There are two main types of auto insurance coverage: mandatory and voluntary. Both types of coverage address various kinds of costs. State-mandated coverages and insurance enforced by a lender or lessor are examples of compulsory coverages. Liability insurance, for example, covers costs such as personal injury to third parties in the event that you are at fault or damage to a vehicle. Collision and comprehensive insurance, which pays for repairs to a car you completely own among other expenses, are examples of optional coverages. Find out how requirements for auto insurance policies must be met and how they can be customized to meet your needs.
- Various forms of protection are available through auto insurance, contingent on the specific policy type. Liability coverage, or covering for injuries or property damage when you are at fault, is a feature of standard auto insurance.
- When you lease a car or have a car loan, you are typically obliged to have collision and comprehensive coverage, which covers damage to your automobile
- Among other charges, medical expenses and lost wages are covered under personal injury protection and medical payments coverage.
What’s Covered by Auto Insurance?
A policy for auto insurance is a compilation of many kinds of safeguards. In addition to the minimum insurance coverage mandated by state legislation, lenders and leasing businesses typically demand additional coverage for cars that are financed or leased.
Insurance Against Liability
Liability coverages for property damage and bodily injury are included in a typical auto insurance policy. Bodily injury liability insurance can assist in covering the other driver’s and passengers’ medical expenses in the event that you are at fault for the collision. Property damage liability can assist with covering the cost of replacing or repairing the other driver’s car as well as any necessary repairs for any damaged buildings or fences. Minimum amounts of property damage and bodily injury coverage are mandated by state laws for drivers, albeit they differ. Here are three instances:
If the costs of an accident above your limits, your state’s minimal liability auto insurance regulations may not offer sufficient financial protection. How much liability coverage you need can be ascertained with the assistance of a professional insurance agent. Furthermore, regardless of who is at fault, each driver’s insurance company in a no-fault jurisdiction pays for the injuries of its insured.
Comprehensive and Collision Insurance
Your car’s replacement or repair costs in the event of a covered traffic accident are partially covered by collision coverage. Comprehensive coverage assists with the cost of replacement or repair in the event that your car is damaged by fire, theft, or another non-collision incident. Similarly, this kind of coverage might assist in covering the cost of replacing a stolen car or repairing a windshield damage. These coverages are not mandated by state laws. However, until the loan is repaid or the lease expires, you will normally need to maintain collision and comprehensive coverage if you own a car or are leasing one. Your lender may purchase these coverages for you and charge you for the insurance if you decide not to carry them.
Protection Against Personal Injury and Medical Payments
No matter who is at blame, these expenses may be covered by your optional or required personal injury protection (PIP), depending on your state:
- Hospital and medical costs: Usually up to a certain percentage or amount
- Wage loss: Replacement of income
- Loss of services: Hiring people outside the family to perform household responsibilities
- Costs associated with a funeral: paying for a percentage of your funeral expenses
There may be a minimum PIP coverage level that you must carry in no-fault insurance states. For example, in New York, the limit is $50,000.9. Med pay, also known as medical payments coverage, can assist with paying funeral and/or medical expenses for you and your passengers as well as any deductibles and co-payments that your health insurance may not cover.
Coverage for Underinsured and Uninsured Drivers
Your uninsured motorist coverage may come into play if a hit-and-run driver or a driver without auto insurance causes damage to your vehicle. This insurance helps cover the price of auto repairs as well as medical bills for you and your passengers. If the negligent driver’s insurance does not cover the full cost of your injuries or vehicle damage, your underinsured motorist policy may assist in making up the difference. This insurance is usually packaged together and referred to as underinsured/uninsured motorist (UM/UIM) coverage. Minimum quantities of uninsured motorist coverage are mandated by certain states for drivers.
What Is Not Covered by Auto Insurance?
Certain kinds of losses are not covered by a typical auto insurance policy. Even a comprehensive coverage policy won’t always give you all the protection you require. Generally, the following are not covered by typical personal auto insurance policies: Any discrepancy that remains between the amount owed on a car loan and an insurance settlement a temporary rental automobile while your own vehicle is being fixed after a covered accident; however, in certain jurisdictions, you may also be eligible for a temporary rental car if your vehicle was deemed a total loss. Roadside help, mechanical failures, towing expenses, and normal wear and tear Recreational, off-road, commercial, motorbike, and all-terrain vehicles vehicles used for business travel or for ride-sharing services like Uber or Lyft Damage done on purpose mishaps while driving in Mexico or engaging in auto racing
Extra Choices for Auto Insurance Coverage
Your protection may be increased by including optional coverages in your insurance. Certain insurers provide a large selection of optional coverages, while others only offer a select handful. Typical add-ons for auto insurance include:
- Guaranteed Auto Protection (GAP) insurance pays out a payment based on the real cash worth of the car in the event that it is totaled. This figure can be less than the remaining debt to the lender. For instance, even though you still owe the lender $18,000, the insurance company might offer a settlement of $15,000. The $3,000 discrepancy may be covered by gap insurance.
- Insurance for historic automobiles: While new cars lose value rapidly, the value of antique, classic, and exotic cars can appreciate over time. You can bargain with the insurer about an automobile’s value if you have classic car insurance. This kind of insurance might assist in covering the hefty cost of specialized repairs or restoration after a covered loss.
- Rental car reimbursement: This insurance helps cover the cost of a rental automobile while your own is being repaired if your vehicle is totaled in an accident that qualifies for coverage. In the event that the other driver is at fault, they might provide you with rental car insurance.
- Custom components and equipment: Custom wheels or a navigation system are examples of equipment that are typically not covered by ordinary auto insurance policies. The expense of restoring your customizations after a covered loss is assisted by bespoke parts and equipment coverage.
- Coverage for rideshare or delivery drivers: If you operate a vehicle on behalf of a transportation or delivery company, this coverage can shield you and your vehicle in situations where the company’s insurance does not extend to you, such as while you are waiting for a passenger or order.
- Roadside assistance: If you are stuck, your insurance may cover the cost of towing, fuel delivery, locksmith services, and flat tire changes.
Which Kind of Auto Insurance Is Necessary?
Your specific demands and requirements, state regulations, and lenders will all determine what kind of auto insurance you need. Lenders and state regulations mandate that you maintain specific kinds and amounts of coverage. If the costs of an accident exceed your coverage, the minimum bodily and property liability coverage required by most states may not provide sufficient financial protection. Raising your boundaries aids with asset protection. If your automobile is stolen or damaged, comprehensive and collision coverage can help with replacement and repair—especially if you are the driver at fault. Generally, when the market value of your car falls to a few thousand dollars, you should cancel your comprehensive and collision insurance. But once a car loan is paid off, you can also think about removing comprehensive and collision insurance. Drivers who use ridesharing or delivery services can purchase a stand-alone policy or add an endorsement to their current vehicle insurance coverage. If you frequently use your car for work, see if your employer’s nonowner auto insurance policy covers you.Ask your insurance agent if you need to get a commercial auto insurance policy if your employer does not offer nonowner coverage.
