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You have the keys. You have the car. Now all you need is car insurance and you’ll be ready to hit the road. Here is a look at common car insurance coverage types.
What Does Liability Insurance Cover?
Liability car insurance covers you when you cause property damage or injuries to someone else. For example, if you cause an accident and the other driver breaks their arm, your liability insurance would pay for medical bills and for the damage to the other vehicle. Liability insurance also covers legal costs if you are sued because of a car accident.
When you buy liability car insurance, you’ll have the option to choose your policy limits. You will often see the limits written as a series of three numbers. For example, you might see it written as 20/40/10. That means:
- $20,000 of bodily injury/death coverage for one person per accident
- $40,000 of bodily injury/death coverage to more than one person per accident
- $10,000 of property damage coverage per accident
You are required to purchase liability car insurance in most states. It’s a good idea to buy more than your state’s minimum requirement. That’s because you have to pay for any amount that exceeds your policy limits and you could be sued for the balance. Generally you want to buy enough liability insurance to cover what you could lose in a big lawsuit.
What Does Uninsured Motorist Insurance Cover?
If a driver without insurance crashes into you, uninsured motorist coverage (UM) pays for your injuries and—in some states—damage to your car. It also covers your passengers and family members who live with you. In addition to medical costs and car repair bills, it pays for funeral expenses and for lost wages. Uninsured motorist insurance also covers you if you’re hit as a pedestrian.
Underinsured motorist (UIM) coverage is similar to UM. It pays for medical bills and other expenses if a driver who does not have enough insurance crashes into you.
UM is required in some states and optional in others. Generally, UM is a good coverage to have. One out of eight drivers are out on the road without car insurance, according to the Insurance Research Council.
If you buy UM, you will typically have to match your liability car insurance amounts. For example, if you have liability limits of 100/300, you will have to buy UM in that amount.
What Does Collision and Comprehensive Insurance Cover?
Collision and comprehensive insurance are often sold together, but they are two separate coverage types.
- Collision insurance pays to repair or replace your car if you crash into another car or object (such as a fence, guardrail or tree).
- Comprehensive insurance pays to repair and replace your car if it is stolen or damaged by fire, flooding, hail, vandalism, falling objects (like a tree branch) or a collision with an animal.
Collision and comprehensive insurance are optional coverage types in terms of state laws. But if you have a car loan or lease, your lender or leasing company will likely require you to carry both coverage types.
Both collision and comprehensive insurance have an insurance deductible. Deductibles are commonly in amounts such as $250, $500, $1,000 and higher. A deductible is the amount deducted from an insurance claims check. For example, if your car repair bills are $2,000 and you have a $500 deductible, the insurance payment will be $1,500.
A higher deductible will lower your car insurance premium, but make sure you can afford to pay that amount out-of-pocket.
Comprehensive and collision insurance only pay out up to the actual cash value of your car. (For example, if your car is totaled.)
Medical Payments and Personal Injury Protection
Medical Payments is often referred to as “MedPay.” It covers medical expenses for you and your passengers regardless of who is at fault for the accident. MedPay is often sold in small amounts and is not available in all states.
Personal injury protection (PIP) is a similar coverage that pays for medical bills and other expenses for you and your passengers, no matter who is at fault for the accident. PIP also covers other expenses such as lost wages, rehabilitation costs, funeral expenses and survivor benefits, and services you cannot perform due to injuries like house cleaning or child care.
PIP is required in some states. In other states, PIP is optional or not offered. In states where it’s required, there is a minimum amount mandated under state law, but you can buy more. In states that offer it, but don’t mandate it, you can choose the coverage amount that works best for you.
Other Types of Car Insurance
Car insurance companies offer several optional coverage types that you can buy to tailor a policy that suits your needs. Here are some common coverage types:
- Accident forgiveness. If you cause an accident, this coverage will “forgive” you, meaning your rates won’t go up. The rules vary by insurer, but generally you’ll get one forgiven accident per policy for a specific timeframe, such as every three years.
- Gap insurance. This coverage pays the difference between what you owe on your loan or lease and the insurance settlement if your car is totaled or stolen. For example, if you owe $25,000 but the value of your totaled car is $22,000, gap insurance would pay the $3,000 “gap.”
- Rental reimbursement insurance. This insurance will pay for rental car costs and public transportation costs when your car is in the repair shop due to a problem covered by your policy, such as a car accident.
- Rideshare insurance. If you are a driver for a rideshare company such as Uber or Lyft, there may be a gap in coverage when you get a ride request and you are on your way to pick up a passenger. If you get into a car accident during a gap, you may be without coverage from your insurer and the rideshare company. This coverage helps plug that gap.
- Roadside assistance insurance. This coverage pays for services like a tow truck, locksmith, refuel, changing a flat tire or jump-starting a dead battery if your car is disabled.
What Does Car Insurance Cover FAQ
How much car insurance do I need?
A good way to determine how much car insurance you need is to start with liability car insurance. A general rule of thumb is to buy enough liability car insurance to cover what you could lose in a lawsuit. You can be sued for damage beyond your coverage limits, so it’s prudent to buy liability insurance in amounts that protect your assets, savings and house. At the very least, you want enough liability coverage to pay for a serious accident, such as limits of 100/300/100.
If uninsured motorist coverage is available in your state, it’s wise to buy it. It covers your medical bills and other expenses (like pain and suffering, and lost wages) if a driver without insurance crashes into you.
You can get coverage for car repair bills by adding collision and comprehensive insurance. If you need even more coverage, you can plug those gaps with optional coverage types like gap insurance and rental reimbursement insurance.
How do I get car insurance?
When you’re ready to buy a car insurance policy, the first step is to determine the types of coverage and the amounts that you will need. Then it’s a good idea to compare car insurance quotes from multiple insurance companies. That’s because prices vary from one insurer to the next for the exact same coverage.
You can typically get car insurance quotes online or by speaking with an independent agent on the phone or in-person. Be sure to compare quotes for identical coverage amounts and to ask about discounts. Car insurance quotes are always free.
But keep in mind, cost isn’t everything. If you need to file an insurance claim, you want a company that has a good reputation for customer service. The best car insurance companies combine stellar service at a reasonable price.
What does full coverage car insurance mean?
The term full coverage car insurance typically refers to a policy that has liability insurance, collision insurance and comprehensive insurance.
Liability insurance pays for property damage or injuries you cause to someone else. Collision and comprehensive insurance cover damage to your car from a host of problems. These include car accidents, car theft, vandalism, fire, floods, falling objects, hail and collisions with animals.
The average national cost for full coverage car insurance is $1,998 a year for a policy with 100/300/100 in liability insurance, and comprehensive, collision and uninsured motorist coverage.