What Does Auto Insurance Cover?

There are several ways of looking at insuring your vehicle. You may be asking what is the cheapest automobile insurance I can buy and it is answered in that post. Or you can keep reading to find answers to what should my car insurance cover before worrying about buying one. It is important to know all your options first and choose whichever one you like rather than start searching for the cheapest. The premium difference between a basic policy and a good one may be negligible, especially if you believe additional coverage is worth the money. You should use your initiative towards including a particular cover if you cannot decide to include or leave it out.

Why Buy Car Insurance?

This topic is extensively covered in another post on this website but it makes sense to touch this topic here once more. The most popular US vehicle insurance policy is full coverage as about 72% of policies sold are for full coverage. This suggests that most people buy insurance for peace of mind and not because they are legally required to buy minimum coverage. So, it is best to break it down in order to determine what coverage you may need or want to buy.

What Does Liability Car Insurance Cover?

As we discussed in detail in another post on this site, liability auto insurance is for the damages you may cause to other people and their properties. It doesn’t pay any of your or your family’s damages and injuries.

Yet, you need to buy sufficient coverage to make sure that all the liabilities arising from an accident you caused is paid for by your insurance. Otherwise, you will be putting everything you own on the line to pay for such damages and injuries. That is why it is fair to say that the richer you are the larger your liability coverage should be.

Does Car Insurance Cover Repairs?

No matter what type of a policy you have it should cover repairs to third party vehicles up to your policy limit should you be the one who caused the accident. Remember that third party vehicles are the ones belong to others. Does your auto insurance cover repairs to your own vehicle? This totally depends on the type of policy you have. Liability only vehicle insurance policies don’t provide any protection for the policyholder other than protection from third party claims. You need to have Collision and Comprehensive coverage to claim for repairs to your own automobile and they are explained below.

What Does Full Coverage Car Insurance Cover?

As liability only auto insurance policies don’t cover your own losses you need to consider how to handle such risks that come with driving. Accidents do happen and statistically, you are likely to have 3 – 4 accidents in your lifetime. So, you cannot really ignore it and hope for the best.

A typical full coverage policy would be a good solution for most people as it includes Liability, Collision and Comprehensive Coverage at a fairly reasonable premium. These 3 covers take care of the largest damages and losses you may suffer or cause others to suffer and therefore can prevent a potential financial ruin.

You may see several other covers included in a full coverage depending on the insurer and the state requirements. No fault states require minimum Personal Injury Protection (PIP) coverage as part of their minimum automobile insurance requirements. Some states require Uninsured Motorist Coverage to be included with every policy sold automatically. And some insurers like to include Rental Reimbursement cover as well in policies they promote.

So, it at least provide Liability, Collision and Comprehensive Coverage and may have more depending on your insurer and state. It is best that we look at the essential components of a typical full coverage policy and talk about what each of them cover.

Liability Coverage: A typical full coverage policy would include reasonable level of liability coverage. Insurers tend to offer higher than minimum coverage in package policies like full coverage. Still you should check to make sure that you are happy with the liability cover provided in your full coverage policy. You can always ask to increase the limits or look for another insurer that offers policies with higher limits.

Collision and Comprehensive Coverage: After liability, probably the first thing that comes to mind is damages to or total loss of your vehicle. It can be stolen, get involved in an accident with an uninsured motorist, perish in a fire or totaled due to natural disasters. Adding collision and comprehensive coverage to your policy makes sure that your vehicle is insured for its full value if anything happens to it.

 – What Does Collision Car Insurance Cover? As the name suggests, it pays for damages due to traffic accidents. Your vehicle would either be repaired or totaled following an accident. If it is repairable, insurance company would pay for the costs of repairs. Otherwise, it would send you a check covering open market value of your auto.

 – What Does Comprehensive Auto Insurance Cover? It pays for other damages to your car like flood, hurricane, falling objects, theft, fire, vandalism, civil disturbance and so on. So, this coverage is for all the other damages to your automobile including accidental damages, except collision.

You are not legally required to insure your own losses but it would be a sensible thing to do, if you can afford it and if your automobile is worth insuring. Most people cannot afford to replace their cars on their own if something happens to it and therefore they should insure it. On the other hand, you may be alright not to bother insuring a clunker that is worth less than $4,000.

Uninsured Motorist Coverage: About 14% of US drivers are driving without insurance. This is a serious number and it can be even worse in your state as some states have as much as 24% uninsured drivers. If they cause an accident it is fair to assume that they wouldn’t have the means to pay for the losses they caused.

This cover may be automatically included in your policy because a few states require it to be included in every policy sold. If not, it is always a good idea to add full uninsured motorist coverage to your policy, just in case an uninsured driver cause damages to your vehicle and injuries to you. Uninsured Motorist Injury Coverage covers you even when you are a pedestrian and Uninsured Motorist Property Damages cover may not be available in some states.

Personal Injury Protection (PIP): The next coverage you should consider is Personal Injury Protection (PIP) or Medical Expenses Coverage, especially if you don’t have good health insurance coverage. This is the part that pays for injuries you and your family may suffer regardless of who is at fault. If your health insurance covers such injuries and costs you may not need this coverage. Personal injury protection pays for consequential losses like loss of wages as well while medical expenses coverage is just for medical costs. Personal injury protection coverage is required as part of minimum coverage in no fault states but the minimum requirements would be low.

Once you have all the above covers you can consider yourself fully insured.

Other Additional Covers: However, you can add more to your policy if you want. For example, you can add gap insurance, rental reimbursement coverage, accident forgiveness, towing and emergency assistance for extra protection. Some full coverage policies may have extras included to make them more attractive but it can make them more expensive in the same time. You need to look at cost of car insurance while considering these additional covers and decide if they are worth the money since they are not likely to cause you financial ruin.

 Cost of Car Insurance

It is difficult to conclude this post without mentioning the cost of auto insurance for different types of policies because cost is one of the most influential factors in decision-making. Perhaps, you should start with checking average premium expenditure and average cost of full coverage auto insurance in your state. This will give you some idea as to how much more you will need to pay for full coverage, in comparison to an average policy.

Car insurance costs can be as individual as DNA and therefore difficult to guess on a personal level. Good thing you can always get a few cheap vehicle insurance quotes online for both liability only and full coverage and compare the costs. Just remember to get a few quotes for both types of policies in order to increase your chances of finding the best prices. An insurer who has offered the best rate for basic coverage may not offer the best rate when you want full coverage. That is why you should always get alternative quotes.

Also, many people get only one quote and take it instead of comparing quotes from different vehicle insurers. If you are one of those policyholders you may be paying for a liability only policy that is much more expensive than a full coverage auto insurance policy.

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