Auto Insurance: Understanding The Basics Of Vehicle Coverage

Auto insurance is a contract between you and your insurance company that offers financial protection in the event of an accident, theft, or damage. It covers damage to your vehicle and protects you financially if you're liable for someone else's injuries or property damage. Most states require a minimum amount of liability coverage, and if you lease or finance your car, your lender may also require comprehensive and collision coverage. Auto insurance can also pay for medical bills if you or your passengers are injured in an accident, or if you're hit by an uninsured or underinsured driver.

What does auto insurance cover?

Auto insurance, or car insurance, is a financial safeguard in the event of car accidents, theft, or other auto incidents. It covers damage to your vehicle and can also protect you financially if you're liable for someone else's injuries or damages. The amount of coverage you'll get depends on the type of insurance you have and the limits you've agreed upon with your insurer. Here's a detailed breakdown of what auto insurance covers:

Liability Coverage

Liability coverage is required in most states and is the minimum insurance coverage in every state except New Hampshire and Virginia. It covers the expenses if you're at fault in an auto accident, including damage to other vehicles and objects, bodily injuries to other drivers and their passengers, and legal expenses if you're sued due to the accident. The coverage limits are typically written as a series of three numbers, such as 20/40/10, indicating the coverage amounts for different scenarios.

Comprehensive Coverage

Comprehensive coverage protects your car from damage caused by events beyond your control. This includes theft, vandalism, falling objects, natural disasters like floods and hailstorms, collisions with animals, and damage to your windshield or glass. It also covers events like fire, explosions, riots, and vandalism. Comprehensive insurance usually has a separate deductible, and some insurers may offer glass coverage without a deductible.

Collision Coverage

Collision coverage pays for repairs to your vehicle if it collides with another vehicle or object, including trees, guardrails, or fences. It also covers incidents like rolling your vehicle. Even if you're at fault, collision coverage will reimburse you for the repair costs minus the deductible. If you're not at fault, your insurance company may try to recover the costs from the other driver's insurance.

Medical Payments/Personal Injury Protection (PIP)

Medical payments coverage and PIP cover the treatment of injuries to the driver and passengers. PIP is broader and is available in certain states; it can cover medical payments, lost wages, funeral costs, and the cost of replacing services normally performed by someone injured in an accident. Medical payments coverage is typically offered in most states.

Uninsured/Underinsured Motorist Coverage

This coverage protects you if you're hit by a driver with no insurance or insufficient coverage. It pays for vehicle repairs, injuries, medical expenses, lost wages, and funeral costs for you, your family, or a designated driver. It also offers protection in hit-and-run incidents or if, as a pedestrian, you're struck by an uninsured or underinsured driver.

Additional Coverage Options

Auto insurance also offers several optional coverage types that you can add to your policy, depending on your needs. These include:

• Rental car reimbursement: Covers the cost of a rental car while your vehicle is being repaired or replaced after an accident.
• Roadside assistance: Provides help if your vehicle breaks down, including towing services, flat tires, dead batteries, and running out of gas.
• Rideshare coverage: Covers you if you drive for a ridesharing service like Lyft or Uber, filling any gaps in coverage from the rideshare company's insurance.
• Loan/lease payoff coverage: Similar to gap insurance, it covers the difference between the value of your vehicle and what you owe on it if it's stolen or totaled.

What doesn't auto insurance cover?

Auto insurance is a contract between you and your insurance company that protects you against financial loss in the event of an accident or theft. While auto insurance covers a wide range of incidents and damage, there are certain exclusions to what is covered.

Firstly, auto insurance does not cover wear and tear or mechanical failures. This means that any maintenance or repairs needed due to normal use or mechanical issues will not be covered. Additionally, auto insurance typically does not cover people who regularly drive your car but are not listed on your policy. If someone who is not on your policy is driving with your consent, they may still be covered, but this is not always the case. It's important to review your specific policy to understand who is covered and under what circumstances.

Another important exclusion to note is that auto insurance usually does not cover commercial or business use of your vehicle. If you use your car for delivering items, providing transportation services, or any other commercial activity, your personal auto insurance will likely not provide coverage. However, some insurers offer supplemental insurance products that can extend coverage for commercial or business use, usually at an additional cost.

Furthermore, auto insurance typically does not cover personal items that are damaged or stolen from your vehicle. In the event of theft or damage to personal items, your homeowners or renters insurance policy may provide coverage. It's important to review your homeowners or renters insurance policy to understand what is covered and under what circumstances.

Lastly, auto insurance generally does not cover intentional damage caused by the policyholder. While comprehensive coverage may protect against vandalism or intentional damage done to your car by someone else, it typically excludes damage that the policyholder inflicts intentionally.

It's important to carefully review your auto insurance policy to understand the specific exclusions and limitations. Each policy is different, and there may be variations in what is and isn't covered. By understanding the exclusions, you can make informed decisions about your coverage needs and consider additional insurance products to fill any gaps.

Who does auto insurance cover?

Auto insurance provides financial protection for you, your family, other passengers, and your vehicle. It covers the costs if you hurt someone or damage their property with your car. It can also cover your medical expenses and, depending on the coverage in your policy, it may cover damage to your own vehicle when you are and aren't driving. For example, if you back into a telephone pole or a tree branch falls on your car.

An auto insurance policy will cover you and other family members on the policy, whether driving your car or someone else’s car (with their permission). Your policy also provides coverage to someone who is not on your policy and is driving your car with your consent.

Personal auto insurance only covers personal driving. It will not provide coverage if you use your car for commercial purposes, such as delivering pizzas. It will also not provide coverage if you use your car to work for ride-sharing services such as Uber or Lyft. However, some auto insurers now offer supplemental insurance products (at an additional cost) that extend coverage for vehicle owners that provide ride-sharing services.

How does auto insurance work?

Auto insurance is a safeguard for your financial well-being in the case of car accidents, theft, or other incidents beyond your control. It works as a contract between you and an insurer, where the insurer agrees to provide financial protection in exchange for a premium. This premium is the amount of money you pay for your policy, and it is essential for maintaining coverage.

The purpose of auto insurance is to provide financial protection and help cover the costs associated with car accidents, theft, or other covered incidents. The specific coverages included in your policy will depend on the laws of your state, the coverages you choose, and your insurer. Basic car insurance typically covers vehicle repairs, medical expenses, and damages or injuries you cause to others while driving. It is important to note that basic car insurance usually does not cover maintenance or general wear and tear.

When purchasing auto insurance, you will need to select an insurance company and determine the level of coverage you need. You will then pay the premium to purchase the policy. The insurance policy is a contract based on the agreement that the insurer will pay for damages based on your coverage and up to the limits specified in the policy.

In the event of an accident, you will need to follow the process for filing a claim with your insurance company. This typically involves ensuring everyone's safety, documenting the accident by taking pictures, gathering relevant information, and submitting the claim to your insurer. It is important to note that a specific coverage type may have a deductible, which is the amount you must pay out-of-pocket before the insurance coverage kicks in.

How much auto insurance do you need?

The amount of auto insurance you need depends on several factors, including where you live, the value of your vehicle, and how much coverage you can afford.

Most states require a minimum amount of liability insurance, which covers any property damage or injuries you're responsible for. However, these minimum requirements are often not enough to cover the full cost of an accident. It's recommended to set your liability limits high enough to cover even the worst-case scenario, such as $100,000 per person and $300,000 per accident in bodily injury liability, and $100,000 per accident in property damage liability coverage.

In addition to liability insurance, you may also want to consider additional types of coverage, such as:

• Collision coverage, which pays for repairs to your own vehicle after an accident, regardless of who caused it.
• Comprehensive coverage, which protects against other risks such as theft, fire, or damage from extreme weather.
• Uninsured/underinsured motorist coverage, which covers costs if you're in an accident caused by a driver who doesn't have insurance or whose insurance can't pay for the full extent of the damage.
• Personal injury protection, which covers medical expenses for you and your passengers in an accident, regardless of who caused it.
• Medical payments coverage, which is similar to personal injury protection but doesn't cover lost wages.

The amount of coverage you need for each of these will depend on your personal situation and financial capabilities. It's important to review your state's requirements and your own needs to determine the right amount of coverage for you.

Frequently asked questions