Why do you need car insurance?
You drive down the street and see an accident. You hope everyone is okay, and your mind starts to wander into the, gosh, what if this that was me scenarios. It’s not a fun thought.
But what if it did happen to you? Aside from the terror of injury, there is a lot to think about. Recovery, repairs, and yes, are you covered? Do you have the right insurance to cover you and your loved ones if the same thing happened to you?
There are so many types of car insurance, and it’s hard to know which one is right for you. Do you need liability? Collision? Comprehensive? Uninsured/underinsured motorist? And what do all those letters even mean?!
Don’t worry, we’ve got you covered (pun intended!). In this guide, we’ll teach you about the different types of car insurance, what they cover, and how to find the right policy for you. We’ll also show you how to get discounts and other benefits.
What is car insurance?
Car insurance is a product that provides financial protection for cars, trucks, motorcycles, and other road vehicles from loss, physical damage, and bodily injury liability resulting from a traffic collision, theft, or other losses. People purchase auto insurance to protect themselves and their families against costs associated with vehicle-related accidents and incidents. Depending on the situation, some types of coverage are required by law, while others are optional. Car insurance can help pay for medical bills, vehicle repairs, and other expenses related to accidents or events that cause your car to be unable to drive. It can also protect yourself, your family, and your passengers from losses related to property damage or bodily injury. In addition, car insurance can be used to pay off car loans if the pre-accident value of your car is less than the loan amount, known as gap coverage. Lastly, car insurance is legally required in most states, so it is vital to make sure you have adequate coverage.
What types of car insurance coverage are available?
1. Liability insurance
Liability insurance is an essential type of car insurance coverage that protects you financially if you cause an accident, damage another person’s property, or injure someone. If you are sued, it will pay for the other party’s medical costs, legal fees, and any settlements or judgments. In many states, liability insurance is required by law, with limits set by the state. It’s important to carry enough insurance to cover the value of your assets in case of a lawsuit, as you may be held responsible for any costs above your policy limits. We recommend carrying at least $100,000 per person and $300,000 per accident in bodily injury liability coverage, and $100,000 per accident in property damage liability coverage. Higher limits are recommended if you have teenage drivers on your policy. While liability insurance is vital, you may need other types of coverage depending on your state and whether you finance or lease your vehicle. Ensure you have the coverage you need to protect yourself and your assets.
2. Property damage liability coverage
Property damage liability coverage is a vital part of car insurance for many reasons. It is a type of coverage that helps to protect you financially if you are responsible for causing damage to another person’s property in a car accident. This coverage pays for the costs of repairing or replacing the damaged property, such as another person’s car or a fence. It also pays for any legal fees that may be incurred if someone sues you as a result of the accident.
In almost every state, drivers are required to purchase some amount of property damage liability coverage. Depending on the state, minimum requirements range from $5,000 to $25,000. In Nevada, the required minimum property damage coverage is $25,000. It is important to purchase coverage that meets your state’s minimum requirements. Still, you may also choose to purchase additional coverage in order to be better protected in worst-case scenarios. If you are a high-net-worth individual, you should select higher coverage to protect your assets.
By having property damage liability coverage, you can provide financial protection for yourself and others who may be affected by an accident that you are responsible for. This type of coverage is essential for anyone who drives a vehicle and can help to provide peace of mind that you are covered in the case of an accident.
3. Uninsured motorist (UM) and Underinsured motorist (UIM) coverage
Uninsured motorist coverage and underinsured motorist coverage are types of car insurance (usually offered at a small additional cost) that provide coverage for the damages and injuries inflicted upon you by an at-fault driver who either does not have insurance or does not have enough insurance. It pays for your medical bills if you are involved in an accident caused by an uninsured or underinsured driver.
Uninsured or underinsured motorist coverage is crucial because it provides additional financial protection if you are involved in an accident with an uninsured or underinsured driver, who may not have the means to cover the costs of the damages they have caused. It’s also important to note that this type of coverage will cover you in a hit-and-run collision, and the police cannot locate the person that caused the accident.
It is also important to note that a few states require uninsured motorist coverage, so it is important to check your state’s laws before deciding to opt out of this type of coverage.
4. Collision insurance
Collision insurance is a type of car insurance coverage that pays to repair or replace your car if you’re involved in an accident, regardless of who was at fault. It covers damage to your vehicle caused by collisions with other vehicles, objects like fences or trees, or single-car accidents involving rolling or falling over. State law never requires collision coverage, but dealerships and banks usually require it for leased or financed cars.
Collision insurance is important for car owners because it helps to protect them financially in the event of an accident. Without it, they would be responsible for the full cost of repairs or replacement of their vehicle after an accident, which could be prohibitively expensive. Furthermore, collision insurance covers more than just car-on-car accidents; it also covers single-car accidents, damage caused by hitting an obstruction in the road, and other scenarios.
In addition, collision insurance helps to provide peace of mind knowing that, if something were to happen to their car, they would not be stuck with the full bill. The cost of collision insurance varies based on a number of factors, such as driving history and the value of the car, but it is usually considerably cheaper than having to pay for any repairs or replacements out of pocket.
5. Comprehensive Insurance
Comprehensive auto insurance is a type of insurance coverage that helps pay for the cost of damage to your vehicle that is not caused by an accident. This type of insurance covers losses from things like theft, vandalism, extreme weather events, and damage from falling objects. Comprehensive coverage is not typically required by state law, but it is usually needed for leased or financed cars.
It is important to consider comprehensive insurance if you cannot afford to pay the cost of repairing or replacing your vehicle out of pocket in the event of an unexpected incident. Comprehensive insurance is usually more affordable than other types of car insurance and covers events that are out of your control. Generally, it is advised that if the cost of comprehensive insurance is more than 10% of your vehicle’s value, then you can consider dropping it.
6. Medical payments insurance
Medical payments insurance, or MedPay, is a form of insurance coverage designed to help pay for medical expenses after an automobile accident. It is an alternative to personal injury protection (PIP) and is available in states such as Nevada without “no-fault” insurance laws. MedPay covers medical expenses related to injuries sustained in accidents, including copays and deductibles of other insurance policies like health insurance and PIP.
In certain states, MedPay is required. In Maine and New Hampshire, for example, MedPay must be purchased along with car insurance. Other states, like Nevada, only require that you decline met pay coverage specifically. Coverage limits typically start at $1,000 per person and max out at $10,000 per person.
MedPay is available for all types of vehicles, including cars, trucks, motorcycles, and recreational vehicles. It is important to note that this coverage is only available if you are not already covered by health insurance. Moreover, it is important to review your coverage with a professional to ensure that you are not duplicating your insurance coverage.
7. Personal Injury Protection
Personal Injury Protection (PIP) is a type of car insurance coverage that helps cover medical expenses, lost wages, and other costs incurred after a car accident. It is also referred to as “no-fault coverage” and is required in some states. PIP generally pays regardless of who caused the accident, but the amount of coverage varies by state. It typically covers 80-100% of medical bills, 60-80% of lost wages and replacement services, and funeral expenses. PIP is available in no-fault states, and some states make it optional. Liability coverage helps pay for other people’s injuries, but PIP can help pay for your and your passengers’ injuries. When deciding on the amount of PIP coverage to buy, consider your health insurance plan, disability insurance, and your passengers’ policies.
8. Rideshare insurance
Rideshare insurance is a type of insurance that helps fill in the gaps between a driver’s personal insurance and any insurance provided by the ridesharing company. It covers you while you’re waiting for a ride request or dropping someone off and protects you from any potential liabilities that come with driving for a ridesharing platform. This can be an especially important type of coverage for drivers who don’t have enough coverage from their personal car insurance to cover an accident or other incident that happens while driving for a ridesharing company. Without rideshare insurance, drivers can be left with high bills, or even worse, all on their own.
9. Motorcycle insurance
Motorcycle insurance is a form of insurance that covers a variety of risks associated with owning and operating a motorcycle. It typically includes coverage for liability, medical payments, collision and comprehensive, uninsured/underinsured motorist, and rental reimbursement.
Liability motorcycle insurance is the coverage you need if you are legally liable for damages caused by your motorcycle. It covers damages to others, including property damage and bodily injury.
Medical payments coverage helps cover medical costs for motorcyclists or passengers injured in an accident, regardless of fault. It is generally offered at a set amount per person.
Collision coverage helps cover vehicle repair costs if your motorcycle is damaged in an accident. It typically pays for repairs to the vehicle up to the actual cash value of the motorcycle.
Comprehensive insurance helps cover theft, vandalism, fire, flooding, and other non-accident-related damages.
Uninsured/underinsured motorist coverage helps cover damages to you and your motorcycle if you are in an accident with an uninsured or underinsured motorist.
Rental reimbursement coverage helps pay for rental car costs if your motorcycle is damaged in an accident and needs to be repaired.
By understanding each type of coverage and how it might apply in different situations, you can determine which types of coverage you need in order to protect yourself and your motorcycle.
9. Boat insurance
What types of boat insurance are available? There are several types of boat insurance available, ranging from liability insurance to medical payments coverage. Liability insurance covers damage to another person or property as a result of an accident, while collision insurance covers damage to your boat caused by an accident. Comprehensive coverage covers damage to your boat caused by incidents other than an accident, like theft, vandalism, or natural disasters. Personal Injury Protection (PIP) and Uninsured/Underinsured Motorist Coverage provide coverage for medical bills resulting from an accident. Medical Payments (MedPay) coverage pays for medical expenses for you and your passengers after an accident. Additionally, gap Insurance covers the dollar-amount “gap” between the balance of your financing and what your boat is worth, and Umbrella Insurance provides extra coverage for assets of $1 million or more in case of a lawsuit. Lastly, Rental Reimbursement, Emergency Roadside Assistance, Mechanical Breakdown Insurance, Usage-Based Insurance (UBI), Non-Owner Boat Insurance, and SR-22 Insurance are all additional coverage options to consider.
10. Umbrella coverage
Umbrella insurance is an essential form of coverage for anyone who wants to protect their assets from potential lawsuits themselves and their family from a catastrophic injury. It provides an extra layer of protection beyond your existing liability insurance policy and offers coverage ranging from $1–5 million. Umbrella insurance will cover any damages you’re legally responsible for in the event of an accident, as well as legal fees, false arrests, and slander. It can also cover you for injuries caused by another person, much like underinsured or uninsured motorist coverage.
For those with a net worth of $500,000 or more, umbrella insurance is an absolute must. It is the only form of insurance that can protect you from large settlements and court awards that exceed your existing liability limits. It’s important to remember that umbrella insurance provides coverage even in an accident involving an uninsured driver. This means that if another is found liable in an accident, your umbrella policy can still provide protection against expensive damages.
Having umbrella insurance can be beneficial in other ways as well. For instance, it can provide coverage for libel and slander, which can be incredibly expensive if someone sues for damages. It can also provide coverage for false arrest and detention, which can be financially devastating in the absence of proper coverage. Ultimately, umbrella insurance is an invaluable form of coverage that can protect your financial well-being in an unexpected accident or lawsuit. Make sure to consult with your insurance agent about the extent of the umbrella coverage under your policy.
How to protect your family with car insurance
Step 1: Understand the types of coverage available
The types of car insurance coverage available for families with cars are liability insurance, uninsured and underinsured motorist coverage, medical payments coverage, personal injury protection, collision insurance, comprehensive insurance, umbrella coverage, and emergency roadside assistance.
Liability insurance is a required type of insurance that covers damages to other people or property caused by the policyholder. Uninsured and underinsured motorist coverage is optional, but it covers the cost of damages caused by an uninsured driver. Medical payments coverage or personal injury protection, depending on your state, is another optional type of coverage that helps cover medical expenses incurred from an accident.
Collision insurance covers the cost of repairs to the policyholder’s car caused in an accident. Comprehensive insurance covers losses caused by theft, vandalism, and other events unrelated to an at-fault accident. Medical payments coverage helps cover medical bills incurred from an accident and is usually only available in certain states. Finally, emergency roadside assistance helps cover towing and other services in the case of a breakdown.
Step 2: Compare the amount and types of coverage
When comparing the amount and types of coverage for your family’s car, you should consider the minimum amount of coverage required by your state, the overall price of similar policies, the deductible amounts, the cost of your premium, the coverage limits, the financial resources available for out-of-pocket expenses if an accident occurs, and the policy coverage of your assets. Additionally, you should consider the affordability, customer reviews, and convenience of the car insurance company that you choose.
Step 3: Determine which type of policy is right for you
When choosing a car insurance type for your family, there are several factors to consider. First, you must determine what types of coverage are required in your state and any additional coverage your loan or lease requires. Additionally, you should consider optional coverage such as collision, comprehensive, or emergency roadside assistance to ensure your assets are fully covered and your costs are minimized.
Once you know what type of coverage is necessary, you should compare deductible options, as well as quotes from a variety of companies to make sure you’re getting the best deal. Additionally, research customer reviews of the companies you’re considering to ensure customer service and claims process are up to par. Finally, compare convenience factors such as online quote tools, customer service response times, and even the company’s location.
By comparing and contrasting the different types of car insurance coverage and potential companies, you can be sure you are getting the best coverage for your family at the most affordable price.
Step 4: Check if you qualify for discounts or other add-ons
Step 1: Understand the coverage you need and compare the overall cost of similar policies. Make sure the deductible amounts are approximately the same.
Step 2: Contact the insurance company or your agent and complete an application. You will need to provide some basic information, such as your name, date of birth, social security number, driver’s license number, names of the insured drivers you want the policy to include, make, model, and VIN of the car, policy limits and deductible amount.
Step 3: Get quotes from multiple carriers and review your policy options.
Step 4: Select the coverage that’s right for you.
Step 5: Ask if you are eligible for any discounts or other add-ons. Most insurance companies offer discounts such as multi-car, multi-policy, safe-driver, and low-mileage. Additionally, some add-ons, such as roadside assistance and custom equipment coverage, may be automatically included in your policy, but you should check to make sure.
Step 5: Read reviews and ratings of different insurers’ policies
Reading reviews and ratings of different insurers’ policies can help protect your family from car insurance costs by allowing you to compare policies and select the one that offers the best coverage for the best price. By understanding the coverage you need and comparing the overall price of similar policies, you can be sure you’re getting the most bang for your buck. Additionally, looking into discounts offered by different insurers ensures you’re paying the lowest possible rate. Furthermore, understanding the differences between a tort and no-fault systems in your state can help you determine what type of coverage you need. Utilizing these resources and following the tips listed in this article can help you make an informed decision and ensure you’re getting the best deal.
Step 6: Research customer service protocols and policies
Researching customer service protocols and policies when selecting a car insurance company can help protect your family from financial losses due to inadequate coverage. Knowing what types of coverage are available and what is required by your state’s transportation agency can help you make an informed decision about the policy that best meets your needs. Comparing quotes from multiple insurers can also help you find the most competitive rates. Having the right coverage in place can help protect your family in the event of an accident or other loss.
Step 7: Look into insurance policies for rental cars or reimbursement
Rental reimbursement and rental car policies can help protect your family from unforeseen costs associated with car accidents. Rental reimbursement policies cover the cost of a rental car up to a certain amount while your car is being repaired. Rental car policies, on the other hand, cover the cost of a rental car while you are traveling.
Comparing the two policies, rental reimbursement provides you with a short-term solution while your car is in the shop, while the rental car policies are more suited for longer trips, such as vacations.
By having both policies in place, you can be sure that your family will have a way to get around while your car is being repaired. And in the event that your car is totaled, having a rental car policy can help you travel more easily while you look for a new car.
Additionally, both policies can provide you with peace of mind, knowing that you are financially covered in the event of an accident. However, it is important to note that rental reimbursement policies will not cover routine maintenance or regular trips, so it’s important to be aware of the limitations of each policy before signing on.
Therefore, rental reimbursement and rental car policies can be a great way to ensure that your family is protected in the event of an accident. Whether you need short-term coverage while your car’s in the shop or long-term coverage while you look for a new car, these policies can provide the financial security you need.
Step 8: Make sure you’re getting the right combination of coverage for your needs
When choosing car insurance coverage for your family, you should look for policies that include minimum coverage requirements as mandated by your state, as well as optional types of coverage such as collision, comprehensive, uninsured motorist, personal injury protection, and MedPay. Additionally, you should consider deductible options and choose a deductible that you can comfortably afford in case of an accident. Lastly, compare quotes from several companies to ensure you are getting the best deal for your family’s needs.
Step 9: Consider taking advantage of discount programs offered by respective insurers
Discount programs are offered by many car insurance companies to help reduce the cost of premiums. Typical discounts include multi-car, multi-policy, safe driver, and low-mileage discounts. Discounts can be an effective way to lower your car insurance costs, as they reward drivers for taking certain steps to reduce risk. For example, a safe driver program could provide a 10% discount when you enroll, and even up to 30% if you complete the program. These programs offer incentives for safe driving behavior, such as following the speed limit and keeping your credit score up. Other discounts, such as those for multiple vehicles, good student drivers, safety devices and anti-theft devices, can also help to reduce costs. It is important to research the different discounts available and speak to your insurance agent to see which ones you qualify for.
Conclusion
Car accidents can be scary and costly, but by taking a few minutes to learn about car insurance, you can protect yourself and your family. This guide taught you the basics of car insurance, from types of coverage to basic requirements. Armed with this knowledge, you’ll be able to make an informed decision about what type of policy is best for your needs. Hopefully you won’t ever have to use your insurance, but if you do, you know that you will be covered. Now when you shop for car insurance, you’ll be ready.
