Car insurance is a major expense for most drivers. It’s also an important one. When buying auto insurance, it is helpful to understand what you are buying and why. In the U.S., there are mandatory car insurance laws.
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Required Coverages
All 50 states have mandatory car insurance laws. However, the extent of this coverage varies from state to state. Some states require minimum liability coverage and proof of insurance before you can register vehicles or renew your license.
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Required coverages vary by state, but generally, all drivers must have:
- Bodily injury liability (BI) – This pays for someone else’s medical bills if you cause an accident. The amount of BI coverage will vary by state, but it’s legally required in order to drive a car.
- Property damage liability (PD) – This pays for damage caused by your car to another person’s property, such as their vehicle or house. Again, the amount of PD coverage will vary by state.
- Uninsured motorist coverage(UM) – This pays for injuries sustained by you or others when hit by a driver who does not have insurance.
- Underinsured motorist coverage(UIM) – This pays, after exhausting PIP benefits, for injuries sustained by you or others when hit by a driver who does not have enough insurance.
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Bodily Injury Liability
Bodily injury liability is a part of your car insurance policy. It pays for medical expenses to others injured in an accident that you’re at fault for, and it’s required by law in all 50 states. If you hit someone with your car and they get hurt as a result, their injuries may require medical treatment that could cost hundreds or even thousands of dollars. Your bodily injury liability coverage will cover this bill if the person was acting within their rights when they were involved in your collision.
Property Damage Liability Coverage
Property damage liability coverage pays for damage you may cause to another person’s property in an accident for which you are at fault. For example, if you hit a parked car and cause $5,000 in damage, it might be covered by your property damage liability coverage. When purchasing auto insurance, most states require that drivers carry this type of coverage with a minimum amount set by law (such as $50,000).
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Uninsured and Underinsured Motorist Coverage
Uninsured and underinsured motorist coverages pay your medical bills if someone who is not insured or does not have enough insurance hits you. Uninsured motorist coverage pays for injuries resulting from an accident caused by a driver who has no liability insurance. Underinsured motorist coverage pays for injuries resulting from an accident caused by a driver who lacks adequate liability insurance to cover your losses.
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Personal Injury Protection
Personal injury protection (PIP) is the portion of your car insurance that covers medical bills, lost wages and other expenses allowed by the state after an accident. It’s often called no-fault insurance because it provides this coverage regardless of who caused the car crash. PIP is not health insurance or Medicare; it is only intended to help you recover from injuries sustained in a vehicle collision.
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Collision Coverage
Collision coverage pays for damage to your car when you are involved in an accident with another vehicle or object. In a two car accident, insurance companies use police reports and work within state guidelines to determine fault and the portion each company will pay. Collision coverage is often required by lenders and can be helpful to repair or replace your car after collision damage.
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Comprehensive Coverage
Comprehensive coverage pays for damage to your car caused by an event that is not a collision with another vehicle or object. This typically includes: hitting an animal, such as a deer; vandalism, theft, or fire; weather-related damage like hail or flooding; and damage to safety glass caused by flying objects during driving. Comprehensive coverage can often be bought with a zero glass deductible. This allows you to not pay a deductible when repairing damage to your windshield. This option is often called “full glass coverage.”
One of the most important things to do when you’re buying car insurance is to understand exactly what coverage you need. An auto insurance agent can be very helpful in explaining the coverages and help you decide how much coverage is right for you and your situation. Reach out to Flom Insurance Agency for your auto insurance needs!
