5 Types of “Must-Have” Car Insurance

With the exception of New Hampshire and Virginia, car insurance is required for drivers throughout the United States. However, motorists in New Hampshire must show proof of financial responsibility, and Virginia drivers are still on the hook financially if they cause an accident and don’t have insurance. Because of this, it’s important that drivers in all 50 states carefully consider their options when it comes to purchasing an auto insurance policy—but with so many car insurance companies and policy options to choose from, it can be daunting deciding which coverage to choose.

In some cases, the coverage you’ll have to buy will be dictated by state law. For example, if you live in a state where car insurance is required, you’ll have to at least carry the minimum liability amount. Something to remember, however, is that the minimum liability coverage is usually much lower than the average cost of accident-related damages. If you only have minimum liability coverage, you could be responsible for any damages not covered by this limit.

If you’ve ever been involved in a car accident, you know how important it is to have the right insurance. Here, we take an in-depth look at the five types of “must-have” car insurance every driver should have.

Liability Insurance

There are two different types of liability insurance: bodily injury and property damage. As the names suggest, these cover injuries suffered by the vehicle occupants and any damages to vehicles or other property caused by the accident.

Most states have a minimum liability insurance threshold. In Texas, for instance, drivers must have at least $30,000 in liability coverage for each injured person, up to a total of $60,000 per accident, alongside $25,000 for property damage per accident.

What your liability insurance covers:

  • Bodily injury to others involved in a crash you caused
  • Property damage resulting from a crash you caused

Your liability insurance does not cover any damages you sustain in the accident, including medical expenses, vehicle repairs, financial losses, and pain and suffering. Additionally, if the other people involved in the accident suffer damages amounting to more than the total amount of liability coverage you have, you could be liable for the difference.

PIP Insurance

Personal injury protection, often shortened to PIP and otherwise known as no-fault insurance, can help cover expenses that liability insurance does not. This includes your medical bills, lost wages, and other financial losses after an accident.

Many states require PIP coverage. These states are sometimes known as “no-fault” states and have different rules when it comes to recovering compensation after an accident compared to states that follow a more traditional fault-based system. Other states allow for “add-on” or “choice” PIP insurance, meaning drivers have the option to purchase this form of insurance, but it is not required by state law.

As of 2024, PIP insurance is required in the following states:

  • Delaware
  • Florida
  • Hawaii
  • Kansas
  • Kentucky
  • Massachusetts
  • Michigan
  • Minnesota
  • New Jersey
  • New York
  • North Dakota
  • Oregon
  • Pennsylvania
  • Utah

Drivers may choose to add PIP insurance in:

  • Arkansas
  • Maryland
  • New Hampshire
  • South Dakota
  • Texas
  • Virginia
  • Washington
  • Washington, D.C.
  • Wisconsin

While PIP insurance is mandatory in both Delaware and Oregon, these states are technically at-fault states, meaning the process of filing a claim after a car accident follows a typical tort process, rather than a no-fault one.

UIM/UM Insurance

Underinsured motorist (UIM) insurance covers the at-fault party in the case of an accident in which they don’t have enough coverage for the damage they caused. It is often put in the same category as uninsured motorist (UM) insurance because the two are so similar. UM insurance, however, is designed to help cover damages when the at-fault party does not have liability insurance.

In several states, UIM and/or UM insurance is mandatory. Sometimes, drivers are able to forgo this type of coverage if they sign a waiver. However, it is a good idea to maintain UIM/UM coverage, as it helps protect you financially after a crash.

Some of the benefits of UIM/UM insurance include:

  • Protection Against Uninsured Drivers: UM coverage ensures you're financially protected if you're hit by a driver who doesn't have insurance. Without UM insurance, you would have to sue the uninsured driver or be stuck with the payments yourself. Even if you successfully sue the at-fault driver, you may have trouble collecting the amount you are awarded. If the driver simply doesn’t have the money, you could still be the one who pays.
  • Coverage for Hit-and-Run Accidents: UM coverage can apply if you're involved in a hit-and-run incident where the other driver cannot be identified. In these situations, the hit-and-run driver is essentially treated as an uninsured motorist, meaning you could be entitled to financial compensation for accident-related damages under the terms of your UM policy.
  • Supplemental Coverage: UIM coverage provides additional financial protection if the at-fault driver's insurance limits are insufficient to cover your damages. For example, if you were hit by someone who only had the Texas minimum liability insurance of $30,000 per person, but you suffered $50,000 in injury-related damages, your UIM coverage could make up some or all of the $20,000 difference.
  • Medical Expenses: Both UM and UIM coverage may help cover medical expenses for injuries sustained in an accident caused by an uninsured or underinsured driver. Often, and especially in the case of an accident that results in severe or catastrophic injury, medical expenses far exceed the minimum liability coverage mandated by state law. If the at-fault driver doesn’t have sufficient coverage, and you don’t have UIM/UM insurance, you could be stuck with thousands of dollars in medical bills.
  • Peace of Mind: Having UM and UIM coverage ensures that you're not left with significant out-of-pocket expenses in the event of an accident caused by a driver who lacks adequate insurance coverage. This can provide you with immense peace of mind, knowing that you won’t be on the hook for unexpected medical bills, vehicle repairs, and other costs in the event of an accident.

Collision Insurance

Unlike liability insurance, collision insurance provides coverage regardless of fault. This type of coverage is meant only for damages to your vehicle; in other words, it helps you with the cost of repairs or even full vehicle replacement. It does not cover any injury-related expenses, such as medical bills or lost income due to a new or worsened injury. If your car is paid off, collision insurance is optional. If you’re leasing your vehicle, or if you’re still making payments on it, collision is often required.

Collision insurance helps with vehicle damage resulting from:

  • A collision with another vehicle
  • A collision with an object, such as a tree
  • A single-vehicle accident, such as a rollover

Collision insurance does not cover vehicle damage or losses resulting from other events besides a crash, such as theft or storm damage. It also doesn’t cover damage to the other vehicle(s) involved in a multi-vehicle crash. For that, you will need liability insurance, PIP, or comprehensive coverage.

Comprehensive Insurance

Even if you’ve chosen to get all four of the insurance policies listed above, comprehensive insurance is a good option for those drivers who want to be especially covered. Comprehensive coverage is often sold alongside collision insurance and helps to fill in the gaps left behind by the other policies.

Comprehensive insurance covers you for vehicle damage and loss related to non-vehicle collision events, such as theft, vandalism, severe weather, or even hitting an animal in the roadway. It provides financial protection beyond basic collision coverage, ensuring you're covered in a wide range of unexpected situations that could otherwise result in costly repairs or the full replacement of your vehicle.

While no one expects to be in an accident, the fact is, these things happen all the time. Having the right insurance can make all the difference in what happens next.

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