Chapter 4. Types of auto insurance coverage

Driving without auto insurance coverage is illegal in almost every state in the United States of America. There are minimum car insurance requirements that you need to have in order to drive your car on public roads. These requirements can be found at each state's insurance commissioner's website. There are several basic types of coverage that may be included in the state minimum car insurance requirements.  Hence, it is up to each state to inform its residents as to which type of coverage must be carried.

 

How to

Below is a list of most types of coverage that you might encounter, however, you still need to check your state's residency requirements to make sure you are carrying the appropriate auto insurance:

  1. Bodily injury liability - it is defined per person and per accident
  2. Property damage liability - it is defined per accident and covers damage that you become responsible for, not damage to your own car
  3. Personal injury protection - it is defined per person and per accident  and may include limits to medical and other expenses
  4. Collision - it covers repair or replacement of your car in case of damage caused by an accident
  5. Comprehensive - it covers repair or replacement of your car in case of damage NOT caused by an accident
  6. Medical payments - it covers your medical expenses and could be limited
  7. Uninsured motorist - it covers you and your car if you get hit by uninsured motorist (someone driving without insurance)
  8. Rental reimbursement - it covers a rental car and could be limited to specific situations and time span
  9. Towing and labor - it covers towing and labor on your car and could be limited to specific cases

It is also important that you understand how the insurance rate is calculated for you as a driver. Insurance companies used various factors including but not limited to the following:

  1. Age, sex, marital status, personal habits (smoking, drinking, etc.,)
  2. Type and frequency of use of vehicle (how far do you drive to work, etc.,)
  3. Location and state
  4. Driving record deductible and discount for additional driving training
  5. Type, value, and age of the car

 

Practice

Now that you know how auto insurance coverage is determined, think of paying it forward and discuss your experience with a friend or a family member.

 

Congratulations! You can move on to Chapter 5. What are warranties and extended warranties?

To review the full module on Car shopping, click here.