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The trick with auto insurance, though, is the wide variety in coverage and the range of premium prices from company to company. Even though each state requires insurance, the recommended amount per state is usually the bare minimum, and this figure varies from state to state. The ultimate issue is finding out what specific type of coverage you need depending on the state in which you live.
The Various Types of Auto Insurance
At its most basic level, auto insurance is designed to protect your assets in the event of a financial situation while driving. If you pay the insurance company a monthly premium, the company will cover your losses, according to the type of coverage you purchased.
Every state has a different minimum requirement for insurance. To be sure what your state requires, contact either your state’s department of motor vehicles or department of insurance. The agency will give you the necessary information to find and purchase the requirements for insurance.
Most states require you to purchase a certain level of liability coverage. To receive your vehicle registration, most states want to see auto insurance coverage that meets the minimum liability coverage. Liability coverage will assist you in paying for vehicular or medical damages you cause to another driver in the event of an accident.
According to the Insurance Information Institute, there are six different types of auto insurance coverage. The only coverage that is typically required by each state is bodily injury liability and property damage liability.
Bodily Injury Coverage vs Property Damage Coverage
Bodily injury liability coverage is insurance that will assist you in paying for medical damages you cause to another driver. This is probably the most important type of insurance coverage.
If you get into an accident and do not have enough bodily injury liability coverage, you could be sued by the other driver and have to pay up using any or all of your current assets.
It is not uncommon to have to use assets like your house, savings, or any other available resource to pay for damages, especially if you do not purchase enough bodily injury coverage. Most states require a minimum of liability, which includes bodily injury and property damages.
Property damages liability coverage is insurance that helps pay for any monetary damages you cause to another person’s vehicle, as well as any other property like lampposts or telephone poles. Although not quite as important as bodily injury, you still need to consider purchasing enough property damages coverage in the event you total some else’s car.
Both types of coverage are incredibly important. In fact, they are so important that almost every state requires you to purchase a bare minimum of each type. For example, according to the California Department of Motor Vehicles, you need a minimum of $30,000 of Bodily Injury coverage and $5,000 of Property Damages coverage.
Consider, though, the price of a newer vehicle. Very few vehicles would be priced at $5,000, so purchasing the bare minimum of state coverage is not a recommended option. Even though you do need a certain type of insurance coverage, it would be wise to buy more than the state minimum.
If you injure someone in an accident and damages exceed the state minimum, you would be responsible for any additional damages. That could get very expensive very quickly.
PIP, Collision/Comprehensive, and Uninsured Motorist Coverage
Outside of bodily injury and property damages coverage, you also have the option of purchasing four other types of coverage. Some are never required by a state, mostly because these coverage options are designed to protect the policyholder’s vehicle.
State-required minimum coverage focuses only on other drivers and damages caused to them.
For starters, personal injury protection, more commonly known as PIP coverage, insures any damages to your when in an accident. If you have to be taken to a hospital in an ambulance because of an auto accident, your PIP coverage would kick in to help cover the expenses. This is a very handy coverage option, if you can afford it. Although not always a required coverage type, it can be very helpful in the event of a major injury while driving.
Secondly, collision and comprehensive coverage, most commonly found in tandem, are great options for newer vehicles. Collision will help pay for any damages to your vehicle during an accident, while comprehensive coverage will help pay for damages from natural causes like hail, theft, or earthquakes. Again, these two coverage options are not required by the state but are great to have, especially if you are driving an expensive, new vehicle.
Finally, uninsured motorist coverage will help pay for any damages you incur from a driver who is not insured. Despite the fact that it is illegal to drive a vehicle without insurance, there are thousands of individuals who choose to break that law every day. This coverage option will help protect you against that kind of driver. This, also, is never required by state department of motor vehicles but can be very helpful.
Car Insurance Today
Many years ago, car insurance was not monitored as closely as it is today. In fact, many times you could purchase insurance, pay your first monthly premium, and receive a six-month proof of insurance card. Drivers that came upon financial difficulty chose to not pay auto insurance first.
Today, every insurance company works in accordance with state departments of motor vehicles to make sure you are driving with coverage.
If at any point you fail to pay your monthly premium, the insurance provider will immediately contact your state department of motor vehicles. In that event, the DMV will send you a warning that if you do not reinstate your insurance coverage, your vehicle registration will be revoked. In fact, in some states you can even lose your driving privileges indefinitely.
For example, according to the New York State Department of Motor Vehicles, you must turn in your license plates to the DMV, in the event that your liability coverage lapses. If you do not, you will lose your license. In addition, any out-of-state coverage in New York State is not valid. To prevent any kind of law breaking on your part, be sure to check with your state department of insurance. Each state has a wide range of laws pertaining to auto insurance.
Another intense example is from the Oregon Department of Motor Vehicles. If you are caught in an accident and driving without the appropriate amount of insurance, your license will be suspended for a year. For reinstatement, you must file an SR-22, a legal document proving insurance, for three years. Otherwise, your license will remain suspended.
Having an SR-22 on your record will result in drastically increased insurance prices. Each state has a variety of policies on minimum liability coverage, but every state has one thing in common.
There are serious repercussions for driving without the minimum amount of insurance. Items like SR-22s and lapsed liability coverage will always make auto insurance more expensive. In fact, many states also dictate mandatory fines, some of them quite large, if you do not maintain the required level of coverage.
You Need Liability Coverage
The short answer to the above question is a resounding yes! You definitely need a certain type of insurance for a registered vehicle. If you do not maintain that required insurance, your life will get rough and expensive quickly.
Almost every state requires liability coverage of some kind.
The most important thing to understand is that the state minimum should not be the recommended level of insurance. Despite the fact that the state minimum would also cost significantly less, you will ultimately be left unprotected in the event of a major accident, especially if it is not your fault.
Auto insurance is designed to protect you from financial loss. State-required insurance levels are designed to protect other drivers from financial loss. That is the clear difference between state levels and the recommended levels of auto coverage.
Doing some research on recommended levels of auto coverage is a great idea!
The first step is getting out of the understanding that state minimum requirements for insurance will protect you. They will not! Agencies like these, the Insurance Information Institute and the Rocky Mountain Insurance Information Association are great places to begin your research and find auto insurance that will actually protect you against financial loss.
You do need auto insurance to legally drive your vehicle, but you also need auto insurance that will actually help you. Finding insurance does not have to be difficult either.
By entering your ZIP code into the FREE box on this page, you can start receiving affordable auto insurance quotes that will protect you against loss!