Auto insurance coverage: what you need to know

Everyone has it. And yet no one understands it. Why does auto insurance have to be so complicated?

Don’t worry, Compare.com is here! Here is the simple guide to the auto insurance coverage you need.

In this article:

What Are the Different Types of Auto Insurance Coverage?

There is no such thing as “one size fits all” auto insurance. There is a lot of wiggle room between the two extremes: the cheapest minimum coverage that only meets state requirements, and full coverage, high limit auto insurance.

Liability coverage

You can think of liability as CYA coverage. This is the part of your auto insurance that pays for Other people injury and / or property damage in an accident for which you are responsible. Liability insurance – both bodily injuries and property damage responsibility – is almost always mandatory. And it can protect you greatly if you cause an accident that results in serious injury, or if the other driver chases you.

Read more: What is liability coverage?

Collision coverage

Collision coverage covers damage to your vehicle caused by a collision (as stated on the label). This auto insurance coverage begins when you collide with another vehicle or a fixed object (such as a tree or a wall), or when you overturn or damage your car by hitting a pothole. Collision coverage has a deductible, which is the money you pay out of pocket before insurance pays the rest.

Read more: What is collision coverage?

Full coverage

Comprehensive coverage is the “everything else” part of your auto insurance coverage. It pays to repair / replace your vehicle if it is stolen or damaged by an event other than a collision with another vehicle or object. Comprehensive covers minor incidents, such as broken windshields or a tree branch falling on your car. It can also cover vehicle damage caused by major disasters, such as damage from earthquakes, hurricanes, floods and even tornadoes.

Read more: Explanation of full coverage

Coverage for uninsured and underinsured motorists

It is not mandatory in all states, but coverage for uninsured / underinsured motorists can be very helpful. This coverage, in short UM / UIM coverage, can cover your injuries and / or property damage if you are struck by a driver who is uninsured or who does not have enough insurance. It can also pay for losses after a hit and run.

Driving without insurance is illegal, but it’s more common than you might think! According to Nationwide, around 13% of drivers not have insurance. In states where insurance is expensive, the uninsured rate is much higher. That’s why it’s a good idea to protect yourself with UM / UIM coverage.

Read more: Considering coverage for uninsured motorists?

Personal injury protection / medical payments

Injury protection, also known as PIP coverage, can pay your medical bills resulting from an accident, no matter who was at fault. PIP can also cover wages that you lose because you were injured in an accident, and sometimes other expenses, such as household help or childcare. Several states require PIP coverage, while a handful of others make it optional. Medical payment coverage, also known as Med Pay, only covers medical expenses.

Read more: What is Personal Injury Protection (PIP) insurance? and What is Med Pay coverage?

Premium blankets

In addition to the main types of coverage described above, you also have the option of adding auto insurance coverage for specific situations. These premium covers include:

  • Replacement of a new car: This supplemental coverage will pay for a new vehicle if you total your new car shortly after purchasing it. Mileage / time limits apply.

  • Learn more: What is a new car replacement?

  • Rental refund: When you can’t drive your car because it’s been in an accident, this coverage will pay for a rental car.

  • Mechanical failure: This auto coverage will cover certain auto repairs if your vehicle has a mechanical problem.

  • Learn more: How to compare breakage insurance plans

  • OEM Approval: OEM stands for Original Equipment Manufacturer. This additional coverage means that when your car is repaired after an accident, only genuine parts – not cheaper look-alikes – are used on your car.

  • Evanescent franchise: Each year that you drive without an accident, your deductible decreases by a certain amount (like $ 100 or $ 50).

  • Pet Injury Coverage: If your pet is injured in a car accident while traveling with you, this coverage can help pay vet bills.

  • Learn more: Does auto insurance cover pets?

What is the minimum auto insurance required by law?

The amount of auto insurance you need to legally drive depends on the state where you live. Some states require that you have PIP protection or medical coverage. Some require coverage for uninsured / underinsured motorists.

To find out how much car insurance you need to have, see minimum auto insurance laws by state.

How Much Insurance Do I Really Need?

A state minimum insurance policy may be the cheapest auto insurance option, but that doesn’t mean it’s your best choice. Insurance is about protecting you, your finances, and your family. So ideally your policy will include enough coverage to protect you if the worst happens – if you cause an accident with serious injury and are sued.

When you ask yourself “How much auto insurance do I need?” You have to take your financial situation into account. What monthly premium can you easily afford? Could you buy a new vehicle or pay for repairs yourself if you don’t have full collision coverage? Keep in mind that you can control your auto insurance costs by changing these two factors:

Your deductible

You can choose your deductible, although it probably can’t be zero (sorry). Typical amounts are $ 500 and $ 1,000. Increase your deductible for collision and comprehensive coverage will immediately lower your auto insurance rates.

Coverage limits

You can also choose your coverage limits, as long as they meet the minimum requirements for your state. You can start with a 25/50/25 policy ($ 25,000 per person, $ 50,000 per accident, and $ 25,000 in property damage), then compare quotes from higher limit policies to see how much you would pay.

What does auto insurance not cover?

Auto insurance unfortunately cannot cover everything. In your policy, you’ll see a lot of things listed as exclusions, which means they’re not covered. Some common auto insurance exclusions use a vehicle without authorization; race or compete in your car; normal wear and tear; and mechanical failures. Non-standard vehicles such as ATVs, golf carts, or snowmobiles may also not be covered.

Do I have to file an auto insurance claim?

If your vehicle is damaged in an accident, it is usually a good idea to file a complaint. That’s why you have insurance, after all!

If the accident is someone else’s fault, you should absolutely file a claim so that their insurance can cover your losses. However, sometimes it’s better not to file a complaint.

As a rule of thumb, if the cost of repairs is roughly equal to or less than your deductible, you should skip the claims process and pay for the repairs yourself. Or maybe you can live with scratches and dents on your vehicle.

Auto Insurance Coverage FAQs

Does auto insurance cover damage and injury you cause to other drivers?

Yes! This is what civil liability coverage is for. However, your auto insurance may not cover everything. If the cost of injury and / or property damage to other drivers exceeds your liability limits, you may have to pay more.

Does auto insurance cover theft?

Your comprehensive insurance covers vehicle theft, as well as the theft of all parts of your car. It can also cover damage caused by an attempted break-in. Auto insurance does not cover theft from your vehicle. If you leave something in your vehicle and it is damaged or stolen, it will not be covered by your auto insurance. (However, homeowner’s or tenant’s insurance may cover your losses.)

Does auto insurance cover injuries to your passengers?

It depends on who your passengers are. If you are the driver at fault, your personal injury liability insurance can help pay for injuries to your passengers, unless they are family or household members. In this case, your PIP or Med Pay can help cover their medical bills.

Does auto insurance cover you if your car gets destroyed and is worth less than what you owe on it?

If your car is totaled, your auto insurance will only pay its actual cash value. If you owe more than it’s worth, you still have to pay off your loan. Boo! The exception is if you have gap insurance, which can cover the difference.

Does your auto insurance cover you if you are hit by someone who has no insurance?

Uninsured Motorist coverage can cover you if you are hit by an uninsured driver or have a hit and run. If you don’t have this coverage, however, you will have to sue the driver.

Where is the best place to compare covers?

It’s easy ! Compare.com is the site you can trust to provide you with free, accurate, and genuine auto insurance quotes from the world’s best. auto insurance companies. Our customers save an average of $ 720 per year.


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Justin D. O'Neill