Auto insurance protects you in the event of an accident or other incidents where you need to cover for damage or injuries. Depending on the type of insurance and coverage options, you may receive a payout when filing a claim for damages to your vehicle. Insurance can also help cover medical expenses and repairs when you’re at fault for hitting another car.
What Is Auto Insurance?
Auto insurance policies offer protection in the event of an accident. It may cover damages to the policyholder’s vehicle or another party’s damages or injuries.
Each policy covers specific damages and situations. Policies also include different limits and deductibles, all of which influence the price that you pay.
Who Needs Auto Insurance?
Almost every state requires some form of auto insurance. Virginia and New Hampshire are the only two states that don’t require vehicle owners to get car insurance.
Types of Auto Insurance Coverage
Insurance companies offer a variety of coverage options, including:
- Auto liability coverage
- Auto comprehensive coverage
- Auto collision coverage
- Medical payments coverage
- Personal injury protection (PIP)
- Uninsured/underinsured motorist coverage
Keep in mind that coverage can vary from state to state. Some states also require that you obtain certain types of coverage, such as auto liability coverage.
Auto Liability Coverage
Liability coverage is often the bare minimum insurance required for drivers. It covers expenses for damage and injuries to other people, property, and vehicles if you’re at fault for an accident.
Comprehensive Coverage
Comprehensive coverage covers damage to your vehicle in most situations other than collisions. If your car is stolen, vandalized, or damaged due to severe weather, comprehensive coverage may cover the repairs.
Collision Coverage
Collision coverage is specifically for car accidents. It offers coverage when you get into a collision with another object or vehicle.
Medical Payment Coverage and Personal Injury Protection
Medical payment coverage and personal injury protection insurance can cover your medical expenses and other costs if you’re injured.
Uninsured/Underinsured Motorist Coverage
Uninsured and underinsured motorist coverage options are used to cover your repairs if another driver is at fault but doesn't have insurance or can’t cover your expenses.
Some states allow insurance companies to sell different uninsured/underinsured motorist (UM/UIM) policies for bodily injuries and property damage. Bodily injury coverage covers injuries to you and your passengers. Property damage coverage helps cover repairs to your vehicle.
What’s Not Covered by Car Insurance?
Car insurance is mostly used to address accidents. It doesn’t cover basic maintenance and general wear and tear. If you get a flat tire or suffer from engine problems, you need to cover the costs yourself, unless the repairs are covered by a warranty.
Coverage is also only available if certain conditions are met. If you let someone else drive your vehicle and they get in an accident, you may not be covered.
Some insurance companies also won’t accept claims involving accidents that occur when driving for a ridesharing platform. If you plan on driving for a ridesharing platform, look for insurance policies that offer supplemental rideshare coverage.
How Much Auto Insurance Should I Get?
You should first consider the state requirements when deciding how much auto insurance coverage to get. Most states have a minimum amount of coverage for liability insurance. You may need $100,000 to $500,000 in liability coverage, depending on where you live.
Lenders may also require minimum coverage for those with a car loan or a lease. For example, you may need to get comprehensive and collision coverage with a minimum limit.
Understanding Auto Insurance Pricing
Auto insurance rates are based on a variety of factors. Insurance companies look at:
- Location
- Age
- Vehicle type
- Mileage
- Usage
- Driving history
- Coverage options
Some of these details are used to determine the risk of insuring you. For example, certain vehicles or locations are considered riskier to insure, resulting in higher premiums.
Your coverage options, including the type of coverage, deductibles, and limits also determine the price. If you get full coverage with high limits and a low deductible, you’ll pay more.
What Is an Insurance Premium?
A car insurance premium is the amount that you pay to maintain your policy and coverage. You can typically save by paying more up front, such as paying annually instead of monthly.
What Is a Deductible?
A deductible is the amount that you pay out of pocket on an insurance claim. For example, if you get in an accident that requires $2,000 to repair and you have a $250 deductible, the insurance company will pay $1,750.
Conclusion
Auto insurance is required in almost every state. If you pay a fee, the insurance company promises to cover certain expenses, such as repairs for your vehicle after an accident. The amount and type of coverage can vary depending on your specific needs and state requirements.
Depending on where you live, you may at least need liability coverage. Some states also require collision or comprehensive coverage. The amount of coverage largely affects your rates. To save money, you may consider paying an annual premium instead of a monthly one.
