Home » Car Insurance » The Basics Of Auto Insurance

The Basics Of Auto Insurance

Calculator and pen on a piece of paper

Practically all states require that drivers have a car liability insurance before they can legally drive a motor vehicle.

The liability insurance covers the costs of medical care, the repair of the car, and other costs of the other driver if the policyholder is at fault in an accident.

State law sets the minimum insurance that the driver must pay for the damage caused by his negligence in the event of an accident.

If you’re caught driving without insurance in a state that requires it, the police can confiscate your vehicle. You’ll have to pay a healthy fine and obtain insurance before you can have your car back.
 

The Types Of Auto Insurance

Some types of auto insurance are required in almost every state. These kinds of insurance policies are:

Liability for personal injury, which covers the costs of injury caused to you or another driver while driving.

Property Damage that will reimburse other persons for the damage you or any other driver operating your car may cause to another vehicle or items on the road, such as a fence or building.

Other types of auto insurance can also be required depending on the state. For example:

Medical Payments or Personal Injury Protection (PIP) refund the medical costs of injury to you or your passengers and covers other expenses like lost wages.

Uninsured motorist coverage protects you if you’re involved in an accident with someone that doesn’t have insurance.

You can also purchase insured motor insurance, which covers the costs if another driver is not adequately covered to cover the costs of a significant accident.

Although these types of coverage are optional, you should add them if affordable to your policy for better financial protection.

The basic insurance required by states covers damage you cause to other vehicles, but it does not cover damage to your car.

To cover damage to your own car, you need one of the following policies:

Collision coverage will compensate you for damage to your car resulting from a collision with another vehicle or other object. Collision coverage does not compensate you for mechanical failures or normal wear on your car, it does cover damage from things like potholes.

Comprehensive coverage protects against theft and damage caused by an incident other than a collision, such as a fire, flood, or vandalism.

As almost every driver knows, windshield damage happens all the time. You should consider additional glass coverage to help offset this risk.
 

States With Exceptions

There are rare exceptions to the compulsory car insurance laws. New Hampshire has no mandatory insurance liability law. Drivers must demonstrate that they have sufficient financial resources to deal with a “culpable” accident.

In Virginia, motorists must take out insurance or register for an uninsured vehicle for a substantial fee.

Motorcycle insurance is required in each state, except for HawaiiMichiganMontana, and New Hampshire, which are not mandatory. The minimum liability limits for motorcycles are the same as for private cars.