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What Insurance Coverage Do I Need for My Vehicle?

By Remar Sutton, DCU StreetWise Spokesperson

Insuring your vehicle can be confusing, particularly since laws vary from state to state. What is required by state law and what you should have can be different. This report provides reviews of the various types of coverage available and describes which ones you should have.

Types of Auto Insurance Coverage

Let’s start with descriptions of the various coverage's that can be found in an auto insurance policy.

Bodily injury liability. This coverage pays the following if the policyholder caused an accident: medical, rehabilitation, and funeral (if necessary) of your passengers, the other driver, the other driver’s passengers, and any pedestrians involved up to the policy limits. It also covers pain and suffering awards and legal costs.
Property damage liability. This coverage pays to repair or replace another person’s vehicle or other property damaged by the policyholder’s vehicle.
Uninsured and underinsured motorist coverage. If an accident is caused by a hit-and-run driver or a driver that has little or no insurance, this coverage pays the medical, rehabilitation, and funeral bills, and pain and suffering of the policyholder and policyholder’s passengers up to the policy limits.
Collision. This coverage pays to repair or replace the policyholder’s vehicle whether the damage was caused by another vehicle, a roll-over, another object, or even potholes up to the policy limits. This coverage usually has a deductible.
Comprehensive. This coverage pays to repair or replace the policyholder’s vehicle if it is stolen or damage caused by something other than a collision, such as a storm or fire.
Medical payments. This coverage pays the medical bills for the policyholder and the policyholder’s passengers up to the policy limits.
Personal Injury Protection (PIP). This coverage reimburses the policyholder for lost wages and in-home care needed resulting from an accident up to the policy limits.

What coverage and amounts are required by law?

Coverage requirements vary from state to state. What are the driving laws in my state? from the Insurance Information Institute, provides a summary of the state laws for automobile financial responsibility/compulsory limits and the laws governing liability coverage.

For detailed state requirements, visit your state’s Insurance Department or Commissioner web site. To find it, click on your state on the State Insurance Departments & Commissioners page from the Insurance Information Institute website.

Which coverages and amounts do you need?

Most state requirements provide for only a minimum amount of coverage which is usually not enough to cover accident costs. The following coverages are reflective of industry and consumer expert findings and should be used as a comparative tool.

Bodily injury liability—at least $100,000 per person and $300,000 per accident
Property damage liability—at least $100,000 per accident
Uninsured and underinsured motorist coverage—same as bodily injury
Collision and comprehensive—choose the highest deductible you can afford
Medical payments—you may want to carry at least $5,000 (or higher) to protect any passengers that may not have health insurance.
PIP—not necessary unless you do not have separate health or disability insurance. If your state requires PIP and you have health insurance, you may wish to buy only the minimum required.

For more information

A Guide to Auto Insurance from Consumer Reports gives a particularly helpful overview.

These articles from the Insurance Information Institute provide more details on auto insurance and state laws.

State Insurance Departments & Commissioners

So, what do you think?

If you find this review helpful, please pass the word to your friends. Also email me with any comments or suggestions.

Remar Sutton

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