Car insurance basics: what the coverage types mean
In short: nearly every US state requires drivers to carry at least liability insurance, which pays for injuries and damage you cause to others. Collision and comprehensive cover damage to your own car and are usually required if you have a car loan or lease. State minimums are often low, so consider whether they would really cover a serious accident.
The main coverage types
- Liability: pays for other people's injuries (bodily injury liability) and their property, such as their car (property damage liability), when an accident is your fault. It does not pay for your own car.
- Collision: pays to repair or replace your car after a crash, whoever is at fault, minus your deductible.
- Comprehensive: pays for damage from things other than a crash, such as theft, fire, hail, flood or hitting an animal.
- Uninsured / underinsured motorist: protects you if the other driver has no insurance or too little.
- Medical payments or personal injury protection (PIP): pays medical costs for you and your passengers. PIP is required in "no-fault" states.
Reading the numbers
Liability limits are often written like 25/50/25. That means up to $25,000 for one person's injuries, $50,000 for all injuries in one accident, and $25,000 for property damage. Medical bills and car repairs can easily cost more, and you could be responsible for the rest. Each state sets its own minimums; your state insurance department lists them.
What affects your price
- Your driving record and claims history.
- Where you live and park the car.
- The car itself: its value, repair costs and safety features.
- How much you drive, and your age and experience.
- In many states, a credit-based insurance score.
- The coverage, limits and deductibles you choose.
Tips for newcomers
- Insurers may treat you as a new driver if you have no US driving record. Ask whether they accept a driving record or claims letter from your previous country.
- Get a US driver's licence when your state requires it; ask your state's motor vehicle agency what applies to you.
- Get quotes from several licensed insurers for the same coverage. Prices for the same driver can vary a lot.
- Keep proof of insurance in the car, and never drive uninsured: penalties can include fines and losing your licence.
After an accident
- Check for injuries and call 911 if anyone is hurt.
- Exchange names, phone numbers, insurance and licence details with the other driver.
- Take photos of the vehicles and the scene.
- Report it to your insurer quickly, and to the police if your state requires it.
Handy tools
- Loan and EMI calculator: monthly payment, total interest and a year-by-year table.
- Monthly budget planner: see what is left each month and how your spending splits up.
General information, not financial or insurance advice. Coverage, prices and rules vary by state, insurer and policy. Read your policy and check with the insurer, a licensed agent or your state insurance department before you decide.