Auto Insurance: Coverage

Some of the major categories of auto insurance include:

No-fault. No-fault insurance coverage pays for injuries or damages incurred by either you or the other party in an accident. It does not matter which party is responsible. No-fault pays for your medical expenses while the insurers figure out which side is at fault. About half of the states have a no-fault insurance law.

Liability. Liability insurance is also called bodily injury insurance. Liability insurance reimburses the other driver for damages sustained in an accident that is your fault. This coverage includes amounts for bodily injury, property damage and pain-and-suffering damages. Liability coverage is usually stated in your policy as a dollar limit. This is the maximum amount the insurer will pay.

Liability limits are generally stated on a per-person and per-accident basis. For example, liability coverage of "15/30/25" means the insurer pays $15,000 for bodily injury per person, $30,000 for bodily injury per accident, and $25,000 for property damage per accident. Almost every state requires some liability coverage, but the minimums may not be enough. Three states that don't require liability coverage are Wisconsin, Tennessee and New Hampshire.

Collision. Collision insurance pays for medical expenses and property damage that you sustain in an accident in which you are at fault. You may also elect to buy collision insurance coverage when you rent a vehicle.

Comprehensive. Comprehensive insurance provides coverage for theft or loss from accidents other than collision. Coverage pays for property damage sustained from such natural events as flood, fire, hail or vandalism.

Uninsured/underinsured motorist. Uninsured motorist insurance pays you if the other driver does not have insurance. Underinsured motorist insurance pays you if the other driver does not have adequate insurance. These types of coverage are not required in all states. They sometimes cover only medical expenses or those expenses related to pain and suffering.

Personal injury protection. Personal injury protection insurance, which is similar to medical payments coverage, pays the medical expenses that you incur in an accident. PIP also pays for your expenses in a hit-and-run accident. If you die in the accident, it pays a death benefit. PIP also pays for lost wages and other expenses related to the accident. About 15 states require PIP coverage. In other states, it is offered as optional coverage.