September 16th, 2014
While car insurance is not mandated at the federal level, 49 out of 50 states do require a minimum amount of coverage before you can hit the road. New Hampshire is the lone state that doesn't have a law in place that requires insurance, but it does make you responsible for costs associated with an accident, according to the Department of Motor Vehicles.
Most states have a minimum standard of coverage because payments still have to be made regardless of your finances if there is a wreck. This works to the benefit of every driver on the road because it creates a system where you aren't left to pay for your damages that you didn't cause. A larger base of customers also helps keep insurance costs lower.
Auto insurance can be broken down into what is required and what is not. Excluding a few rare instances, much of the car insurance business operates the same way in each state regarding minimum coverage. To be sure of the exact necessities for you, check your specific state guidelines.
Liability insurance is usually referred to as the bare minimum of coverage. It is the lowest level of insurance that protects other drivers, not yourself. It's important to note that this type of insurance does not cover your expenses, only the expenses of others. This means that if you get into an accident with another vehicle, then your insurance will pay for their damage.
After you have paid for the other person's expenses, you will want to pay for your own as well. That's why collision and comprehensive coverage are offered. These plans include basic forms of insurance that cover more than just liability.
Collision insurance is used when you have crashed into another object. In this case, damage will have been done to more than just yourself. If you hit a tree or flip your car, you will still be covered. If you get into a two-car crash, then you will be covered as well. Collision insurance pays for the costs of repairs to your vehicle.
Comprehensive coverage is for instances when your car is damaged, but there was no accident or fellow damaged object. Car damage from wind, hail and fire will be covered under this plan. If someone steals your car or breaks a window, then you are covered, as well.
There are many scenarios that require additional coverage, and it is usually best to be over-insured rather than under-insured. For instance, if your car breaks down, it would be beneficial to have roadside assistance or emergency insurance to help you get back on the road.
Medical payments coverage can provide insurance for medical expenses associated with car accidents. This can include surgeries needed after an accident. Even funeral expenses are covered in the event that an accident leads to the death of another driver.
You will most likely want insurance for a small period of time when renting a car. This will cover the damages incurred while you were under a renter's agreement with a company. These are temporary plans that expire once the vehicle is returned.