Understanding what car insurance covers and choosing the right policy is critical to protecting yourself on the road. Whether buying your first policy or reviewing options at renewal time, here is an overview of key coverages, recommended limits, ways to save, and factors that influence premium pricing. Use this comprehensive car insurance guide to make informed decisions.
Liability Insurance: Protection For Others
Liability insurance covers injuries or property damage you cause to other parties in an accident when you are at fault. It satisfies the liability portion of claims against you up to the policy limits. Bodily injury liability covers medical expenses and lost wages, while property damage covers repair costs to the other vehicle or property.
Liability insurance is required in nearly every state. Many experts recommend $100,000 per person and $300,000 per accident as minimum liability limits. Higher limits of $250,000/$500,000 or more provide even greater protection of assets if sued.
Collision Insurance: For Damage to Your Vehicle
Collision coverage pays for repairing or replacing your vehicle after an at-fault accident with another car, object or as a result of rollover. It also covers damage from potholes, vandalism and other impacts. Collision claims are subject to your chosen deductible amount (e.g. $500 or $1000).
Collision is optional but recommended for vehicles you're still paying off or would have trouble replacing. For older cars, dropping collision helps lower premiums.
Comprehensive Coverage: For Non-Collision Damage
Comprehensive insurance covers damage to your car that isn't from a collision, like theft, falling objects, fire, floods, hail, vandalism and windshield cracks from rocks. Like collision, you pay a deductible per comprehensive claim made.
Comprehensive is optional but highly recommended since liability doesn't cover damage to your car. It provides extensive protection for little premium cost.
Uninsured/Underinsured Motorist Coverage
Uninsured motorist coverage protects you if you're hit by a driver with no insurance. Underinsured motorist coverage applies if the at-fault driver lacks sufficient liability coverage to pay for your losses. This protects you from bearing repair costs and medical bills after getting hit by an irresponsible driver with too little or no insurance.
Personal Injury Protection/Medical Payments Coverage
Personal injury protection (PIP) and medical payments coverage pay the medical expenses of you and your passengers after an accident, regardless of fault. They help cover bills the health insurer doesn't pay. These coverage types may be mandatory in "no-fault" states.
Gap Insurance: Protects You if Car is Totaled
Gap insurance covers the difference between what your vehicle is worth and what you still owe if it's totaled, preventing you from owing thousands to the lender if your loan balance exceeds the car's value. It's worth considering for new cars that depreciate quickly.
Rental Car Reimbursement: Pays for Rentals
Rental coverage reimburses you for rental car expenses while your vehicle is being repaired after filing a covered claim. While optional, it provides access to rental cars you otherwise would have to pay for out of pocket.
Roadside Assistance: Help When Stranded
Roadside assistance provides towing to a repair shop, battery jump starts, flat tire changes, lockout services, and fuel delivery if you run out. It's inexpensive yet useful coverage for avoidable headaches.
Understand Deductibles and Policy Limits
The auto policy limits dictate how much the insurer pays per covered incident. Deductibles require you to pay out of pocket before coverage kicks in. Choosing lower deductibles costs more in premiums but saves at claim time. Higher liability limits are wise to fully protect assets.
Look into Discounts to Lower Premiums
Taking defensive driving courses, maintaining good credit, insuring multiple cars or drivers on one policy, going paperless, paying annually, and belonging to certain organizations can all earn you discounts to reduce car insurance premium costs.
Shop Around for the Best Rates
Rates vary significantly among insurers for the same coverage. Regularly compare quotes from different companies when policies renew to find potential savings. New insurers offer lower rates to attract customers.
Credit, Driving Record Affect Premiums
Insurers charge more for bad credit, accidents, moving violations like speeding tickets, and claims history. Maintaining good credit and a clean driving record keeps car insurance affordable.
Following the guidance in this car insurance overview helps ensure you select adequate, cost-effective coverage customized to your needs and budget. Consult agents or company representatives for policy-specific questions.
Frequently Asked Questions About Car Insurance (FAQ)
What is the minimum car insurance coverage required?
Liability insurance with limits of 25/50/25 (25k per person/50k per accident/25k property damage) is the minimum in most states. Higher limits are recommended.
Is rental car insurance worth purchasing?
If you have rental coverage through your auto policy or credit card, additional insurance through the rental company is often redundant and unnecessary in most cases.
What insurance do I need to lease a car?
Leased vehicles require comprehensive, collision coverage and gap insurance. Liability limits should meet state minimums. Review lease requirements.
How much liability coverage should I get?
Experts often recommend $100,000 bodily injury per person, $300,000 per accident minimums. $250,000/$500,000 limits or higher provide greater protection from lawsuits.
Can I get car insurance with bad credit?
Yes, but options are limited and you’ll pay more. Some insurers specialize in high risk drivers. Improve your credit score to lower rates.