Auto Insurance Coverage'sIn order to be an educated consumer, you will want to research all the types of auto insurance coverage before you decide what you need to buy. If you don't, it is possible that you will not have the coverage you need, or maybe even worse, will be paying for coverage you will never use.
From liability to gap to SR-22, these articles will explain each type of auto insurance so you can make informed, smart, auto insurance coverage decisions.
Auto Insurance Coverage Basics
Liability car insurance pays for accidents you cause and is typically required by state law. Find out what it covers and how much you’ll need on your policy.
Costs of injuries and property damage can be expensive. In fact, they can be so expensive that they are generally well out of the average person’s budget. If you are unable to pay, you risk losing your assets, such as your home, in lawsuits.
The best way to protect yourself from huge financial losses after an accident is by having liability insurance.
Types of Liability CoverageLiability insurance is the most commonly required type of car insurance throughout the various states. Even in the rare state that does not require liability car insurance, you may find that having liability insurance is worth the financial security.
Liability insurance is composed of the following coverage types:
- Bodily injury coverage – pays for injuries suffered by others in an accident you caused.
- Property damage coverage – pays for damage you cause to another person’s property (typically their vehicle) in an accident.
Liability Coverage LimitsEach state that requires drivers to have liability insurance has its own set of minimum limits your car insurance policy must meet. The limit refers to the maximum amount your car insurance company will pay in a claim.
You may notice 2 numbers associated with bodily injury liability coverage:
- The first number is the limit covered per person in an accident.
- The second number is a total limit covered if 2 or more people are hurt in the accident.
Example of Minimum Liability Insurance Limits
While minimums will vary amongst states, you’ll often see them listed as follows:
- $15,000 for bodily injury, per person.
- $25,000 for total bodily injury.
- $10,000 for property damage.
Does Liability Insurance Cover Personal Damages?Liability insurance only pays for bodily injuries or property damage suffered by others when you are at fault in an accident.
Your own injuries or property damage are not covered through liability insurance.
Liability Insurance CostsDifferent factors can go into determining the cost of liability insurance. When comparing car insurance quotes, keep in mind that the following may factor into your rates:
- Your driving record.
- The limits you choose for each coverage.
- You may find that your state’s minimum limit requirements do not provide adequate financial protection.
- Car insurance companies generally offer higher limits at an increased rate.
- Your gender.
- Your marital status.
- Your credit score.
- This is not applicable in all states, as some states make it illegal for insurance companies to use your credit score when determining premiums.
No-Fault Insurance and Liability InsuranceIf you live in one of the handful of states that requires no-fault car insurance, or personal injury protection coverage, you may still required to buy liability car insurance.
While your state is considered a “no-fault state,” this does not mean that fault is taken completely out of the question after a car accident.
When you are found at-fault for an accident, the other person’s no-fault insurance will pay for his own bodily injury first. You can still be held responsible for injury-related costs the other driver’s no-fault insurance was unable to pay.
Your liability insurance will kick in at this point to help you cover these costs.
Umbrella InsuranceUmbrella insurance is a type of insurance that provides broad financial protection by working in conjunction with most types of liability insurance you have, including:
- Liability auto insurance.
- Liability homeowner’s insurance.
- Liability boat insurance.
Vehicle coverages can help act as financial protection when your car is damaged or broken down.
Remember, this coverage only pays for your vehicle damages. For comprehensive protection, remember to look into the other 2 main categories of car insurance:
- Liability insurance – Pays for injuries and property damage to others in an accident you cause.
- Medical coverages – Helps pay for medical care after you or your passengers sustain injuries in an accident.
Comprehensive and Collision InsuranceWhen it comes to vehicle insurance coverages, these two are the big ones. Together they help protect your car from damages caused by numerous events.
NOTE: These coverages do not cover damages you cause to other people’s cars. See our Liability Insurance page to learn how to protect yourself from costs incurred by other drivers after an accident.
Comprehensive Insurance CoverageThis coverage, sometimes referred to as “other than collision,” will help pay for repairs to your car after it has been damaged by an event other than a traffic accident.
Coverage terms will vary by provider, but you will generally be covered for damage from:
- Falling (missile) objects.
- Natural disasters.
Collision Insurance CoverageThis coverage will help pay for repairs to your car after it has been damaged in a traffic accident.
NOTE: Comprehensive and collision coverages are optional coverages; however, they are typically required as part of a car loan or lease agreement.
Emergency Road Service CoverageSometimes, out of nowhere, things go wrong with your car. Emergency road service coverage, also known as towing and labor, can help you with certain vehicular mishaps such as:
- Tire blowouts.
- Dead batteries.
- Locked-in keys.
Mechanical Breakdown InsuranceThis coverage is very similar to an extended warranty offered by a car dealer. Mechanical breakdown insurance helps pay for several types of major mechanical issues to your car and can be much more affordable than standard extended warranties.
Not all car insurance companies offer mechanical breakdown insurance. Speak to your insurance agent or representative to find out if this coverage is available to you.
Gap Insurance CoverageFor drivers with car loans or who are leasing their car, gap coverage can be highly valuable.
When your car is declared a total loss, your car insurance company will reimburse you the value of your vehicle at the time of the total loss using your comprehensive or collision coverage.
There is typically a difference between:
- The current
fair market value of your car.
- The amount you still owe on the car.
Loan/Lease Payments CoverageThis is very similar to gap coverage, except that it has one major difference:
It will only cover up to a specified percentage of your vehicle’s estimated value.
Custom Parts and Equipment CoverageFor those who like to modify their cars, this coverage is especially valuable. Custom parts and equipment coverage can help pay for after-market installed parts, including (but not limited to):
- Engine parts.
- Cosmetic features.
Purchasing Vehicle CoveragesWhen getting car insurance quotes, keep in mind that not all car insurance companies will offer all of these coverage types. Also, because they are directly related to your vehicle, your car can heavily factor into the price of these coverages.
Typical factors that help determine car insurance rates include:
- Your car’s:
- Where you park your car.
- Your driving record and claims history.
- Your credit history.
- Some states do not allow insurance companies to factor your credit history into your premium.
- Your chosen deductible:
- This is your out-of-pocket expense towards a claim.
- Choosing a higher deductible can get you a lower premium.
Don’t forget to keep in mind that when it comes to car insurance, all policies are not created equally. Study your policy and speak to your car insurance agent or representative to learn all about your auto insurance coverages.
Injured in a car accident? Medical car insurance coverages include: liability, personal injury protection (PIP insurance), and medical payments.
Medical car insurance coverage helps pay for costs you encounter after you or your passengers are hurt in a car accident.
The two main types of medical coverage are:
- Medical payments coverage.
- Personal injury protection.
Medical Payments CoverageMedical payments coverage will help pay for your medical bills after you are hurt in a car accident.
Medical payments will also help pay for:
- Funeral costs.
- Injuries suffered by your passengers.
- Injuries you sustain as a pedestrian or bicyclist if you are hit by a car.
- Necessary dental care resulting from a car accident.
Personal Injury ProtectionAlso known as “no-fault insurance," personal injury protection (PIP) is similar to medical payments coverage in that it helps pay your medical bills no matter who is found at fault for a car crash.
The key differences between PIP and medical payments coverage are:
- PIP is generally required in no-fault states – which are also the only states where PIP is available.
- Medical payments coverage is typically offered as an optional coverage.
Buying Medical CoverageWhen comparison-shopping for car insurance, you should consider some factors before purchasing medical coverages.
Purchasing Personal Injury ProtectionAs stated above, where PIP is offered, it is typically required. This is because these no-fault states use personal injury protection coverage to restrict the number of car accident-related lawsuits. If your injuries are already covered, you are less likely to sue.
This makes coverage limits one of the biggest considerations when purchasing PIP. No-fault states typically set minimum limits when it comes to personal injury protection coverage. However, you may find these limits do not provide enough coverage.
Car insurance companies can offer higher limits, but keep in mind that higher limits mean higher rates.
Purchasing Medical Payments CoverageWhen purchasing medical payments coverage, remember that while a state may require car insurance companies to offer this coverage to you, you have the option to turn it down.
One of the biggest considerations when buying medical payments coverage is something you should also consider when purchasing PIP: your health insurance. Read below to learn more.
Medical Coverage and Your Health InsuranceWhen buying any type of medical car insurance coverage, you should consider your health insurance.
Depending on what and how your health insurance covers in regards to injuries due to car accidents, you can better decide how much medical coverage you need to purchase, or if you even need to purchase any at all.
Drivers with excellent health insurance may be able to save money by purchasing only PIP minimum limits, or by not purchasing medical payments coverage.