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Understanding What State-Mandated Car Insurance Requirements Actually Cover

Understanding state minimal automobile coverage requirements can be confusing. Here are the most common coverage initialisms and what they mean.

Covering Personal Injury Expenses

  • BI: Most states have Bodily Injury Liability, or BI, coverage. If a driver injures or kills another person, then Bodily Injury Coverage will pay for the other person's medical bills and any damages related to the accident. For example, if the injured person was unable to work as a result of the accident, the responsible driver's BI coverage will pay that person's lost wages. The BI coverage will also cover the driver's legal fees. This coverage applies even if the person harmed was a pedestrian or a bicyclist. 
  • PIP: Commonly called "no-fault insurance," personal injury protection, or PIP, covers any injuries that the driver sustains because of a car accident. This coverage pays for the driver's medical expenses, lost wages, and even ancillary expenses, like home maintenance costs, regardless of who is at fault. Because PIP insurance pays for the driver's expenses even if the driver caused the accident, it is not available in all states.

Covering Property Damage Costs

  • PD: Like BI coverage, Physical Damage Liability, or PD, is generally required. This type of coverage pays for the driver's own vehicle and is available as "collision" and "comprehensive" coverage. If the driver's vehicle is damaged because of an accident, then collision coverage will pay for the car repairs; if the driver's vehicle is damaged as a result of something other than a car wreck, like a fire or a break-in, then comprehensive coverage will be required for the damages to be paid. 
  • PPI: Michigan is the only state that requires Personal Property Insurance, or PPI. If the driver damages other people's property or parked cars, then PPI coverage will pay for the damages. For example, if a driver loses control of the vehicle and hits a city lamp post, careens into a person's gate, and then crashes into that person's parked car, then PPI will pay for this property damage. Michigan places a $1 million cap on PPI coverage. 

Covering Expenses That the Other Driver's Insurance (or Lack of Insurance) Does Not Cover

  • UM: Some states require drivers to carry Uninsured Motorist coverage, or UM. Even though the grand majority of states requires drivers to possess car insurance, not all drivers comply. As a result, some states require their drivers to carry UM insurance so that, if the driver is involved in an accident involving an uninsured motorist, the UM coverage will pay for the insured driver's medical expenses, lost wages, and even pain and suffering. It also covers any passengers riding with the insured driver.
  • UIM: Underinsured Motorist coverage, or UIM, is similar to UM coverage. The difference is that UIM coverage will pay for expenses that exceed the other driver's minimum insurance coverage. For example, if the other driver has BI coverage of $50,000, but the medical expenses are $90,000, then the driver's UIM coverage will take care of the remaining $40,000 not covered by the other driver's insurance.

Contact your auto insurance, such as Colling Insurance Services, Inc., for more information.