Should you get
into a car accident and harm someone else or yourself with your car, your car
insurance may cover the costs of medical bills. Depending on the coverage
included in your policy, car insurance could also cover damage to your car
while it’s parked, like if a large tree branch were to fall on it.
Ultimately, what your auto insurance
will cover — and how much — depends on what type of car insurance you have and
the amount of coverage you select. Read on to learn more about how exactly auto
How Car Insurance Works
When you purchase car insurance, you can
opt for different types of insurance and policy amounts. Think of it as one of
those “create your own” burrito places where you can add different fillings to
your burrito. Depending on the state in which you live, there are certain car
insurance requirements you’ll need to meet — more about this later on.
Adding more types of insurance and higher coverage
limits provides greater coverage, but it also raises your premiums. Having a lower
deductible can also bump up your rates. On the other hand, a higher deductible
can lower your rates.
(A deductible is a common insurance term that means how much
you would need to pay upfront before insurance coverage kicks in.)
Car Insurance Requirements
Most states require car insurance, with
the type of insurance and minimum coverage amounts depending on the state.
The only two states that do not require
car insurance are Virginia and New Hampshire. While auto insurance is not
mandatory in New Hampshire, if you’re at fault in an accident, you would need
to show that you have enough funds to meet the state’s motor vehicle financial
responsibility requirements. In Virginia, if you don’t have the minimum
coverage amounts for car insurance, you’ll need to pay a yearly uninsured motor
vehicle fee of $500 on top of your regular registration fees.
If you’re not sure what the minimum requirements for
car insurance are in your state, you can check your state’s DMV site. Keep in
mind that while you can squeak by with the minimum coverage, how much car
insurance you need varies. Depending on your situation, it may
be a good idea to get more coverage.
Types of Car Insurance
When shopping for car insurance, there
are six main types of car insurance to keep in mind.
Should you get into a car accident and are found to be
the one who caused the crash, bodily injury liability
coverage can help cover medical bills and wages lost for taking
time off of work because of bodily harm. It can also cover named drivers, such
as family members on your policy or drivers who are using your car with your
Bodily injury liability is typically
must-have coverage. According to the Insurance Information Institute (III), the
average claim for bodily injury was $20,235 in 2020. Having enough coverage
could help protect your property, assets and home.
If you crash into another car or an
object, or your car gets damaged from driving over a pothole, collision
coverage can pay for the costs to repair any damages to your car. It can also
cover damages should your car flip over. Once your deductible is paid, the
coverage will kick in.
If the other driver is the one at fault,
then typically a claim can be filed with their insurance company, and they’ll
cover the costs. In the case the other driver’s coverage amounts aren’t enough,
and you don’t have uninsured motorist coverage (sometimes called underinsured
coverage), then your own collision policy can step in.
If you’re taking out a loan and still
paying off your car, lenders likely require you to have full coverage, which
includes liability, collision, and comprehensive insurance, which we’ll go over
While collision coverage can cover the
costs of damage during a car crash, comprehensive liability includes everything
else — like a deer running into the front of your car, riots and vandalism, a
tree branch falling on your car, a hailstorm and natural disasters.
Comprehensive coverage can also pay for a broken windshield (though whether it
makes sense to file a claim depends on your policy and deductible). It can also
cover theft, of either your entire car or a piece of your car, such as a hood
As mentioned before, if you’re still
making payments on your car, you most likely are required to have both
comprehensive and collision insurance in addition to liability coverage.
Should you, the driver, or your
passengers get harmed in a car accident, personal injury protection (PIP), also
known as medical payments coverage, can help pay for medical bills, lost wages
and sometimes funeral costs. It can cover these costs no matter who is at
fault, hence why it’s sometimes called no-fault insurance.
Depending on your policy, PIP can also
help pay for bodily harm should you get injured while walking or riding a
scooter or a bike.
Like bodily injury liability, property
damage coverage is also usually required in most states. Let’s say you or a
named driver on your policy damages another vehicle or property, such as the
side of a building. In these situations, property damage can reimburse the cost
In the case of a hit-and-run, uninsured
or underinsured motorist coverage can foot the bill for covered damages. Or
should someone who hits you not have adequate insurance; this type of policy
can pay for any shortfalls.
Special Considerations When
Choosing a Policy
Besides the standard types of policies,
there are some additional considerations to keep in mind when it comes to
choosing an auto insurance policy.
While not a type of insurance, roadside
assistance can come in handy should you get a flat tire, or your battery dies
while on the road. While you can usually attach this to your existing auto
policy as an add-on, what exactly is covered might vary by carrier.
Outside of purchasing roadside
assistance as an add-on to your car policy, you can also shop around for
companies that offer roadside assistance as a standalone service.
If you have a new ride and your car gets
totaled, new car replacement coverage can replace the vehicle in its entirety.
This is usually available as an add-on if you purchased a policy with collision
and comprehensive insurance.
Depending on the insurance company and
carrier, this might cover cars that are no more than two years old. Plus,
restrictions and limitations might differ.
If your car is getting repaired and
those repairs are covered under a car insurance claim, a policy might include
an add-on to cover the fees for getting a rental car or other transportation
while your vehicle is in the shop. Whether you take public transit, rent a car
or take a rideshare, what exactly is covered depends on your specific policy
If you’re a rideshare driver for a
company like Uber or Lyft, you’ll need to meet the minimum coverage amounts for
that particular company. Some insurance companies provide rideshare coverage in
their policies. If not, you might need to get a rideshare endorsement or a
separate rideshare insurance policy.
If you have liability and comprehensive
coverage on your car, then that coverage can typically carry over to when you
rent a car within the country. As mentioned before, depending on the
particulars of the policy and car insurance company, this might not be
applicable in every state, and the amount of coverage can also vary.
What Does Car Insurance NOT Cover?
While auto insurance can cover a lot of
things, it doesn’t cover normal wear and tear or routine maintenance. And
unless it’s a rental car, it doesn’t provide coverage when you’re driving
someone else’s car.
A policy also doesn’t pay for lost
personal belongings in your car, such as air pods or gym gear. This could be
covered by a renters or homeowners insurance policy.
At the end of the day, not all policies
are alike nor are they created equally. It’s important to check to see what
your policy will cover.
There are six main types of insurance —
bodily injury liability, collision, comprehensive, personal injury protection,
property damage and uninsured or underinsured motorist coverage. But the type of
coverage and limits required vary by state.
Not sure what type of car insurance you need and how
much it could cost? To find a policy that meets your needs, it can be helpful
to do some comparison shopping.
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