What Do Different Auto Insurance Options Cover and Which Ones Do I Need?


Auto insurance policies are mandatory and may often be thought of as a necessary evil – that is until you’re in an accident. The best way to make sure you don’t find yourself underinsured, is to understand your options and anticipate your needs.

Nearly every state in the U.S. requires motor vehicle owners to carry some minimum amount of liability insurance. In the few states that don’t have this requirement, drivers who chose to forego insurance must pay an uninsured vehicle fee to the state or in the case of New Hampshire and Mississippi may post cash bonds instead.

In Rhode Island, drivers are required by law to carry minimum liability insurance coverage. To some, this may feel like an unnecessary burden, but to those involved in the approximately 6 million motor vehicle accidents that occur in the US every year, a properly chosen insurance policy can mean the difference between financial ruin, and getting back on your feet.

The National Highway Traffic Safety Administration (NHTSA) estimates that in 2015, US roads saw at least 6.3 million motor vehicle accidents – or roughly 17 thousand accidents every single day. The total annual cost of these accidents is estimated to reach $230.6 billion. Based on these staggering figures, having a well-chosen auto insurance policy becomes a necessary protection as opposed to a burdensome requirement.

What do all those different types of coverages mean? Which coverages are really worth adding to the standard minimum coverage and which are worth increasing beyond the required minimums? The answers to these questions are largely dependent upon a variety of factors including where you live, how often you drive, what assets you own, the income you earn, and drivers in your household. Unfortunately, no one knows if or when an accident will occur, or how severe ones injuries might be.

However, what you can control is your own auto insurance coverage.  It is imperative to have knowledge of the available coverages and how they apply to your individual situation so that you can make an informed decision as to what types and how much insurance coverage to carry. Here’s an overview.

Liability Insurance

Liability insurance covers you in situations where you are the at-fault party in an accident. This type of insurance is mandatory in most states, including Rhode Island. Liability insurance covers the two following types of damages:


Property Damage

Property damage is paid out by the at-fault driver’s insurance company to the other party, deemed not at fault,  in order to pay for physical damage to their vehicle, or to other property damaged as a result of the accident. The required minimum liability coverage in Rhode Island is $25,000 per person or $50,000 per accident,

Bodily Injury

Bodily injury damage covers the cost of medical treatment, lost wages, and pain and suffering for anyone injured in an accident, and deemed to be not-at-fault. The required minimum in Rhode Island is $25,000 per person or $50,000 per accident,

   These basic minimum limits may be enough to meet the state requirement, but can be woefully inadequate in some situations. Imagine the following scenario. Let’s say you are responsible for an accident that results in bodily injuries to four passengers in another vehicle and each of those passengers requires substantial and prolonged medical treatment. Even if the cost of all the medical treatment for each person does not exceed the basic limit of $25,000, the total combined medical bills for all four injured passengers is likely to exceed the minimum coverage of $50,000 per accident.

   In this case, your insurance company would pay out the $50,000 in minimum coverage, and the injured passengers could then sue you for the remainder of their medical bills, lost wages, and pain and suffering.

   Analyzing potential scenarios like this can help you to make informed choices about the amount of liability coverage you really need.

Uninsured/Underinsured Motorist Coverage

Uninsured/underinsured motorist coverage is paid out by your insurance carrier directly to you in the event that you’re the victim of an accident that was caused by someone who had no liability insurance, or whose policy limit is inadequate to cover all of your resulting damages. The RI DMV estimates that 15% of all cars in Rhode Island are uninsured. Without uninsured/underinsured motorist coverage, it will be extremely difficult for you to recover all of the resulting damages from an accident with one of these uninsured vehicles.

Why is this? In the previous example, we mentioned that you could be held responsible for expenses that exceeded your liability insurance coverage. So couldn’t you simply sue the at-fault party for the remainder of your damages? Perhaps, but consider this: someone who is violating the law by driving around uninsured, or who carries only the minimum required insurance, likely doesn’t have the financial resources or assets to cover your damages in the result of a jury verdict and judgment against them.

In many states, this type of insurance is not required. However, given the scary statistics of uninsured and underinsured drivers, it is essential in order to have the peace of mind that you and your family will be fully compensated regardless of the at-fault party’s insurance coverage.

In Rhode Island, insurance companies are required to offer uninsured/underinsured motorist coverage along with liability policies. However, an individual may lawfully decline this coverage in writing.  Additionally, uninsured/underinsured coverage also applies to both pedestrian and bicycle accidents with another vehicle.


Collision Coverage

This type of insurance policy is optional in the state of Rhode Island. It is paid by your own insurance company directly to you and covers physical repairs or replacement of your vehicle, up to its fair market value. This optional coverage applies in the event that you are found to be at-fault in an accident or the other vehicle was uninsured. It applies to vehicle damage sustained due to a collision with another vehicle, or damages sustained in a single-vehicle accident such as a rollover or a collision with an object (for example, a tree). It does not cover the costs of medical treatment, pain and suffering, damage caused to other vehicles or property, or losses unrelated to a crash (for example, theft).


Comprehensive Coverage

Another type of optional insurance, comprehensive coverage, will help you to recover the value of your vehicle if it is damaged due to natural disasters, fire, vandalism, and other factors not related to motor vehicle accidents or normal use. Comprehensive coverage may also cover theft. It may be required to purchase this type of policy if a car is leased or financed. This type of insurance comes with a deductible – an out-of-pocket fee that will need to be paid first before your insurance company reimburses the remainder of the claim.


Medical Payments Coverage and Personal Injury Protection (PIP)

Medical Payments coverage will pay the cost of out-of-pocket medical treatment for injuries that the driver, their passengers, or their family member who may have been driving the car, sustained in an accident, regardless of who is at fault. This type of insurance can cover medical costs even if you are injured in a car other than your own, or as a pedestrian, or bicyclist. This type of coverage is meant to supplement an individual’s health insurance and can be used for reimbursement of co-pays, prescriptions, and treatment received outside of a healthcare network.

Personal Injury Protection (PIP) may also help cover medical expenses as well as a portion of lost wages as a result of an inability to work after an accident. PIP is not mandatory in the state of Rhode Island, but is mandatory in the state of Massachusetts.

Other Types of Coverage and Important Reminders

In Rhode Island, there are two additional coverages which can be added to a standard auto insurance policy – rental reimbursement coverage and towing and labor coverage. The former will reimburse a vehicle owner for their expenses if they need to utilize a rental car while their vehicle is being repaired or while they are shopping for a replacement vehicle. Towing and labor coverage will reimburse the costs of towing the vehicle to a repair shop in the event of an accident or if the vehicle breaks down.

It is important to note, all car owners need to remember that they are required by law to carry proof of insurance in their vehicle at all times. Acceptable proof of insurance includes an insurance card issued by your carrier or a photocopy of it. Any such documents need to clearly state the car owner’s name. Failure to present such proof if involved in an accident, or if you are pulled over by an officer, could result in a fine of $500.