

In these states, PIP kicks in regardless of who caused the accident. Suppose you get into a crash in which you sustained a sprained shoulder. Your own PIP coverage will help pay for your hospital and medical bills up to the maximum limit.

Uninsured and Underinsured Motorist Coverage

As of the latest estimates, about 13% of US motorists drive without car insurance. Florida has the highest projected uninsured motorist rate, at a staggering 26.4%. At least one in five drivers in MI, MS, and TN also go without coverage.

In these states, uninsured motorist (UIM) coverage isn’t a legal requirement. However, 22 states do, including Connecticut, Minnesota, and New Jersey, to name a few. Underinsured motorist (UM) coverage is also mandatory in 14 states.

UIM coverage can help pay for the costs to treat your crash injuries caused by an uninsured driver. In some cases, it may also help cover some of the costs of repairing your vehicle.

UM coverage has benefits similar to UIM coverage. However, this only kicks in if you get hit by a driver without enough coverage.

Each state also enforces its own minimum required limit for both UIM and UM. It’s best you find out more about these limits, lest you want to become a UI or UM yourself.

Different Types of Car Insurance You Can Buy as You Want

You can add “optional” types of car insurance to your policy after you meet state requirements. They may not be mandatory, but they’re still a smart investment against other causes of losses. Let’s take a look at some of the most common optional auto coverage types in the US.

Comprehensive Coverage

This helps pay for the costs to repair or replace a vehicle damaged by fire or hail. In some cases, it also includes coverage for theft and vandalism. Do note that motor vehicle theft is still rampant, with 721,885 reported cases in 2019.

Comprehensive coverage isn’t mandatory by law, but your lender may require you to get it. This is especially true if you still have a lien (like an auto loan) on the vehicle.

Medical Payments Coverage (MedPay)

This coverage helps pay for the medical costs needed by an injured policyholder. Some insurers also provide coverage for passengers and other policy-listed drivers. These listed drivers are often family members allowed to drive the insured car.

Medical payments coverage can help pay for the costs of hospital visits and lab tests. It may also provide some level of coverage for surgical procedures.

The majority of states don’t require MedPay, except for Maine and Wisconsin. In these two states, liability coverage, underinsured, and uninsured coverage are also mandatory.

Collision Coverage

Collision coverage covers the policy holder’s own vehicle against damage. Let’s say you hit an object, such as a post or a fence, which caused rear-end damages to your car. The collision coverage may then help pay for the costs to repair your car.

Like comprehensive coverage, most states don’t require collision coverage. However, you may still need this if your car is still under a loan.

Never Go Without Enough Car Insurance

Most US states only require two different types of car insurance: BI and PD liability. However, it’s too risky if you only purchase these two (and their minimum limits). It’s best you explore other coverage options to make sure you have enough protection.

The most important thing, though, is to never drive without a valid auto insurance policy. Otherwise, you’d pay for any injury or damage you cause in a car crash. 

Ready for more life- and driving-essential guide like this? Feel free to stick around then to browse our other blog posts!

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