The auto insurance industry is heavily regulated and under these regulations, competing car insurance companies are required to offer nearly identical products to comply with state minimum insurance requirements. Depending on individual state laws, companies may offer some coverage in certain states and not in others.
Regardless of your state and car insurance needs, consumers need to be well-informed about the different types of car insurance, terms, and coverage in order to compare car insurance rates in their state.
Liability insurance is mandatory in most states and is the most basic type of coverage. The purpose of liability insurance is to cover damages to others caused by an insured driver’s negligence. In addition to providing coverage for damages to others, liability insurance also provides the policyholder with legal counsel to defend him or her in court against actions arising from an auto accident. If the insured driver was not at fault for an accident, the insurer will not make payments under liability coverage. Liability insurance is typically the cheapest form of car insurance.
Bodily Injury Liability Insurance
Bodily injury liability insurance pays for medicals bills, pain and suffering and other claims arising from injuries in auto accidents caused by the negligence of the insured. The policy may have a single limit or a limit that is shown as $25,000/$50,000. This means that the maximum limit for each person injured in an accident is $25,000 and the maximum limit of total injury coverage for each accident is $50,000.
Property Damage Liability Insurance
Property damage liability insurance covers damage to property caused by the negligence of an insured driver. The property may be a car, house, building, light pole or any other property which is damaged in an auto accident. State mandatory limits for property damage liability insurance are usually quite low, but if the amount of the damages exceeds the policy limits, the policyholder may have to pay the difference out of pocket.
No fault or personal injury protection (PIP) insurance covers the insured for injuries received in an auto accident regardless of who was at fault for the accident. No fault coverage is usually mandatory in the states where it is offered and the provisions of this coverage vary widely between states, since each state has its own no fault law. In some states it only covers medical bills, while in other states it may provide coverage for lost wages and even a death benefit.
Uninsured and Underinsured Motorist Coverage
This coverage behaves like liability insurance for a driver with no insurance or insufficient insurance who is involved in an auto accident with an insured person. It provides bodily injury coverage, including claims for pain and suffering, for the insured. It also provides property damage coverage for the insured vehicle, although a deductible applies in most cases. The insurer reserves the right to collect the damages they paid to the insured from the uninsured driver.
Collision insurance provides coverage for damages to the insured vehicle caused by a motor vehicle accident. This is one of the highest prices coverage. There is a deductible which the insured must pay if the car is damaged. It is not mandatory in any state, but may be required as a condition of an auto loan by the lender. The higher the value of the car, the higher the premium on the coverage will be.
Comprehensive coverage pays for damages to the insured driver’s car that was not caused by an auto accident. This coverage includes damage from theft, vandalism, acts of nature and collisions with wildlife or livestock. Like collision coverage it has a deductible and it is not mandatory in any state, but may be required as a condition of an auto loan. It is usually not worthwhile to carry comprehensive or collision coverage on older model cars with very low values.
Other Optional Types of Coverage
Medical payments insurance covers medical bills incurred by the insured as the result of an injury received in an accident up to the policy limit. Towing and roadside assistance insurance pays a limited amount for towing or repairs if the insured car breaks down on the road. Rental insurance pays a limited amount for a rental vehicle for up to 30 days if the insured car is disabled due to an accident, theft, vandalism or an act of nature. None of these coverage are mandatory.
Car Insurance Quotes
Each driver must decide what coverage and insurance limits best meet his or her needs. Minimum mandatory insurance is not right for every driver. Once drivers have decided on the right coverage, they can compare prices with free online car insurance quotes to get the best deal on the insurance they need.
Gary Dekmezian is a blogger who writes about car insurance for MyCarInsuranceRates.com, helping consumers find and compare car insurance quotes online to get cheaper rates.