If you drive a vehicle in the United States, it’s important to understand your state’s minimum auto insurance requirements. While auto insurance is generally mandatory across the U.S., the specifics of required coverage vary from state to state.

The various types of auto insurance coverage included in a policy may include the following, each of which is discussed in more detail throughout this article.

  • Personal Injury Protection
  • Property Damage Liability
  • Bodily Injury Liability
  • Uninsured/Underinsured Motorist Coverage
  • Collision Coverage
  • Comprehensive Coverage
  • Additional Medical
  • Rental Car Reimbursement Insurance

In this post, we’ll break down the basic auto insurance coverages which may apply in your state. It’s important to check your state specifics because the required policy provisions and dollar amounts of coverage can vary.

Do You Live in a No-Fault State?

Before diving into the different types of coverage required, it’s essential to know whether you live in a “no-fault” state. A “no-fault” state means that regardless of who is responsible for an accident, your own insurance covers your medical expenses, lost wages, and other related costs up to the policy’s limits. This type of coverage is referred to as Personal Injury Protection (PIP) insurance coverage.

Personal Injury Protection

If an auto insurance policy include Personal Injury Protection (PIP), your insurance company will pay for some of your damages up to a certain dollar amount, even if you are “at-fault” for the accident. PIP pays for medical expenses, lost wages, and other related costs up to a certain dollar amount.

For example, North Dakota is a “no-fault” state and requires drivers to have PIP coverage in their insurance policy up to $30,000 per person. If you are involved in a car accident, whether “at-fault” or not, the PIP will pay your medical costs, lost wages, and benefits up to $30,000.

Some states have additional options that can supplement or replace PIP coverage.

Property Damage Liability

The second coverage type is the Property Damage Liability (PDL), which covers damage you caused to another person’s property during the accident. The PDL coverage can cover a variety of expenses.

For example, the insurance covers the costs of any damage you cause to another person’s vehicle or other property, such as trailers, homes, fences, buildings, or traffic signs. The PDL also covers legal expenses if you need to hire a lawyer to defend you if the other party sues you.

It’s crucial to understand that PDL only covers damage you cause to other people’s property. If your vehicle is damaged, PDL won’t cover repairs. For that, you’d need additional coverage like collision insurance, which is optional coverage discussed in more detail below.

Bodily Injury Liability (BIL)

The BIL coverage typically pays for injuries you cause to other people involved in the car accident. Some states require BIL, while others make it optional. Although it may not be mandatory in certain states, it is highly recommended because the additional insurance can protect you and your family’s personal assets if you are “at-fault” in an accident.

Without BIL, you could be personally responsible for the medical expenses and legal costs for the other injured persons if it’s determined you are “at-fault” for causing the accident.

Uninsured/Underinsured Motorist Coverage

The uninsured motorist (UM) coverage protects you if you’re involved in an accident with a driver who either doesn’t have insurance or doesn’t have adequate insurance to cover your losses.

The coverage also applies if you are involved in a hit-and-run accident where the other person leaves the scene and you cannot locate them.

States will generally separate this category into three separate categories:

  • Uninsured motorist bodily injury
  • Uninsured motorist property damage
  • Underinsured motorist bodily injury

Collision and Comprehensive Coverage

These policies help pay for damages to your vehicle in the event of an accident or non-accident events like vandalism, theft, or natural disasters.

Collision Insurance covers accident-related events. Your standard insurance policy will not pay for repair costs related to your vehicle after it’s damaged in the accident. The PDL will pay to fix the other person’s vehicle but not yours.

For example, if you are involved in a car accident and your car sustains damages of $1,800 and the other vehicle incurs damages of $4,000, your PDL will cover the $4,000 damage to the other vehicle. PDL does not cover your $1,800 in damages.

Adding collision insurance can often be the most expensive component of your annual insurance premium. So, most people elect to add collision insurance with a very high deductible to lower the premium.

Comprehensive Insurance covers non-accident-related events, such as vandalism. For example, if someone breaks your passenger side window to steal property out of your vehicle, the comprehensive coverage may pay to replace the car window. However, the same issue applies to premiums and deductibles as collision insurance. Most motorists will add comprehensive coverage with a higher deductible to keep the added premium low.

Additional Medical Payments

Some insurance companies will offer the option to add additional medical coverage on top of the PIP benefits. The medical coverage addon will pay for those expenses beyond what’s covered under PIP. What’s different about the additional medical payment coverage is it applies exclusively to medical costs, whereas PIP applies broadly to medical expenses, lost wages, death benefits, and other related costs.

Rental Reimbursement Insurance

Rental reimbursement insurance is another option your insurance company may offer. If your vehicle is damaged in an accident and needs to be repaired over several days or weeks, the rental reimbursement insurance will pay for you to get a rental car. The coverage is typically limited to a fixed daily rate and a limited number of rental days, usually not to exceed a month.

Final Thoughts

Staying within the bounds of your state’s auto insurance laws will protect yourself, your passengers, and other motorists and pedestrians on the road.

Although you may find yourself in a state with low mandatory coverage, increasing the dollar amounts of coverage or adding optional coverage, such as collision coverage, is a good idea.

It’s not enough to simply say “I have auto insurance, so I’m good”. Having the right types of coverage within your auto insurance policy will give you peace of mind, knowing that you’re covered if the unexpected happens.