Choosing the right car insurance can be confusing, but understanding the different types of coverage available will help you make an informed decision. Below, we break down the key policies you should consider when shopping for car insurance.
Types of Coverage in Your Auto Insurance
Your auto insurance policy consists of several components designed to protect you, your passengers, and other drivers. The most common types of coverage include liability insurance, property damage liability, and bodily injury liability.
- Liability Coverage: This helps cover the costs if you’re at fault in an accident. It’s important to note that this coverage goes to the other driver (or their passengers), not to you or the people in your car.
- Bodily Injury Liability: If you’re at fault in an accident, this coverage pays for the medical expenses of injured passengers in the other vehicle.
- Property Damage Liability: This coverage helps pay for repairs to the vehicle you hit in an accident where you are at fault.
Liability coverage is often expressed in ratios like 20/50 or 100/300, which refers to the dollar amount your insurance will pay for each injured person and the total amount for all occupants in the other vehicle. For example, a 100/300 policy will pay up to $100,000 per person and up to $300,000 for all passengers in the other vehicle.
Additional Coverage Options
While liability coverage is required in most states, other policies protect you and your vehicle in various ways:
- Personal Injury Protection (PIP): PIP helps cover medical expenses for you and your passengers, regardless of who caused the accident. It may also include lost wages if you’re unable to work due to injury.
- Uninsured/Underinsured Motorist Coverage: If you’re involved in an accident with a driver who has no insurance or insufficient coverage, this policy helps cover your medical expenses and damages.
- Collision Coverage: This pays for repairs to your car if you’re in an accident, whether you’re at fault or not.
- Comprehensive Coverage: This covers damages to your car from non-collision events, like theft, vandalism, or natural disasters.
Minimum Coverage Requirements
Every state in the U.S. requires some form of auto insurance, but the minimum coverage requirements vary. Typically, states mandate a minimum level of liability insurance, but these amounts may not be enough to fully cover repair costs or medical bills in the event of an accident. Many drivers opt for coverage that exceeds the minimum required to ensure they’re fully protected.
Your car insurance provider will likely recommend coverage based on the value of your assets—ensuring that you’re covered for more than just the minimum, in case of significant damages or lawsuits.
Review Your Health Insurance
Before purchasing car insurance, it’s a good idea to check your health coverage. If you’re the only driver in your vehicle, you may not need personal injury protection (PIP), especially if your health insurance covers injuries sustained in a crash. However, you should still ensure you’re covered for accidents involving uninsured or underinsured drivers. These policies typically cost about $40 annually for $100,000 in coverage.
Collision and Comprehensive Coverage: Deductibles
Both collision and comprehensive insurance come with a deductible, which is the amount you must pay out-of-pocket before the insurance kicks in. When choosing your deductible, consider that a higher deductible will lower your premium. If you can afford a higher deductible, it can make sense to save on your monthly premiums and only pay for smaller repairs yourself.
Keep in mind that insurance claims for collision or comprehensive coverage are based on the current market value of your car—not the price you originally paid for it. This is important when deciding how much coverage you need.
No-Fault Insurance
In some states, you’ll need no-fault insurance, which means your insurance company will pay for your medical expenses regardless of who caused the accident. This policy also limits your ability to sue the other driver. States that require no-fault insurance include New York, New Jersey, Michigan, Florida, and several others. While this coverage is necessary in these states, it can also be more expensive, so it’s essential to choose your provider wisely.
Final Thoughts
When choosing car insurance, it’s crucial to understand the different types of coverage and how they protect you. In most cases, opting for higher coverage than the state minimum is a smart choice to ensure that you’re adequately protected against both minor and major accidents.
Additionally, always consider your personal circumstances, such as whether you rely on your car for work, how much you can afford for a deductible, and whether you have health insurance that covers accidents. By carefully evaluating your needs and comparing policies, you can find the right coverage to protect both your vehicle and your peace of mind.
Take the next step by filling out a form on Best Auto Insurance to compare the best prices and coverage options for your needs.