What does car insurance cover?

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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
insurance works.

 

Related: 6 tips that can lower your car payment

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.

Bodily Injury
Liability

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
permission.

 

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.

Collision

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
next.

Comprehensive

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
ornament.

 

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.

Personal Injury
Protection (PIP)

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.

Property Damage

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
of repairs.

Uninsured or
Underinsured Motorist

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.

Roadside
Assistance

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.

New Car
Replacement Coverage

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.

Rental
Reimbursement Coverage

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
and limits.

Rideshare Coverage

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.

Car Rental
Coverage

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.

The Takeaway

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.

 

Learn more:

This article originally appeared on SoFi.com and was syndicated by MediaFeed.org.

 

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Having more than one source of income is pretty common these days. For some people, it’s a way to make ends meet. For others, it’s a way to grow their wealth. It can also be a way to feel more financially secure. If one source of income dries up, there is another that can fill in the gap. While a common source of income is the type earned from a regular job, there is also passive income.

 

Creating and managing passive income streams isn’t a passive activity. It requires upfront work and sometimes investment to build up a source of passive income. Depending on what your passive income source is, such as a blog or podcast, it may require you to put in time each week to keep it earning you cash.

 

Related: 25 things to know when renting out an Airbnb

 

 

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Passive income is money that you earn without active involvement. In other words, it is income that isn’t attached to an hourly wage or annual salary. Passive income streams could include things like cash flow from rental properties, dividend-yielding stocks, sales of a product (that requires little or no effort), royalties and more.

 

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In addition to passive income streams, there are other types of income you can earn:

  • Earned income: This is the most common type of income
  • — money you make from a job. With earned income, you are trading your time for money.
  • Profit income: Profit income comes from the sale of a product after expenses have been deducted.
  • Interest income: This can be money earned from one entity lending to another entity, such as a person, company or bank. This can also be referred to as interest from accounts such as savings accounts and certificates of deposit (CDs) in which you receive a 1099-INT at the end of the year.
  • Dividend income: Most dividend income is earned by the distribution of income from companies to shareholders owning stocks that pay dividends.
  • Rental income: Rental income is earned when you rent or lease a house, car, or other property you own to someone else.
  • Capital gains: This generally refers to profit (or gain) that is subject to taxation when you sell an asset such as stock or real estate. There are both long- and short-term capital-gains tax rates depending upon how long you held the asset before sale.
  • Royalty income: Royalty income is generated when you own the rights to a piece of art, music, literature or another asset licensed for other people to use, or from the extraction of oil, gas, or minerals.

 

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There are only 24 hours in a day. If you go to a job each day that pays you a set amount of money, that is the maximum amount that you’ll ever make in a 24-hour period. That is called earned income.

 

By investing some of that earned income and creating sources of passive income, you may be able to increase your earnings. Diversifying your income stream may also improve your financial security.

 

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  • More free time: By earning money through passive income sources, you might be able to free time in your schedule. You may choose to spend more time with your family, pursue a creative project or new business idea, or travel the world.
  • Financial security: Even if you still plan to keep your 9-to-5 job, having multiple sources of income could help increase your financial security. If you lose your job, become sick or get injured, you may still have money coming in to cover expenses. This is especially important if you are supporting a family.
  • Tax benefits: You may want certain legal protections for your personal assets or to qualify for tax breaks. Consulting with an attorney and/or tax advisor to explore setting up a formal business structure like a sole proprietorship, a limited liability company (LLC) or a corporation might help you decide if this is a good route for your particular situation.
  • Location flexibility: If you don’t have to go into an office each day, you’ll be free to move around and, possibly, live anywhere in the world. Many passive income streams can be managed from your phone or laptop.
  • Achieve financial independence: The definition of financial independence is having enough income to cover your expenses without having to actively work in order to cover living expenses. This could allow you to retire early and have more freedom to live your life the way you choose. Whether you’re interested in retiring early or not, passive income can be one way to help you reach financial independence.
  • Pay off debt: Passive income may help you to supplement your income so that you will have the opportunity to pay off any debts more quickly.

 

Depositphotos

 

Although it might sound like a dream come true to quit your job and travel the world, earning through passive income is not quite that simple.

  • Earning passive income is not a passive activity: Whether you earn passive income through a rental property, running a blog or in another way, you will still need to put in some time and effort. It takes time to get these income sources up and running, and they don’t always work out as planned. If, for example, you run an Airbnb, you have to maintain the property, ensure a high-quality experience for guests, and address any issues or concerns guests may have to secure positive reviews.
  • Passive income requires diversity: In order to earn enough passive income to quit your job and cover all your expenses, you would most likely need more than one source of income. Although you may no longer need to clock into a 9-to-5 job, you will likely still need to spend time managing multiple income streams.
  • It’s lonely at the top: It might sound great to never have to go to the office again and to have the freedom to travel, but earning money through passive income can become lonely. Not having anyone to talk to during the day might make you feel lonely, and if you aren’t self-motivated, you may find it difficult to stay on task if you need to manage your passive income streams.
  • Getting started may require investment: Depending on how you plan to earn passive income, it may require an initial financial investment. You may need money for a down payment on a rental property, the development of a product you plan to sell or for investment into dividend-yielding stocks.

 

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There are a number of ways to earn passive income. Some options, like the following, take relatively little active supervision.

 

 

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By simply putting your money in the bank, you may be able to start to earn passive income on it. If you invest in an FDIC-insured account, the first $250,000 of your money is protected. There are both banks and online platforms that offer high-yield savings accounts.

 

 

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Although this may take an up-front investment, buying into a business and becoming a silent partner can be another passive income source.

 

 

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Using a peer-to-peer or crowd-lending website, you can be matched to an individual seeking a loan and lend your money as an installment-type loan, earning interest on it. You might earn even more than from a bank, depending on the loan.

 

 

AndreyPopov/istock

 

Another popular passive income source is rental property. You might want to purchase a home to rent out to an ongoing tenant or list a property on a short-term rental site like Airbnb. Hiring a property management company lessens your day-to-day involvement, thereby making this venture more passive than active.

 

 

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If you don’t have thousands of dollars to spend on a piece of property, you can always check out your options on crowdfunded real estate sites like Fundrise and CrowdStreet. For Fundrise, you only need $500 to start.

 

 

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There is no guarantee that investing in dividend-paying stocks will continue to earn you passive income, but some investors may enjoy the thrill of the ups and downs of the stock market. Dividend-paying stocks typically pay investors quarterly or annually and often allow investors to reinvest the dividends.

 

 

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If you’re just getting started with investing, you may want to use automated investing tools to help you choose the appropriate allocation of assets for your goals.

 

AndreyPopov / istockphoto

 

When you open your retirement account, you can choose to invest it however you want. One way to earn passive income on a retirement account is through mutual funds. You can choose the level of risk you want to take with your money by finding a mutual fund that is higher or lower risk.

 

 

Flickr: American Advisors Group

 

When you join a company’s affiliate program, you earn a commission from every product that someone purchases from that company. All you have to do is post the link on your blog, website or social media pages. Amazon Associates is a great place to start.

 

 

CarmenMurillo / iStock

 

Another one of the best passive income opportunities is renting out your car on a site like Turo. It’s basically the Airbnb of cars, and, according to Turo, the average annual income for one car on the site is $10,516.

 

 

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If you have a clean driving record and a newer car, consider getting in touch with a car advertising agency. You simply drive around town with ads on your car and easily earn passive income.

 

 

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Do you have space in your driveway that you aren’t using? Then rent it out on platforms like Stow It, where you can find people who will pay to rent out the space.

 

 

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If you have extra space in your garage, shed or storage unit, then you could earn passive income by using a peer-to-peer storage site like Stashii to find people who need your space.

 

 

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You may not have space to store other people’s things, but you might consider investing in a real estate investment trust (REIT) that focuses on storage units. For example, one option is Public Storage, which has ownership or interest in 2,548 properties located in 38 states.

 

 

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Perhaps you don’t have a car, but you do have a bike that’s just sitting around. Your bike could be a lucrative passive income source, especially if you live in a high-traffic area. List your bike on Spinlister to get started.

 

 

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Even if you don’t own a rental property, with your landlord’s permission, you may be able to rent out a room in your apartment or list it on Airbnb and start adding to your passive income streams.

 

 

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If you love pets, you can earn passive income by welcoming pets into your home while their owners are on vacation. For instance, you could charge $30 to $80 per day just for running a doggy daycare. You can gain clients through word of mouth or use a site like Rover to find customers.

 

 

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When your friends go out of town, they may need someone to stay in their home and do simple things like water their plants and collect their mail. You can easily make money and have somewhere new to stay for a little bit. Along with making yourself available to friends, you can sign up to be a house sitter on HouseSitter.com.

 

 

Valeriy_G / iStock

 

Some domain names are cheap, while others cost a lot of money because they are in high demand. One thing you could do to start another passive income stream is to purchase domain names you think will be popular. Purchase low for around $10 to $100 and then sell them for a much higher price later on.

 

 

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Have you ever done a home improvement project that required you to purchase tools? You may never need to use those tools again. Thankfully, now you can rent tools, and rent out your tools, on peer-to-peer platforms such as Sparetoolz to earn passive income.

 

 

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Let’s say you don’t have any songwriting ability, but you would like to make money on other artists’ work. You can invest in royalties through Royalty Exchange and earn passive income on the intellectual property.

 

 

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You can make thousands of dollars per month if you own a billboard where companies can advertise their products and services. Do your research and make sure you get the right permits before committing to a billboard.

 

 

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If you don’t have the time or energy to create content for your own blog, then look into ones that are already successful and see if the owners are willing to sell. You could also hire someone to manage your blog so that you’re truly earning in a passive way.

 

 

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If you have a special skill or knowledge about a certain topic, you may be able to create a video course where you teach people about that topic and charge them to take the course.

 

 

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You may want to research online platforms where you can sell everything from digital art to e-books. Whether you’re an artist, graphic designer or writer, you can create digital products to sell online.

 

 

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Many companies, bloggers and individuals use stock photos on a regular basis. You may be able to upload your best photos to stock photo sites and earn passive income on them.

 

 

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If you’ve been dreaming about an amazing phone app that you think a lot of other people would use, you may want to look into hiring a development team to create it.

 

 

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You may be able to earn passive income through sales of a product that you create. This could be a book that you write or a physical product that you design and make. You might also list items you already own on sites like eBay and earn extra income through those sales.

 

 

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Do you love to write songs? Then you could license your music and start to earn passive income. You’ll just have to team up with a music licensing company to get started.

 

 

Rohapp

 

Through platforms like Amazon’s KDP, you can self-publish a book and earn a royalty on it every time someone makes a purchase. You will be able to set the price of your book and be in full control of your book’s Amazon page, where you can list pictures of the book, reviews and videos promoting it.

 

 

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You can start selling books online without having to write anything. How? By focusing on blank books, such as journals, sketchbooks and planners. Simply find a design you believe will appeal to people and begin collecting royalties when people buy your books.

 

 

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Another artistic endeavor that could be a good passive income stream is creating greeting cards that you sell to a wholesale or retail stationery company that accepts independent artist submissions.

 

 

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If you want to sell products online but don’t want to store any of the goods, you could always look into dropshipping to earn passive income. With dropshipping, you don’t have to have much money to start since you don’t need inventory to fulfill orders for customers.

 

 

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If you like to write and are passionate about a certain topic, you might want to start a blog and earn money through ads and affiliate links.

 

 

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If you enjoy creating videos more than writing, then consider starting your own YouTube channel. Once you get enough viewers, you can earn passive income through YouTube advertising.

 

 

DepositPhotos.com

 

Podcasts are all the rage, and they can generate some passive income streams for you. If you start a podcast that resonates with people, then you can grow your audience and monetize your show by sponsoring with ad partners. If you get enough listeners, you may be able to sign up for podcast advertising networks.

 

 

vadimguzhva / istockphoto

 

When people are out at a bar or nightclub or they’re frequenting a cash-only business, they may need cash right away. If you own an ATM business and you place your ATM in high-traffic locations, you could start to earn passive income through surcharge fees. Typically, you could earn around $3 per withdrawal.

 

 

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Similar to an ATM business, a vending machine business allows you to use your creativity and determine high-traffic areas where you could make a lot of money. If you buy in bulk, you’ll be able to save on the snacks and drinks you purchase for your machines.

 

 

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No matter which type of passive income you choose to pursue, it’s important to keep track of your finances and both your short-term and long-term financial goals.

 

Tracking multiple sources of income in a monthly budget can be a complex task. To be profitable, it’s important to pay attention to how much money you put into the maintenance of your passive income stream(s), such as property upkeep or monthly online services.

 

Portra

 

Establishing passive income streams is one way to diversify your income and can help you build wealth and achieve financial freedom in the long term. There are a variety of ways to earn passive income, such as through investing, rental properties and earning royalties. Some passive income sources require a financial commitment upfront, such as purchasing a rental property, and others may require a time commitment.

 

Learn more:

This article originally appeared on SoFi.comand was syndicated by MediaFeed.org.

 

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