Types of Car Insurance: What Coverage Is Mandatory in 2023?

The four most common types of car insurance coverage are: liability; full or physical damage; medical payments or personal injury protection; and uninsured/underinsured motorists. Liability insurance is required in most states, while other coverage types may be optional or mandated in some states. Full coverage is required if you are financing or leasing your car.

Even if a coverage type is optional, it may be useful adding to your auto policy. Keep reading to learn how auto insurance coverage works in 2023 and which types are best for your situation.

What Auto Insurance Coverage Do I Need in 2023?

While different states enforce their own insurance requirements, liability insurance is the most commonly required. In some states, carrying additional coverage, like uninsured motorist coverage and personal injury protection, is legally mandated, as well.

Below are commonly required coverage types in 2023 and their limit ranges:

  • Bodily injury liability coverage: $15,000 to $50,000 per person and $30,000 to $100,000 per accident
  • Property damage liability coverage: $5,000 to $25,000 per accident
  • Uninsured/underinsured bodily injury coverage: $20,000 to $50,000 per person and $40,000 to $100,000 per accident
  • Uninsured/underinsured property damage coverage: $5,000 to $25,000 per accident
  • Personal injury protection: $5,000 to $50,000 (only for states that offer no-fault insurance)

Collision and comprehensive coverage are commonly required but only if you’re financing or leasing your car. Car insurance endorsements — optional add-ons to your policy — are also available and can offer useful benefits, like roadside services if your car breaks down (more on that later).

What Are the Most Common Types of Car Insurance?

Liability; physical damage; medical payments or personal injury protection; and uninsured/underinsured motorists are the four most common types of car insurance coverage.

Liability

Required in nearly every state, liability coverage is the most common type of auto insurance. This coverage steps in when you are responsible for another person’s injuries or property damages in a car accident, paying for their medical expenses, repairs, and legal expenses if you are sued.

Liability insurance is broken down into two types of coverage: property damage and bodily injury.

Bodily injury (BI) liability covers the other persons’ injuries in a car accident that you caused. Expenses covered may include their medical bills, lost wages while recovering and funeral costs if you caused a fatality. BI liability coverage also pays for legal expenses, like attorney and settlement costs, if the injured party sues you.

The BI liability limit in most states is $25,000 per person. Though, some states have limits as low as $15,000 per person and as high as $50,000 per person.

Property damage (PD) liability covers the other person’s repair bills in a car accident that you caused. PD liability coverage extends beyond two-car accidents and can pay for damages caused to somebody else’s home or personal belongings, such as those incurred if you drive into your neighbor’s backyard fence.

Liability coverage will not pay for your medical expenses or property damages. You will need to purchase additional coverage to cover your losses.

Motor vehicle laws use three numbers to distinguish the limit requirements for each type of coverage; as an example: 25/50/10. This tells drivers that they need to carry the following coverage limits:

  • $25,000 bodily injury per person
  • $50,000 bodily injury per accident
  • $10,000 property damage per accident

Physical Damage

Full coverage, or physical damage insurance, bundles your state’s minimum insurance requirements plus collision and comprehensive coverage.

Collision and comprehensive insurance are required when financing or leasing a car.

Collision coverage pays for repairs to your car if you strike another car or object, like a tree or gate, even if you were the at-fault driver. Driving without collision insurance would leave you financially on the hook for all of your car repairs if you were responsible for the accident.

Comprehensive coverage pays for non-collision-type physical damages, such as fire, vandalism, theft and hail. However, you are covered for only damages to your car.

Full coverage will not reimburse you for personal belongings, like clothes, your wallet and electronics. Your home or renters insurance policy may cover these losses.

Medical Payments or Personal Injury Protection

Medical payments coverage (Medpay) pays for you or your passengers’ medical and funeral expenses incurred after a car accident. Coverage is available whether you or the other driver can be held liable. Medpay generally covers the following expenses:

  • Doctor visits
  • Hospital bills
  • Ambulatory fees
  • Emergency room bills
  • Surgeries
  • X-rays

While health insurance should cover your medical bills, Medpay can still be useful. Drivers generally don’t pay any deductible or copayment before Medpay coverage kicks in.

Personal injury protection (PIP) functions similarly to Medpay and pays for your medical and funeral expenses plus lost wages. PIP is also called “no-fault insurance” because it pays for your injuries even if you were the at-fault driver — outside of no-fault states, you would typically file a claim with the liable driver’s insurance carrier for reimbursement.

PIP is available in 12 states and may be mandatory or optional depending on where you live.

Uninsured/Underinsured Motorist

Uninsured/underinsured motorist (UM/UIM) coverage steps in when you get into an accident but the liable driver does not have auto insurance or has insufficient coverage. UM/UIM coverage is mandatory in some states. If you live in a state with a high percentage of uninsured drivers, like Mississippi (29.4%) or Michigan (25.5%), you should consider maintaining UM/UIM insurance.

Uninsured motorist coverage pays for your medical and repair expenses if the liable driver has zero auto insurance. You may also be covered if you were involved in a hit-and-run accident and could not identify the driver.

Underinsured motorist coverage pays for your medical and repair expenses if the liable driver has auto insurance but does not have enough coverage to fully reimburse you for your losses. For example, a California driver faces a $7,000 repair bill after a car accident but the liable driver only has $5,000 in property damage liability coverage — the minimum requirement in California. Your UIM coverage would cover the remaining $2,000.

If you already have collision and Medpay coverage, UM/UIM coverage may be redundant and unnecessary.

We Can Help You Find the Right Coverage

Other Types of Car Insurance

You can expand coverage by purchasing endorsements, which are add-ons to your auto policy. Common endorsements include gap insurance, roadside assistance and rental car reimbursement.

GAP

If your car is totaled in a car accident, guaranteed asset protection (gap) insurance would pay for the difference between the remaining balance on your auto loan and its actual cash value (ACV) — your car’s value after depreciation.

For example, say you totaled your car in a covered accident. Your car is worth $10,000 and there’s $12,000 left on your auto loan. Your auto policy would reimburse you for $10,000 and gap insurance would cover the remaining $2,000 to pay off your remaining loan balance.

Gap insurance is typically required if you make a down payment of less than 20% on your car.

Roadside Assistance

Roadside assistance pays for emergency roadside services if your car breaks down or you’re locked out. Roadside services include flat tire changes, tows, fuel delivery and locksmith services. Many national carriers sell roadside assistance at affordable rates — Allstate charges about $2.08 per month, for instance. However, you are generally limited to three to four service calls per year.

Rental Car Reimbursement

Rental car reimbursement steps in when you need a temporary car while your car is undergoing repairs or was totaled. If the other driver was at fault, their liability insurance should cover your rental car costs. However, the claims process can take a while. Rental car reimbursement will help you secure a rental car immediately without paying out of pocket and your insurer will seek reimbursement from the liable driver’s insurance carrier on your behalf.

FAQs

How much car insurance do you need?

Liability insurance is the most commonly required auto coverage and limits typically range from 15/30/5 to 50/100/25. Some states require additional coverage, like uninsured/underinsured motorist coverage and personal injury protection, and full coverage is necessary if you are financing or leasing your car.

What isn’t covered by car insurance?

Commercial use of your car, such as transporting people or making food deliveries, is not covered by your personal auto insurance policy. Personal belongings inside your car, like clothes and electronics, are not covered, either (but may be covered by your renters or home policy).

How do you choose what type of car insurance to get?

At the minimum, you must meet your state’s insurance requirements and purchase full coverage if you’re financing or leasing your car. For additional peace of mind, you can increase your coverage limits and purchase optional endorsements, like roadside assistance.

Key Takeaways

  • The majority of U.S. states require drivers to carry auto liability insurance.
  • Uninsured/underinsured motorist coverage and personal injury protection are legally required in some states.
  • Full coverage, which bundles your state’s minimum insurance requirements plus collision and comprehensive coverage, is required when financing or leasing a car.
  • Drivers can purchase auto insurance endorsements, like roadside assistance and rental car reimbursement, to enjoy additional coverage.

Shopping for car insurance in 2023? Shopping around at least once a year can help ensure you’re paying the cheapest rates possible. Fortunately, SmartFinancial’s FREE online tool makes this a simple process: just enter your zip code below or call 855.214.2291 to receive your free car insurance quotes.

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