Guide to Car Insurance Coverage in the USA

Although coverages typically vary from state to state, these are the major coverage options found on most policies throughout the USA. There’s really not much more to it and it is fairly simple so don’t be intimidated. Each company will add its own “bells and whistles” but these are the major options. The Department of Insurance in each state will set the rules and mandate the minimum coverages that each company must offer.

Bodily Injury – This coverage provides a limit of coverage to a third party injured in a car accident caused by you. If you are found legally liable for their injuries, the policy will pay up to the coverage limits and typically cover legal expenses associated with the defense. This usually means you are being sued and the good news is that the insurance company will pay for your legal expense. But, only up to the limit on the policy. Click this link for a complete glossary of insurance terms and definitions.

Property Damage - This coverage will pay for the damage to the property of a third party, in a car accident that is your fault. If you are deemed to be legally liable, the policy will pay up to the limit of liability found on the policy. This section of the policy does not pay to fix your own car. Keep reading for more information about that.

Medical Payments or PIP – This coverage generally pays for medical bills of the insured associated with a car accident regardless of who is at fault. This coverage can extend to other members of your household and even passengers riding in your auto if they are injured and incur any medical bills as a result of a car accident. Even if you have regular health insurance, this coverage is generally the primary payor of any medical bills associated with a car accident subject to the coverage limit on the policy. Check with the Department of Insurance in your state for the minimums.

Tort Option – This is an option that some states offer as a way to help consumer’s lower premiums. A choice can be made to have the un-limited right to sue for pain and suffering when you are injured in an auto accident. This option will likely cost you more money. Another choice can be made to limit your right to file a lawsuit if you are injured in an auto accident that is not your fault. This limitation could refer to a specific dollar amount that you can sue for. It could also mean that you have to meet the states definition of a “serious injury” before you can sue and expect to collect. It would be difficult to find an attorney that would advise you to limit your right to sue. After all how would these guys make any money? But your reward for doing so will be lower policy premiums and the savings could be significant. Check with a local insurance agent to find out if your state has such a choice.

Income Loss – Is like a disability policy that will pay up to the specified coverage limit on your policy and/or for a specific period of time if you are disabled as a result of a car accident. However, despite the coverage limit, the insurance company will not pay you more if you are disabled than if you are working. If they did, who would ever want to go back to work?

Collision – An important coverage that will pay to fix your own car if you strike an object or flip your vehicle. Typically, the maximum payable under this coverage is the book value of your car. Some companies have provisions that will pay for a new replacement vehicle. Either way, the insured will usually have to pay a deductible and the insurer will pay the balance to get the car fixed or replaced.

Comprehensive – Also known as “other than collision” pays for damage to your car for losses that do not fall under the definition of a collision loss. Some examples are: fire, theft, vandalism, hail storm, flood, hit an animal, a tree falls on your car, and so on. ***Although many insurance agents and consumers use the term “full coverage” no such language will be found on any policy because no risk is covered for any and all losses. There are always exclusions but they are few with car insurance. Instead, when the term “full coverage” is used it means that the insured has a liability policy plus collision and comprehensive. Thus, you are covered for liability losses and for damage to your car.

Rental Reimbursement – This coverage will pay for a rental vehicle if your car is damaged by a covered loss and will be in the body shop getting fixed. The limit will be either a specific dollar amount and/or up to a specified numbers of days. For example, many companies will pay up to $25 per day for up to 30 days.

Insurance industry insider has over 20+ years in the business and has previously owned and operated car insurance agencies in multiple states. Currently owns and operates the Ninerell Insurance Agency, Inc. in the state of Pennsylvania. Author of numerous insurance articles and regularly consults with insurance agents all across America. Also owns and operates insurance related websites.




The official source of Car Insurance Coverage in the USA is
the National Automotive Insurance page at Business.com