Common Types of Auto Insurance Coverage

Providing you purchased the required coverages, car insurance policies offer financial assistance when you are involved in accidents or suffer losses due to other perils by paying claims against you when you cause accidents and compensating you for your own damages and injuries. The most common types of vehicle insurance coverages include liability, uninsured/underinsured motorists, personal injury protection, medical payments, collision and comprehensive.

Auto insurance isn’t cheap and therefore motorists need to balance the need for coverage with costs. Since it is a minimum requirement in 49 out of 51 jurisdictions in the United States, it stands to reason that nearly all drivers have at least liability coverage. Only Virginia and New Hampshire have options for not buying it; a $500 fee in Virginia and proof of financial ability in New Hampshire. As statistics show below; most motorists buy full policies that include several coverage options.

There are literally a dozen or more types of coverage options you can have to provide protection for others and yourself. As you add more to your policy, the comfort level increases but so does the premium. So, here are the most commonly purchased types of automobile insurance coverages;

They come in three tiers as explained below;

Liability Coverage

Minimum vehicle insurance requirements are set by each state legislature and the District of Columbia. Liability coverage comes in two inseparable parts.

Bodily Injury Liability Coverage provides protection for people you caused injuries in an accident you caused.

Property Damage Liability Coverage pays for damages to other people’s vehicles and properties in an accident you are at fault.

Liability coverage is legally required and for the benefit of third parties. It does not include your injuries or your own vehicle’s repairs. The basic limits in each state range widely from a low of 15/30/10 ($15,000 for single injury incidents, $30,000 for multiple injuries and $10,000 for property damage) to a high of 50/100/25.

Even at the highest range, many experts agree it is not enough to pay for expenses of even a moderate accident. That is why many auto insurance companies offer higher levels of liability coverage in their policies as standard like 50/100/50 and increasing to 100/300/100 is highly recommended.

Liability Plus

It refers to a tier that includes liability with one or two other additions that may or may not be required by states to be included within the minimum state requirements.

Uninsured/Underinsured Motorists Bodily Injury Coverage provides injury coverage to you and your passengers if you are hit by an uninsured driver. 22 states mandate this coverage as part of minimum requirements. Considering 12.6% of motorists are uninsured on average in the country, it is a good addition to your policy.

Uninsured/Underinsured Motorists Property Damage Coverage pays for your and your passengers’ property losses in an accident caused by an uninsured driver.

Personal Injury Protection (PIP) offers injury coverage to you and your family regardless of who is at fault in an accident. 12 no-fault states require PIP as part of minimum required vehicle insurance. And those states are; Delaware, Florida, Hawaii, Kansas, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Dakota, Oregon and Utah. PIP includes medical expenses, loss of wages and funeral costs and covers you when you are a pedestrian, cycling and a passenger in someone else’s auto.

Medical Payments coverage pays for you and your passenger’s medical bills or funeral expenses in case of traffic accidents. It is required in two states; Maine and New Hampshire. It also covers you as a passenger in someone else’s car and if you get hit by a vehicle as a pedestrian. It doesn’t have a deductible and typically comes with much lower limits than PIP.

Full Coverage

Full coverage auto insurance is a term used to describe a policy that includes liability, collision and comprehensive as they are usually sold together.

Collision Coverage pays for damages to your own automobile suffered in a traffic accident regardless of who is at fault.

Comprehensive Coverage (often referred to as not collision) pays for damages to your own automobile in case of auto theft, vandalism, fire and acts of nature but not collision.

Both Collision and Comprehensive are optional coverages but they are normally required by lenders and lessors and each have a deductible. They are both highly popular because they together provide essential coverage for policyholders’ own vehicles. Insurers either repair the damages to the insured car or pay enough money to replace it in case it is totaled.

What Are the Most Purchased Types of Car Insurance?

According to the NAIC, the body responsible for collecting data on policies sold as well as advocating for it within each state, here is the breakdown of most purchased coverage combinations.

A breakdown of the most commonly purchased vehicle insurance coverages:

  • 87.4% of drivers purchase Liability
  • 78% also purchase Comprehensive Coverage
  • 72% also purchase Collision
  • Over 72% of drivers (7/10) therefore purchase a Full Coverage policy
  • 12.6 of drivers are uninsured

Other Types of Optional Auto Insurance Coverage

There are a few optional add-ons available to drivers to enhance their policies.

Here are the most common add-ons to a vehicle insurance policy:

  • Rental Car Reimbursement pays to rent an automobile when yours is being repaired due to insured loss.
  • Roadside Assistance provides assistance when you are stranded on the side of a road and often provide towing and includes labor costs. It is usually a fairly cheap addition to have.
  • Accident Forgiveness is offered to qualifying policyholders and forgives the first accident to prevent your premiums going up.
  • Business-Use can be added to personal auto insurance policies to include coverage when the vehicle is used for business purposes like pizza deliveries (but people need totally different coverage if they want to join Uber).
  • Guaranteed Auto Protection (GAP) is additional coverage offered to pay the difference between what your insurer would pay if your vehicle is totaled and your outstanding auto loan.
  • Mobility coverage is offered to motorists with special needs and comes into effect when their vehicle is being repaired by insurance.
  • Custom Parts & Equipment coverage is usually added by a rider to a policy to include custom works done to the insured vehicle and equipment in the vehicle like wheelchairs, business equipment.

It is sometimes easy to overlook things when we are overly concerned with costs. However, we need to look at the long-term picture and consider what if we suffer losses beyond our means and have no back up. Shopping around for the cheapest quotes often helps in reducing car insurance premiums and allowing people to afford the coverage they need.