Car Insurance Coverage 101 – What Is Required And What Is Optional?

Are you confused with what coverage you need on your car insurance policy? Most drivers don’t understand basic auto insurance coverage options and which combination makes sense for them. Today insurance companies try to differentiate themselves from the rest of the pack by coming up with fancy names coverage options. This only confuses the customer when they are trying to compare rates from other companies which is probably the plan all along. I will try to better explain which options you have for car insurance and why you might need them.

As an auto insurance consumer you need to understand the two types of coverage available on any standard car insurance policy.

Required Coverage – Most states have a minimum level of coverage that is legal to own and operate a motor vehicle. This usually includes liability insurance for bodily injury, medical payments and property damage.

Optional Coverage – Beyond what is required to meet state law you have many more options to add-on an auto policy. This optional coverage can provide protection for your vehicle, towing services, and much more.

I will first discuss the details of required coverage and then explore many of the most popular optional coverage features available today.

Required coverage is often referred to as “minimum liability limits” or just “liability insurance”. Each state will have their own set of limits that is required by an owner of a motor vehicle. These limits provide protection for all other drivers in the event of an accident. Here is an explanation of the most common required coverage limits:

  • Bodily Injury – Expenses resulting from other people’s injuries or death for which you are legally responsible. Such expenses include loss of income, medical bills and pain & suffering. Most states will have a minimum limit represented in dollars such as $25,000 in bodily injury per person.
  • Property Damage – Coverage for your liability of damaging another person’s personal property after an accident. Such items can include motor vehicle, house, or fence. Again most states will have a minimum limit represented in dollars such as $15,000 in property damage per accident.
  • Medical Payments – Some states have passed laws requiring medical payments coverage or a waiver must be signed to deny it. This coverage pays for medical expenses if you or a passenger in your vehicle are injured. Sometimes coverage will extend to other vehicles you are riding in up to the amount specified on the policy.
  • Personal Injury Protection (PIP) – In no fault states personal injury protection (PIP) is usually required. This coverage allows for a broader range of medical expenses to be covered over standard medical payments coverage. It can cover lost wages and other medical bills that would not be covered by medical payments.
  • Uninsured/Underinsured Motorist Coverage – This covers you and your passengers in an accident where the at-fault party is either under insured or not insured at all. It will also cover accidents where the other party has hit-and-run you in a vehicle or as a pedestrian. While required in most states it can also be waived in most cases. It is not recommended to waive this type of coverage.

Now that you understand what can be required on auto insurance we will shift our focus to optional coverage items. There are too many options to list them all in this article but I will detail a few popular coverages and what they are used for.

  • Comprehensive coverage – True to its name comprehensive coverage encompasses almost everything besides hitting another object. Common claims would include theft, vandalism, wind damage, hail damage and much more. This type of coverage will have an associated deductible that would be due at the time of the claim. If you have a loan on your vehicle this coverage is generally required by your lender.
  • Collision coverage – The name says it all, collision coverage will protect the vehicle against running into something else including another vehicle or object. Usually this is used after an accident where the driver is at fault for the damage done to the vehicle. A deductible is associated with this coverage and can range from $0 up to $1500. If you have a loan on your vehicle this coverage is generally required by your lender.
  • Roadside assistance/Towing – Most insurance companies offer this coverage for a very small premium and it is one of the most used. From a flat tire to a tow to the nearest repair shop this coverage is worth the price. Expect to pay $20 to $50 per year for this coverage depending on the year, make and model of your car.
  • Rental Car Reimbursement – Each company has a different name for this coverage but in the event you need to rent a vehicle while yours is being repaired this is what you will need. It usually only pays for a rental car if the vehicle is in the shop under a covered claim such as an auto accident. Expect to pay between $50 and $150 year for this coverage depending on the daily limit.
  • Uninsured Motorist Property Damage – Most people don’t realize that even if they have uninsured motorist liability coverage that doesn’t mean your vehicle is covered if someone hits-and-runs. This will provide protection for the vehicle in the event you don’t have collision or comprehensive coverage and the vehicle was hit by an uninsured motorist.
  • Glass coverage – Only a few auto insurance providers offer this coverage but it is a very nice coverage to have. It will replace any glass in the vehicle or repair it for a small or no deductible. Expect to pay $25 to $75 per year for this coverage depending on your vehicle type.

Auto Insurance Coverage Basics

Even a slight fender bender in a parking lot can ruin your day. Road accidents can turn a good day into a wild one, but you should not let it ruin your life. You pay auto insurance coverage not only to comply with the law, but you pay it to protect your assets. If you drive a car, you need to have auto insurance coverage. There are different types of auto coverage; the states require you to have some, but insurance companies suggest you to purchase more. The following passages explain key features of the most important auto coverage.

· Liability Coverage: this coverage comes in two different types including Bodily Injury and Property Damage. In the event of road accidents for which you are liable, the insurance company will pay for the damages and injuries that you cause. Liability coverage prevents you from spending too much on medical payments or repairs for someone else’s injuries and property damage.

· Personal Injury Protection (PIP): it covers medical payment and other expenses for your injuries regardless of who is at fault in an accident.

· Medical Payments: in case the PIP coverage reaches its limit for other expenses following an accident, separate medical payments coverage can be helpful. Sometimes you can use it in conjunction with your health insurance as well.

· Collision: it covers repair cost for any damage to your vehicles due to an accident. It may include paint job, replacement parts, broken windscreen, and engine repair.

· Comprehensive: this coverage covers damages to your vehicle due to non-accident causes. Some common causes are fire, theft, vandalism and falling objects.

· Underinsured and uninsured motorists: in case you are involved in an accident with another driver who does not have enough insurance or no insurance at all, this coverage requires your insurance company to remunerate for the damages to your vehicle.

Every state has different rules regarding auto insurance. Depending on where you live, you may need to purchase all the above coverage or only some of them. The limit of each coverage policy is subject to insurance laws too. This table lists the recommended limits for common types of coverage.

Deductibles & Limits

Bodily injury: $100,000 per person, $300,000 per accident

Property damage: $100,000 per accident

Personal Injury Protection: Either deductible or no deductible; it can be optional or mandatory depending on the state. Either deductible or no deductible; anyone with an existing health insurance may not need to purchase this coverage.

Collision: $500 to $1,000

Comprehensive: $500 to $1,000

Uninsured motorist: $100,000, but if this coverage is less

Underinsured motorists: $100,000

More Optional Coverage

Collision and Comprehensive are optional, but they are important. Even when the state does not list them as mandatory, they are still necessary and worth the money. Apart from those two, insurance companies also offer other optional coverage including:

· Rental Reimbursement: your insurer provides an amount of money as compensation for transportation expense during the period when your car is in the shop for repair after an accident. The amount depends on the company’s policy. The money should be enough to rent a car until your car is ready to go again.

· Roadside Assistance: it can be helpful in case your engine breaks down in the middle of nowhere that you need towing service to a repair shop. Some car manufacturers provide this service free of charge with the purchase of a car, so you may not need to buy this coverage.

Money-saving Tips

Auto insurance does not come cheap, but there are ways to save money on premium. One of the ways is to make use of insurance discounts available from most insurers. Even when you are not eligible, you can reduce the premium by increasing deductible or use a car that meets the insurer’s safety requirements.

A deductible is like reserve cash from you for the insurance company. You can consider this a down payment for the premium. If you pay more for down payment, your monthly installments for premium will be less. Increasing deductible from $250 to $500 can reduce up to 30% of the premium. If you can afford it, going for more deductible is a good decision. Many types of coverage allow for the deductible, but you should focus on Liability Coverage.

The financial impact of an accident for which you are liable can be devastating; total cost of car repair and medical payments can reach hundreds of thousands. By increasing the limit of liability coverage, you have better financial protection from the insurance company. However, higher limit means higher premium, and this is why you should consider increasing deductible.

Collisions and Comprehensive are optional.

The basic rule is that you should purchase both if your car is worth at least ten times the amount you pay for those two coverage types. For many older cars, Comprehensive and Collision coverage are not worth the money. Omitting them can save much money.

New cars are not always more expensive to insure than old ones.

New cars have better safety equipment and protective features to keep the driver and passengers save for examples airbag and restraint system. Alarm system and anti-theft equipment are good safety features as well.

Most auto insurance companies offer discounts for such features.

If your car does not have them, consider installing third-party safety equipment to be eligible for the discounts. A safer car is less risky, and insurance companies are grateful for that.

The Difference Between State Mandates to Cover and to Offer Infertility Insurance Coverage

Out of the 15 states that have mandated coverage of infertility in health insurance policies, only California and Texas have mandates to offer coverage in health care policies. What this means to a couple dealing with infertility is that their employer has the option to purchase health insurance that offers some coverage for infertility testing, diagnosis and treatment, but they are not required to buy such insurance.

There are many factors that go into the choice of which insurance policy or policies to purchase and offer to employees, price being one of them. If you live in California or Texas and your employer’s choice of insurance coverage does not include any infertility coverage, you should talk to your human resources manager or the manager of benefits and find out if it would be possible to have the company offer additional health insurance policy options with at least one of them offering infertility coverage.

The company may not want to offer such insurance if their costs will be going up, especially if they believe that only one or two employees want such coverage. So go a little grass roots and find out if your co-workers would be willing to pay more for such coverage, and ask them all to ask for it as an option in future insurance offerings. You may be surprised at how many co-workers would like such coverage and your company may surprise you and offer additional choices in insurance coverage in the future.

That leaves us with 13 states, listed just below along with some information, that have mandates to cover. Depending on the wording of the law for each state, health insurance policies and/or HMOs that offer anything from basic coverage to maternity coverage, must also cover some infertility testing, diagnosis and treatments. Basically, a mandate to cover is just that, they must cover “something” where infertility is concerned and many of the state laws state specifically what must be covered too.

  • Arkansas – HMOs and self-insurers exempt; all individual and group policies that cover maternity must cover
  • Connecticut – Self-insurers and religious organizations exempt; all individual and group policies must cover
  • Hawaii – Self-insurers exempt; all individual and group policies must cover
  • Illinois – Self-insurers, religious employers, and companies with fewer than 25 employees exempt; all group and HMOs that cover pregnancy must cover
  • Louisiana – Self-insurers exempt; cannot exclude coverage just because condition results in infertility
  • Maryland – Self-insurers, religious employers, and companies with fewer than 50 employees exempt; all individual and group policies that cover pregnancy must cover
  • Massachusetts – Self-insurers exempt; all insurers that cover pregnancy must cover
  • Montana – Self-insurers exempt; HMOs required to cover as basic health care
  • New Jersey – Self-insurers, religious employers, and companies with fewer than 50 employees exempt; group insurers and HMOs that cover pregnancy must cover
  • New York – Self-insurers exempt; group policies must cover testing and diagnosis
  • Ohio – Self-insurers exempt; HMOs required to cover as basic health care
  • Rhode Island – Self-insurers exempt; individual and group policies and HMOs that cover pregnancy must cover
  • West Virginia – Self-insurers exempt; HMOs required to cover as basic health care

A state mandate to cover means that unless a business’s group, and in some cases individual, health care insurance is exempt, some form of infertility coverage must be included in the policy. On the flip side of the issue is the state mandate to offer, which only means that the insurance company has to offer for sale a policy that includes infertility coverage, but the business is not required to purchase that coverage. Knowing not only what your insurance policy states is covered, but also what your state’s mandate is, can help you when navigating the world of infertility and insurance coverage.