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A Crash Course in Coverage:
Essential Auto Insurance Options

APEF: Solving the Financial Illiteracy Crisis

When you’re learning about personal finance, another topic that's important to understand is auto insurance. Once you get your license and begin driving (yay!), it's time to think about car insurance. When you drive a car, auto insurance helps protect you and others should an accident or damage occur. There are several different types of auto insurance coverage (because of course there are), each serving a different purpose. In this article we’ll break down the most common auto insurance options to help you navigate the world of car insurance with confidence.

What’s required?

Each state mandates minimum car insurance requirements for motorists, which typically includes Auto Liability Coverage. Liability coverage is a type of insurance that helps pay for damages and injuries you cause to other people or their property in an accident. There are two parts to liability coverage:

  • Bodily Injury Liability covers medical expenses, lost wages, and legal fees if you're at fault in an accident that injures someone else.

  • Property Damage Liability covers repair or replacement costs for damage you cause to someone else's property, such as their car or mailbox.

Most states require you to carry a minimum amount of liability coverage.

While liability coverage is essential, there are additional options to consider for more comprehensive protection:


Uninsured and underinsured motorist coverage (UM/UIM) protects you if you're in an accident with a driver who doesn't have insurance or doesn't have enough insurance to cover your expenses.

Comprehensive car coverage helps pay for damages not caused by collision. This may include natural disasters like hailstorms, floods, and fires, as well as theft and vandalism. When purchasing comprehensive coverage you can usually select a deductible amount which must be paid upfront before your insurance pays the rest.


Collision coverage covers damage caused by (you guessed it) a collision with another vehicle or object, no matter who was at fault. This coverage can be especially beneficial if you experience an accident and need repairs on your vehicle; similar to comprehensive policies, collision plans typically feature a deductible payment amount that you select when you purchase the policy.

Medical payments coverage (MedPay) helps pay for medical expenses if you're injured in a car accident, regardless of who caused the accident. MedPay can cover medical bills for you and your passengers, as well as certain costs like ambulance rides and hospital stays.

Personal injury protection (PIP), also known as no-fault insurance, helps pay for medical expenses and other related costs if you're injured in a car accident, no matter who is at fault. PIP can cover medical expenses, lost wages, and even funeral expenses. It may also cover other passengers in your car and sometimes injuries you sustain as a pedestrian or cyclist.


Understanding different types of auto insurance coverage is essential for protecting yourself and your vehicle on the road…not to mention that having at least basic insurance is  a requirement. Knowing these common auto insurance options will help you make informed decisions about the coverage you need for safe and secure driving! The right amount of coverage depends on your car's value, your financial situation, and your risk tolerance.  You can always talk to your guardians or an insurance agent to find a plan that balances affordability with the protection you need.


Bonus Tip: Being a student doesn't mean you're stuck with sky-high insurance rates. Many insurance companies offer discounts for student drivers who can prove they're responsible:

  • Good Student Discount: Hit the books! Maintaining a good GPA (typically a B average or higher) can slash your premium significantly.

  • Student Away at School Discount: Leaving your car at home while you're away at college can lead to a discount, since you'll be driving less.

  • Driver's Education Completion Discount: Taking a driver's education course can demonstrate your commitment to safe driving and earn you a discount.

And remember- maintaining a good driving record is the best way to keep your insurance premiums low! 

Soft skills refer to a set of personal attributes, behaviors, and social attitudes that enable individuals to interact effectively with others in a workplace or social environment. These skills are essential for building healthy relationships, communicating effectively, solving problems, and collaborating with others.

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