When you purchase auto insurance, you are acquiring a mix of coverages that comprise your policy. For this reason, it is useful to understand what types of auto insurance you need and how to set coverage limits.
This article discusses typical auto insurance coverage and optional coverage that can be added to your policy. Then, we will discuss a few of our findings from our analysis of the top auto insurance providers. So fasten your seatbelts and let’s get going!
We recommend obtaining auto insurance quotes from multiple companies so that you can compare coverage and costs. Because premiums are made to order, what is best for your neighbor may not be best for you.
Liability car insurance
Liability auto insurance protects the other driver when you are at fault in an automobile collision. It provides coverage for bodily injury (BI) and property damage (PD) (PD). BI covers the costs associated with injuries experienced in an accident, whereas PD covers property damage. In the majority of states, drivers are required to carry liability insurance or demonstrate alternative financial responsibility. This is to ensure that drivers who injure others or cause property damage can adequately pay the victims.
Bodily injury liability
In almost every state, bodily injury liability coverage (BI) is the most prevalent type of auto insurance. It protects you if you cause an accident that results in the injury or death of others. Your auto insurance company will pay for the other party’s medical bills, missed wages, and burial expenses. Even if the other party decides to sue you in court, BI will cover your legal expenses.
Your insurer will protect you up to the limits of your policy’s bodily injury (BI) coverage; any more costs will be your burden. While the majority of states mandate BI limits of $25,000, they can range from $10,000 per individual in Florida to $50,000 per individual in Alaska. You can raise your limits as long as state law lets you, but you should think about your budget and whether or not an accident could put your assets at risk.
Individuals frequently confuse physical injury liability with personal injury protection (PIP). Your insurance company pays for any injuries you or your passengers get in an accident if you have PIP coverage.
Property damage (PD) insurance covers property damage you may cause to another party. For instance, if you lose control of your vehicle and crash into your neighbor’s home, your property damage insurance would cover the cost of repairs, according to the policy limitations. Similarly, if you rear-end someone’s automobile without their fault, property damage insurance would cover the incident. Here you can learn more about property damage responsibility.
Each state specifies the minimum amount of PD insurance required for drivers. However, keep in mind that if you opt for minimum PD coverage, you will be responsible for any costs that exceed your coverage limitations.
A common source of confusion is whether property damage insurance covers your vehicle. Simply put, it does not. To cover damage to your car, you will need one of the two physical damage auto insurance coverages described below.
Physical damage car insurance
When your vehicle is damaged in an accident or by a falling tree limb, your physical damage auto insurance will cover the cost of repairs. It includes two kinds of coverage: collision and comprehensive, which are separated based on how your vehicle was damaged. You will be required to pay a deductible, often ranging from $50 to $2,000, before coverage kicks in. Your choice of deductible affects your rate, with bigger deductibles yielding lower premiums.
Collision coverage is an optional insurance rider, but ValuePenguin strongly recommends that you purchase it. If it turns out that you caused the accident, collision insurance will cover the cost of repairs to your own vehicle. Even if you are the best driver in the world and did not cause the accident, there is always the possibility that you will be found partially at fault. If this is the case, you may find yourself embroiled in a legal battle to establish your innocence. In this case, your collision coverage will pay for the repairs to your car while your insurance company works to prove you weren’t at fault and get their money back.
When you are involved in an automobile accident that was caused by another driver, the property damage part of that driver’s auto insurance policy would pay for repairs to your vehicle.
Comprehensive insurance pays to restore your vehicle if it is damaged by the following:
- Natural disasters
- Collision with an animal
For instance, if you park your car under a tree and heavy snow causes a branch to fall and smash your windshield, comprehensive coverage, often known as “other than collision coverage,” can help pay for the repairs. Comprehensive insurance is similar to collision insurance in that it is not required by the state. However, if you finance or lease your car, your lender may need it.
Medical Payments Coverage
The coverage aids in the payment of medical expenses and rehabilitation costs. In some states, this optional coverage may not be offered. However, if you have medical payments coverage and are involved in an automobile accident in another state, your coverage will apply regardless of the location of the event.
personal injury protection
Personal injury insurance (PIP) compensates for your and your passengers’ medical bills in the event of an automobile accident. It is sometimes known as “no-fault insurance” because it pays for your injuries regardless of who caused the accident. PIP will occasionally cover missed wages, household expenditures, and even burial costs in addition to hospital charges. Some states, such as New York and Michigan, require PIP, while others do not.
In “at-fault” states, you must file a claim or maybe bring a lawsuit against the at-fault party’s insurance company. This lengthy procedure can be less appealing, especially for those with little resources. However, because PIP compensates for expenditures regardless of culpability, premiums in no-fault states may be slightly higher. Refer to our personal injury protection page for more information on how this coverage works and how much it might cost.
Uninsured/underinsured motorist coverage
The majority of states require drivers to obtain vehicle liability insurance, yet there are still many drivers on the road without coverage. The percentage of uninsured drivers varies per state, averaging between 12 and 25 percent. When you’re in an accident with an uninsured driver, your uninsured and underinsured motorist coverages kick in. This coverage is reasonably inexpensive and can be extremely beneficial in certain situations. Some states incorporate UM/UIM in their minimum vehicle insurance requirements.
Uninsured motorist coverage
If you are hit by an uninsured driver, your uninsured motorist coverage will pay for your medical fees and vehicle repairs. This may involve hit-and-run accidents and instances in which the vehicle was stolen.
Underinsured motorist coverage
This covers your medical expenses and car repair costs if you are hit by a driver with insufficient insurance to cover the harm they’ve caused. If your claims exceed these limits, you can sue the driver for additional reimbursement; however, the underinsured driver may not have sufficient assets to pay in some instances. Underinsured motorist coverage will assist in covering the remainder of medical bills and other accident-related liabilities.
SR-22, or FR-44 in certain states, is not a sort of auto insurance, but it deserves mention here nonetheless. The state may require you to obtain auto insurance and provide proof of coverage if you are caught driving without insurance or otherwise breaking traffic regulations. This evidence is the SR-22 or FR-44 form, which your insurer must file on your behalf.
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Bottom line : This article discusses typical auto insurance coverage and optional coverage that can be added to your policy. Liability auto insurance protects the other driver when you are at fault in an automobile collision. It provides coverage for bodily injury (BI) and property damage (PD) (PD). BI covers the costs associated with injuries experienced in a collision. If you are injured in an auto accident, your insurer will protect you up to the limits of your policy’s bodily injury (BI) coverage.
The majority of states mandate BI limits of $25,000, but they can range from $10,000 per individual in Florida to $50,000 in Alaska. Property damage (PD) insurance covers property damage you may cause to another party. For instance, if you lose control of your vehicle and crash into your neighbor’s home, your property damage insurance would cover the cost of repairs, according to the policy limitations. Physical damage car insurance Collision coverage Collision coverage is an optional insurance rider, but ValuePenguin recommends that you purchase it. Collision insurance pays for the property damage caused by another driver’s auto insurance policy, which would pay for repairs to your vehicle.
Personal injury insurance (PIP) compensates for your and your passengers’ medical bills in the event of an automobile accident. Some states, such as New York and Michigan, require PIP, while others do not. The percentage of uninsured drivers varies per state, averaging between 12 to 25 percent. Underinsured motorist coverage (UM/UIM) and SR-22/FR-44 in certain states is not a sort of auto insurance, but it deserves mention here nonetheless.