Understanding Insurance Issues

4 Things to Know About State-Minimum Auto Insurance

Shopping around for auto insurance coverage? If so, then you might also be looking into buying state-minimum coverage. This is an especially common option for those driving older cars and those looking to pay as little as possible for their coverage. Before you purchase a state-minimum policy, however, there are a few things you should know.

Each State's Minimums Can Vary

Be sure to check your state's current laws and requirements when it comes to state-minimum coverage, as each state's option can vary greatly. Some states, for example, require "no-fault" coverage, whereas many others will always assign fault in an accident. Specific coverage amounts can also vary from one state to the next. You will need to conform to the requirements of the state in which your vehicle will be registered in order for your car to be "street legal."

It Always Includes PIP/Property Coverage

No matter what state you're buying minimum auto insurance coverage in, you'll have personal injury protection (PIP) and property damage coverage built into your policy. Personal injury protection will cover medical bills and related expenses for the other party in the event of an accident where you are found at fault. Property damage protection will cover costs related to fixing the other party's vehicle or other property that was damaged in an accident.

It May Include Underinsured/Uninsured Protection

Some states also include coverage for underinsured and uninsured motorists as part of their minimum auto insurance protection. This will help to pay the difference in coverage if you are involved in an accident with a driver who doesn't have auto insurance or who doesn't carry enough insurance to cover your damages. Even if your state minimum policy doesn't include this type of coverage, it may be worth adding for peace of mind.

It Might Not Be Enough

State-minimum coverage can be a good option for some drivers and vehicles, but it's not for everybody. If you're still making lease or finance payments on your car, for example, you will be required by your lender to carry full-coverage insurance that includes comprehensive and collision coverage. Make sure you know exactly what's required based on your vehicle and lender.

If you're thinking about buying state-minimum auto insurance coverage, be sure to keep this information in mind as you prepare to shop around. From there, you can make a confident decision regarding how much coverage is right for your needs and budget.