Car insurance can give financial protection if your car is damaged or stolen, you are wounded in an accident, or you are at fault for an accident that causes physical harm or property damage to third parties, depending on the coverage you pick. It can also assist you with meeting any minimum coverage requirements imposed by your state or a lender.
The specifics of automobile insurance depend on your state’s regulations, the coverages you have, and your insurer.
On this page, we’ll go over some of the most popular forms of automobile insurance coverage, as well as provide some advice on determining how much coverage you need and obtaining the most economical car insurance available.
What Exactly Is Car Insurance?
Car insurance is a sort of property and casualty (P&C) insurance that protects you financially if you are involved in a car accident, your vehicle is damaged in a non-collision incident (e.g., a falling tree, hail, etc.), or your car is stolen. The insurer will pay for covered expenditures up to any relevant limitations in exchange for a premium (the amount of money you pay for your insurance).
Auto insurance operates on the indemnity principle, which asserts that the insured will be made whole or back to their former financial situation. If your automobile is damaged or you are sued as a result of an accident you caused, your insurance policy can help pay for repairs, replacements, medical costs, and any other expenditures you are found liable for – provided you have the necessary coverage and limitations.
Most states need some type of auto insurance, although the legal requirements and minimum limits vary by jurisdiction.
Most insurance companies demand coverage for third-party bodily injury and property damage liability claims in the event you are at fault in an accident and hurt another motorist or their passengers or damage someone else’s property, such as a fence or mailbox. Personal injury protection (PIP) or medical payments (MedPay) coverage for you and your passengers may be necessary as well.
Physical damage coverages, including comprehensive and collision, are usually optional, although they may be needed if you loan or lease your vehicle. These policies give first-party property protection for your own car in the event it is damaged and you are liable for the repair or replacement expenses.
Every policy has limitations, or the maximum amount that the insurance company will pay on a claim. Some forms of coverage include deductibles, which are the amounts you must pay before the insurer will cover any remaining costs.
There are several types of automobile insurance available, and you may tailor a policy to acquire the coverage you want.
Car Insurance Coverage Types
Because automobile insurance coverages differ between tort and no-fault jurisdictions, it’s critical to consult with a professional insurance agent or an insurance provider about specifics.
Insurance against liability
Liability coverage covers the costs of an accident in case you are legally determined to be at fault. In general, liability insurance provides two types of coverage:
Bodily injury: This covers the costs of injuring or killing others (for example, another motorist, their passengers, or a pedestrian) when you are at fault.
Property damage: This covers the costs of repairing or replacing other people’s property (like a fence or a home) that you damage while driving.
Most states require drivers to have a certain level of liability insurance before they may register and operate a vehicle. Visit your state’s Department of Motor Vehicles (DMV) or our Auto Insurance by State guide to see how much liability coverage you require.
Uninsured motorist protection
Uninsured motorist (UM) coverage protects you financially if you are injured in an accident and the other driver does not have auto insurance. This coverage may extend to cover property damage depending on where you reside. If you are the victim of a hit-and-run, your uninsured motorist policy will also pay. Your state may impose a minimum level of uninsured motorist coverage.
You might also consider underinsured motorist (UIM) coverage, which normally pays the difference between your expenditures and the at-fault driver’s insurance limit when their limits are insufficient. However, in certain states, underinsured motorist coverage is not available until your underinsured motorist limits exceed the other driver’s liability limits.
PIP stands for personal injury protection.
This no-fault insurance coverage compensates for your or your passengers’ medical expenditures if you are wounded in an accident, regardless of who is at blame. If you are riding a bike or walking and are hit by a car, personal injury protection (PIP) may apply.
In some situations, PIP coverage may reimburse you for missed income and expenditures incurred while recovering from an injury, such as home cleaning.
PIP is mandated in certain states and voluntary in others. Always check with your state’s DMV to see if PIP is available and if you are required to carry it.
Coverage for medical costs (MedPay)
Medical payments (MedPay) coverage, like personal injury protection, pays your and your passengers’ medical expenditures for injuries caused in an automobile collision, regardless of who is at fault. Unlike PIP coverage, however, MedPay does not cover any extra or associated expenditures, such as lost earnings.
Some states require MedPay, while others make it voluntary. It isn’t available in every state.
Collision insurance
Collision coverage pays for repairs if your vehicle is damaged in a car accident or collides with another object, such as a building or tree, even if you are at fault. It may also cover pothole damage.
Complete protection
Other than collision coverage, comprehensive coverage covers damage to your automobile that happens during an incident that is not a car accident or impact with another item. Fire damage, hail damage, damage from falling items, a broken or shattered windshield, vandalism, or animal damage are all examples of insured losses. It also compensates you if your vehicle is stolen.
Insurance Supplements
Many vehicle insurance companies provide extra insurance add-ons for purchase to guarantee you have the coverage you require, such as:
Roadside help reimburses you for services to get you rolling again if you get a flat tire, require a tow, or are locked out of your car.
This sort of coverage will pay to replace a totaled vehicle with a new vehicle of the same make and model. Coverage is often restricted to relatively new automobiles – two years old, for example – although the cutoff varies per insurance.
Mechanical breakdown insurance protects you if your automobile breaks down and your manufacturer’s warranty does not cover the repairs.
Rental reimbursement: This add-on will pay the cost of a rental car while your vehicle is being repaired as part of a covered claim. It does not apply when your vehicle is in for normal maintenance.
Rideshare insurance: If you drive for a ridesharing firm, this insurance protects you in the event of an accident while on the job. Personal vehicle insurance policies normally do not cover any commercial hazards.
Gap insurance pays the difference if your automobile is judged “totaled” after an accident and you owe more on your car loan or lease than the insurance company would pay.
How Much Auto Insurance Do I Require?
To figure out how much auto insurance you need, check your state’s mandatory insurance regulations. Most states require drivers to have liability insurance, but some also mandate uninsured motorist coverage or personal injury protection (PIP).
If you finance or lease your car, check with your lender or lessor to see what type and quantity of coverage is needed as part of your loan or lease agreement.
Remember that these are only beginning points and that insurance requirements differ. If you don’t think you’ll be able to handle legal, medical, or repair costs after an accident, or if you have assets you want to protect, consider getting a policy with larger coverage levels.
What if you have an older… and precious item?
If you own a 1972 Chevrolet Corvette or a 1964 Porsche 356C, you’ll need particular insurance coverage, but happily, there’s a whole market dedicated to such automobiles.
Hagerty is one of the most well-known names in the classic automobile insurance sector. Classic automobile insurance is available from American Collectors Insurance, Grundy, and many more major insurers.
Standard auto insurance often covers policyholders for the real cash worth of their vehicles, which means that a car’s age, condition, and depreciation will be examined in comparison to similar vehicles.
A historic automobile owner may discover that basic insurance may not provide adequate coverage to safeguard their vehicle, especially if it has been repaired or modified. Car insurance firms that specialize in creating vintage car coverage are your best bet for fully insuring your historic automobile.
How Much Does Automobile Insurance Cost?
According to our insurer research, the national average cost of a vehicle insurance policy is $1,547 per year. Your interest rate might be higher or lower. Car insurers consider your age, location, driving record, vehicle type, and insurance score when calculating your premium.
The cost of automobile insurance is also determined by the amount of coverage purchased as well as the deductible and limitations selected. Shopping around and comparing quotes from at least three different insurers is the key to obtaining the most economical auto insurance with the best coverage for your requirements.
The Best Low-Cost Auto Insurance Providers
Annual Average Rates:
USAA: $1,022
Geico: $1,250
$1,279 (State Farm)
Visitors: $1,355
$1,383 for an American Family
Nationally: $1,473
$1,540 (progressive)
AAA: $1,958
Farmers earn $2,078.
Insurance: $2,135
Are you paying too much for vehicle insurance? In our ranking of the Best Cheap Car Insurance Companies, you can get the lowest insurance for you.
How to Save Money on Automobile Insurance
Car insurance can be costly, but there are several methods to save money on it, including:
Change your deductible and/or policy limits: Increasing your deductible will result in reduced premiums. Additionally, lowering the coverage limitations of your insurance will decrease your rates.
Inquire about discounts: While many individuals are aware that they may obtain a discount for combining their vehicle insurance with their house insurance, there are frequently many more reductions available. Inquire about discounts for automatic payments, completing a defensive driving course, or being claim-free in the last several years.
Shop around: Because auto insurance firms charge various rates for automobile insurance, acquire estimates from at least three different providers.
Improve your credit history: Drivers with strong credit frequently receive lower insurance prices.
Find out what auto insurance savings are available to you.
What Is the Process for Filing a Car Insurance Claim?
Filing a vehicle insurance claim may be difficult, and each insurance company has its own set of procedures and resources. There are, however, certain things you can do to make the process go more smoothly.
Call your auto insurance company right away. Explain what happened and find out what your policy covers, as well as any claim deadlines.
Collect the necessary information. Depending on the nature of your claim, you may be required to provide a police report, pictures of the damage, the names and contact information of all parties involved in the accident, and a repair estimate. Your insurer should be able to give you a list of required information or papers.
Make a claim. Typically, you may file a formal claim over the phone or through your insurance company’s website or mobile app.
Inquire about renting a vehicle. Find out how to get the automobile or be reimbursed if your coverage covers a rental car.
Why Are Automobile Insurance Claims Denied?
Insurance companies may refuse claims for three reasons:
The driver is someone who lives with you or has access to your automobile, is of driving age, and is not covered by your policy.
At the time of the collision, you were driving your own automobile for work purposes.
Your automobile is not “garaged” at your residence. This isn’t about the automobile actually being in your garage. It means that an automobile is insured under your policy, but it is owned and kept at the address of someone else.
Insurance companies will also refuse claims for self-inflicted harm. This covers damage sustained when off-roading or racing. Furthermore, nearly no motor insurance policy (or warranty) covers wear and tear.
Furthermore, changing the date or facts of an accident or event in the hopes of receiving coverage for damages is banned in all 50 states and Washington, D.C. You may face significant fines, criminal prosecution, and possibly jail.
Is Theft Covered by Car Insurance? Yes. Most of the time.
Car insurance can cover theft, but only if it is the correct form of insurance. We met with Edward L. Blais, J.D., C.I.C., C.P.I.A., President of Blais Insurance in Lincoln, R.I., to learn more. He helped us understand what sorts of plans cover automobile theft. We also presented the vehicle insurance specialist with a variety of scenarios.
“When it comes to an auto policy,” Blais explains, “theft is theft.” So the answer is yes, but not a blanket “yes.”
In Rhode Island, theft is covered under a policy called “Other Than Collision.” “It used to be called comprehensive,” Blais explains. It was previously known as Fire and Theft. In the majority of other states, it is still referred to as “Comprehensive.”
The only way theft would not be covered under this plan is if the policyholder was somehow engaged in the theft of the car. That is outright deception.
Comprehensive insurance often covers “missiles, falling objects, theft, larceny, wind storm (sandblast), contact with bird or animal, mischief, fire, explosion, earthquake…” according to Blais. In general, these are your usual “Act of God” scenarios.
It is vital to know that this extensive level of coverage is in addition to your standard liability insurance.
What happens if your vehicle gets broken into?
So you walk out to your car first thing in the morning, and it’s still there, but the glass is smashed. Perhaps you own a vehicle with a manual gearbox and the burglars were unable to drive stick, so they took your goods instead.
Things become complicated once more. It depends on what those items were, where they were in the automobile, and how the owner utilized them.
If you have valuables in your car, such as mobile phones, CDs, or a pocketbook, these goods are covered under the personal property component of your homes, condo, or renters insurance.
But suppose you have a sophisticated digital camera with numerous lenses (which can be rather costly) and they are taken from your trunk. If you utilize such equipment for business reasons, it will be covered by commercial property insurance or a special scheduled coverage. Once again, particular instances necessitate unique insurance coverage.
What if you installed aftermarket components that were later stolen?
One of the best aspects of owning a car is the chance to modify and personalize it. There are apparently unlimited options to customize your vehicle, from specialty sound equipment to aftermarket wheels and engine modifications. However, just because these items are presently on your vehicle does not imply they are protected under the same policy.
“Your standard stereo is covered under your auto policy if it is stolen in the middle of the night,” Blais explains. “Many aftermarket units are also covered.”
The reasoning is that, in principle, most late-model automobiles have sophisticated sound systems, and aftermarket units are on par with OEM equipment.
However, if you use an adapter attached to a portable audio player, such as an old iPod, it is covered by home insurance.
“Even under the most stringent policy, you won’t get comped if you take the stock wheels off the car and replace them with $5,000 wheels and tires,” Blais added.
The only method to recoup the value of the wheels is to call your motor insurance provider and request that they create a specific policy. Otherwise, you will only be paid for the factory wheels and tires.