Mandatory and Optional Auto Insurance Coverage
Drivers are required by state law to buy certain types of auto insurance, while they have the option to buy additional coverage if they choose. Adding more coverage will result in higher premiums, but it also provides more protection from risk. You should understand mandatory types of coverage so that you do not break the law by failing to get them. Furthermore, you should be aware of optional types of coverage in case they would be helpful in your situation.
The main type of mandatory auto insurance is known as liability coverage. This will apply when someone is hurt or their property is damaged in an accident that you caused. You almost certainly will need to purchase this coverage, except in some states in which a driver can show that they can pay damages for an accident from their own pocket. Liability insurance is divided into categories for property damage and bodily injury. Property damage insurance most often applies to vehicles, but it also can apply to buildings, real estate, or personal property that is damaged in an accident. Bodily injury insurance can apply to injuries suffered by a driver or passenger of a vehicle, but it also can apply to other potential victims, such as pedestrians.
Each state imposes a certain threshold that a liability insurance policy must reach. For property damage, this may consist of any amount between $5,000 and $25,000, depending on the state. For injuries, different thresholds may apply to each accident and to each victim who is injured in an accident. Generally, a driver should expect to purchase at least $15,000 in bodily injury liability insurance per victim, and they may need to purchase as much as $50,000. If your state requires additional types of policies, different limits may apply to them.
Just buying the minimum amount of insurance may not be a smart decision, especially if you have significant assets. If you are at fault in a serious accident, a victim could sue you in a personal injury lawsuit for damages beyond the coverage provided in your policy. Personal liability could create a substantial drain on your resources. You may want to consider paying higher premiums for a broader scope of coverage to reduce the risk of this situation.
Potentially Mandatory Coverage
Some states require coverage for accidents involving uninsured or underinsured motorists. This type of policy protects someone who is injured in an accident caused by a driver who has failed to get the required liability insurance, or whose liability insurance does not fully cover the costs of the accident. A victim can sue the at-fault driver directly in these situations, but usually they will not have sufficient personal assets to pay a judgment. Uninsured and underinsured motorist coverage fills this gap by providing coverage beyond the limits of the at-fault driver’s policy. You can purchase it for both property damage and bodily injury. Even if your state does not require it, uninsured and underinsured motorist coverage often is a smart idea.
In an effort to reduce disputes after accidents and get bills paid more efficiently, certain states have mandated no-fault car insurance. This is often known as personal injury protection (PIP) insurance. It should cover the medical bills of any victims, regardless of who was at fault, and some PIP policies may cover other expenses as well. If your state does not require PIP coverage, you still may be able to purchase it.
Collision coverage can be seen as a property damage version of PIP coverage. The insurer will pay for costs related to vehicle damage in an accident, regardless of who was at fault. It can apply even to accidents in which your car was the only vehicle involved.
Meanwhile, comprehensive coverage applies to any type of harm or loss that did not result from an accident. Perhaps your car was stolen or vandalized, or perhaps severe weather caused damage to a car that was parked outside. People in some rural areas may consider comprehensive coverage because it often applies to damage caused by hitting an animal with a car.
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