What are the Types of Auto Insurance Coverage?
If you’re shopping for auto insurance, you’ve probably noticed that there are quite a few different types of coverage. With so many available choices, how do you know which ones you actually need?
In order to find the best auto insurance policy rates for your needs and budget, you need to understand the most common types of car insurance, including what’s covered and what’s required. And we’re here to help you do just that. Keep reading as we cover the most common types of coverage that will protect you, your passengers, and your vehicle.
Liability Coverage
Liability insurance is what protects other drivers and their property from damage you cause. This type of coverage pays for the costs of repairing any vehicles, as well as the medical bills from resulting injuries.
Most states legally require all drivers to purchase at least the minimum amount of liability coverage set by state law. However, if you can afford it, it’s in your best interest to purchase liability coverage that exceeds your state’s minimum liability coverage requirement. Why? If you’re at fault for an accident, you will be responsible for any claims that exceed your coverage’s upper limit—which means you’d have to pay them out of your own pocket. As a result, purchasing as much liability insurance as you can afford will maximize your protection. This is especially true in the case of a serious accident, so that you can cover yourself in a potential lawsuit without jeopardizing your personal assets.
Types of Auto Liability Coverage
Nearly every state requires car owners to carry the following two components of auto liability coverage:
- Bodily Injury Liability: If you caused an accident, this coverage pays for costs related to another person’s resulting injury or death. This includes medical bills, loss of wages, and funeral costs in the event of a potentially fatal accident.
- Property Damage Liability: This coverage type reimburses others for any damage that you caused to another vehicle or property, such as a tree, building, or fence.
If you live in a no-fault insurance state, you’re also legally required to purchase personal injury protection (PIP). This type of insurance covers the personal bodily injury damage— including medical expenses and loss of income —of both you and your passengers in the event of a covered accident, regardless of who was at fault.
How Much Does Auto Liability Coverage Cost?
The exact cost you pay will depend on your state and the amount of coverage you purchase. However, liability insurance costs an average of $588 annually. Your monthly premium will increase if you raise your liability limits. However, higher levels of coverage are only slightly more expensive than the state minimum, and they can save significant amounts of money if you cause an accident.
Uninsured and Underinsured Motorist Coverage
What happens if you get into an accident with a driver who lacks adequate coverage to pay the costs of a serious accident? Worse still, what if that person has no auto insurance whatsoever? That’s where uninsured and underinsured coverage comes in.
There are four types of uninsured and underinsured motorist coverage:
- Uninsured motorist bodily injury (UMBI): If you’ve been in a collision with an at-fault driver who doesn’t have insurance, this coverage ensures that you’re reimbursed for all associated damages. This includes medical bills, lost wages, and pain and suffering related to the crash, as well as funeral expenses in the event of a fatal accident. It may also cover you if you’re injured as a pedestrian or cyclist.
- Underinsured motorist bodily injury (UIMBI): This covers the same associated expenses as UMBI. The only difference is that it applies to accidents with an at-fault driver who lacks enough insurance to cover all of the damages.
- Uninsured motorist property damage (UMPD): If you’ve been in an accident with an at-fault drive with no auto insurance, UMPD will cover the damage to your vehicle or property.
- Underinsured motorist property damage (UIMPD): This covers the same associated expenses as UMPD. The only difference is that it applies to accidents with a minimally insured at-fault driver.
Both types of coverage are required in some states and optional in others. However, adding them to your policy is a step toward greater financial protection.
How Much Does Uninsured & Underinsured Motorist Coverage Cost?
When compared with other coverage types in an auto insurance policy, the cost for uninsured or underinsured coverage is relatively low. However, it does vary among states, and is usually higher in those with more uninsured drivers.
However, it does vary among states. New York, New Jersey, Maine and Massachusetts are among the states with the lowest percentages of uninsured motorists in the country— at around 3% to 5% —which results in some of the lowest costs. However, Mississippi, Michigan and Tennessee have the most uninsured drivers, around 24% to 29%, resulting in higher costs.
Rates can also be significantly different between insurance companies, but you can expect an average cost of anywhere from $50 to $275 per year.
Comprehensive and Collision Coverage
Most states legally require all drivers to have basic auto insurance, which covers the costs if you cause an accident that results in injury or property damage to another driver. However, this type of basic insurance usually does not pay for damage to your own car.
If you want financial protection for your own vehicle, you’ll need to purchase physical coverage — collision and comprehensive. This optional coverage is made up of two main components:
- Collision coverage: If you’re involved in an accident with another vehicle, or if you hit an object such as a tree or guardrail, collision coverage may help pay to repair or replace your car. Collision coverage comes with a deductible — the amount you pay prior to your insurance company compensating you. Your deductible may vary depending on your policy and insurer.
- Comprehensive coverage: This type of coverage protects your vehicle from circumstances other than a collision. If your car is damaged by a covered peril—including weather, fire, flood, animals, theft, vandalism, or even getting hit by an asteroid! — it may help pay to repair or replace your vehicle. Like collision protection, this coverage has a deductible, the amount you’ll pay out of pocket before your insurer reimburses you for a covered claim.
How Much Does Collision and Comprehensive Coverage Cost?
The specific amount you’ll pay depends on where you live, how much coverage you purchase, and which insurance carrier you choose. However, you can expect to pay anywhere between $1,112 and $1,925 per year for a standard policy.
Free Insurance Quotes for a Policy That Fits Your Needs and Budget
Keeping your monthly premium low starts with finding the best possible coverage rates—and we’ve done the search for you. Thanks to our fast and affordable online insurance quotes, you can choose an auto insurance plan and get your coverage—all in a matter of minutes. Get your quote today and join the rest of the drivers who are saving every month.
