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What is a basic automobile policy?

car insurance basics

Understanding the basics of auto insurance and the types of coverages will help you customize an auto insurance policy to meet your needs. In this article, we will explain the different types of coverages, and the minimum policy limits required by law for the state of New Hampshire and Vermont. We will also make our own recommendations for auto insurance policy limits by coverage type. Adequate insurance coverage is part of a solid personal financial wellness plan, but everyone’s situation is different. Talk to your insurance agent about your unique situation. They will help you strike a balance between coverage and cost to get the most value out of your auto insurance. A typical auto policy includes six different coverages. Each coverage has its own policy limits and is priced separately.

1. Bodily Injury Liability Explained

Bodily injury liability coverage applies to injuries you, the designated driver, or policyholder cause to someone else. You and the family members listed on the policy are also covered when driving someone else’s car with their permission. 
It’s very important to have enough liability insurance, because if you are involved in a serious accident, you may be sued for a large sum of money. Definitely consider buying more than the state-required minimum to protect assets such as your home and savings.

The State of New Hampshire Auto Insurance Bodily Injury limit is $25,000 per person, per accident, and $50,000 per accident if more than one person is involved. 

The State of Vermont Auto Insurance Bodily Injury limit is $25,000 per person per accident and $50,000 per accident if more than one person is involved. 

Our recommended Auto Insurance Bodily Injury limit is $100,000 per person per accident and $300,000 per accident if more than one person is involved. 

With the rise in litigation and consistent increases in legal settlements, we recommend increasing your policy limits to protect your finances. If a legal judgment is ruled against you in an auto accident, you will be personally responsible for the balance of the lawsuit. This could mean a loss of your assets such as savings accounts, investments, property such as your home, and even garnished wages. 

It’s important to note the difference between bodily injury coverage and medical expenses coverage. Medical payments (MedPay) cover medical expenses for the insured, while bodily injury covers injuries and related costs to others. Bodily injury liability insurance covers medical bills, loss of pay, pain, and suffering, funeral costs, and legal fees if you are sued.  Bodily injury liability encompasses many accident-related expenses. 

2. Medical Payments or Personal Injury Protection (PIP)

Medical payments (MedPay) coverage pays for the treatment of injuries to the driver and passengers of the policyholder’s car. At its broadest, PIP can cover medical payments, lost wages, and the cost of replacing services normally performed by someone injured in an auto accident. It may also cover funeral costs.

The state of New Hampshire Auto Insurance Medical Payments coverage limit is $1,000.

The state of Vermont Auto Insurance Medical Payments coverage limit is $0.

Our recommended Auto Insurance Medical Payments coverage limit is $5,000.

For the insured and passengers medical and medical-related costs can add up. One way to assess the potential for out-of-pocket medical expenses is to take a look at your ability to pay for these expenses both from your medical insurance coverage and out of your personal bank accounts. With larger deductibles, additional fees, less coverage per procedure, and more, out-of-pocket expenses have increased for individuals and families. In addition, medical payments or personal injury protection covers more than just medical expenses. It will also pay for lost wages and funeral expenses. 

3. Property Damage Liability Explained

Property damage liability coverage pays for damage you (or someone driving the car with your permission) may cause to someone else’s property. Usually, this means damage to someone else’s car, but it also includes damage to lamp posts, telephone poles, fences, buildings, or other structures your car hit.

The State of New Hampshire Auto Insurance Property Damage Liability coverage limit is $25,000. 

The State of Vermont Auto Insurance Property Damage Liability coverage limit is $10,000. 

Our recommended Auto Insurance Property Damage Liability coverage limit is $100,000

One reason we recommend a large increase in property damage coverage is the current value of vehicles. The cost to repair and replace the more sophisticated vehicles on the road is expensive. Repair and replacement of computers and sensors in addition to autobody costs can add up quickly. New SUVs and pickup trucks range between $50,000 and $90,000 and if you’re in a multi-car accident the minimum limit would not be enough to cover damages especially if the vehicles were totaled. Property damage liability also covers damages to stationary objects such as buildings, signposts, and fences. 

4. What is Auto Insurance Collision Coverage

Collision coverage pays for damage to your car resulting from a collision with another car, object or as a result of flipping over. It also covers damage caused by potholes. Collision coverage is generally sold with a deductible of $250 to $1,000-the higher your deductible, the lower your premium. Even if you are at fault for the accident, your collision coverage will reimburse you for the costs of repairing your car, minus the deductible. If you’re not at fault, your insurance company may try to recover the amount they paid you from the other driver’s insurance company. If they are successful, you’ll also be reimbursed for the deductible.

5. Comprehensive Auto Insurance Coverage Explained

This coverage reimburses you for loss due to theft or damage caused by something other than a collision with another car or object, such as fire, falling objects, missiles, explosion, earthquake, windstorm, hail, flood, vandalism, riot, or contact with animals such as birds or deer. Comprehensive auto insurance is usually sold with a $100 to $300 deductible, though you may want to opt for a higher deductible as a way of lowering your premium. Comprehensive insurance will also reimburse you if your windshield is cracked or shattered. Some companies offer glass coverage with or without a deductible. States do not require that you purchase collision or comprehensive coverage, but if you have a car loan, your lender may insist you carry it until your loan is paid off.

6. Uninsured and Underinsured Motorist Coverage

This coverage will reimburse you, a member of your family, or a designated driver if one of you is hit by an uninsured or hit-and-run driver.

If you have any questions about your automotive insurance give us a call at 800-392-6532 or email


This post is for informational purposes. The details and conditions of insurance policies vary. We always recommend speaking with an agent to understand the terms of your existing policies and the policies you plan to purchase.