Car Insurance Coverage
Most states, with a few exceptions, require drivers to carry car insurance, although specific coverage requirements vary. Coverage is exactly what your car insurance policy will provide you with compensation for, such as if an uninsured motorist damages your vehicle (uninsured/underinsured coverage) or if you damage another person’s vehicle in a collision that was your fault (liability coverage).
Therefore, drivers should determine their state’s minimum auto insurance coverage requirements, as well as any additional or optional forms of coverage they opt to purchase to financially protect themselves and their vehicles in the event of an accident. Keep in mind that extra coverage may be worth the expense, and certain forms of coverage should not be written off simply because they are not required by your state.
When consumers purchase car insurance, they buy a policy that is a bundle of various types of insurance coverage. Most consumers purchase liability coverage and Personal Injury Protection to meet minimum state requirements. Liability coverage pays for accidental bodily injury and property damage suffered by others. This form of coverage will pay for medical expenses, pain and suffering, and lost wages, as well as defense and court costs. State laws determine how much liability coverage you must purchase, but you can always get more coverage than your state requires. Personal Injury Protection (PIP) pays for medical expenses incurred by the insured driver, regardless of fault.
Other forms of coverage include collision coverage, which pays for damages to your vehicle caused by collision, and comprehensive coverage, which pays for loss or damage to you vehicle that did not occur in an auto accident. These may include damages caused by fire, wind, hail, flood, vandalism, and theft. Medical coverage pays medical expenses, regardless of fault, for injury that was incurred in an auto accident. Uninsured and underinsured motorist coverage pays for your car’s damages when an auto accident is caused by a driver who is not insured or is insufficiently insured, respectively. Lastly, rental reimbursement will pay for a rental car if your car is damaged in an auto accident.
Aside from meeting state requirements, drivers will purchase car insurance to satisfy lenders. If you have a car loan, most lenders will require you to have insurance to protect their investment in your car. Borrowers who let their policy lapse will be insured by lenders, who will likely force drivers to pay higher premiums for less coverage than a policy that they would purchase on their own.