Vehicle Insurance: What's Covered?

A vehicle insurance policy is a packet or binder of documents that outline the terms and conditions of your coverage. The first page is typically a declaration page, which includes bold and easy-to-read general information. This is followed by the policy form, which contains the definitions of policy terms, provisions, exclusions, conditions, and details of coverage. The policy will also include other documents such as an insurance ID card, insurance verification, and an insurance agreement. The cost of an auto insurance policy is determined by factors such as your driving record, the type of vehicle, age, gender, and location.

What is included in vehicle insurance?

Vehicle insurance, also known as car insurance, motor insurance, or auto insurance, is a financial protection plan for cars, trucks, motorcycles, and other road vehicles. The primary use of vehicle insurance is to provide financial protection against physical damage or bodily injury resulting from traffic collisions and against liability that could arise from incidents in a vehicle.

Vehicle insurance may also offer financial protection against:

• Theft of the vehicle
• Damage to the vehicle sustained from events other than traffic collisions, such as keying, weather, natural disasters, and damage sustained by colliding with stationary objects

The specific terms of vehicle insurance vary with legal regulations in each region. While different states mandate different types of insurance, most basic auto policies consist of six types of coverage:

• Bodily injury liability
• Personal injury protection
• Property damage liability
• Collision coverage
• Comprehensive coverage
• Uninsured/underinsured motorist coverage

Bodily Injury Liability

Bodily injury liability coverage applies to injuries that you, the designated driver or policyholder, cause to someone else. You and family members listed on the policy are also covered when driving someone else’s car with their permission.

Personal Injury Protection

This coverage pays for the treatment of injuries to the driver and passengers of the policyholder's car. At its broadest, personal injury protection can cover medical payments, lost wages, and the cost of replacing services normally performed by someone injured in an auto accident. It may also cover funeral costs.

Property Damage Liability

This coverage pays for damage you (or someone driving the car with your permission) may cause to someone else's property. Usually, this means damage to someone else’s car, but it also includes damage to lamp posts, telephone poles, fences, buildings, or other structures your car hit.

Collision Coverage

Collision coverage pays for damage to your car resulting from a collision with another car, an object, such as a tree or telephone pole, or as a result of flipping over. It also covers damage caused by potholes.

Comprehensive Coverage

Comprehensive coverage reimburses you for loss due to theft or damage caused by something other than a collision with another car or object. It covers events such as fire, falling objects, missiles, explosion, earthquake, windstorm, hail, flood, vandalism, riot, or contact with animals. It will also pay to repair your windshield if it is cracked or shattered.

Uninsured/Underinsured Motorist Coverage

Underinsured motorist coverage reimburses you, a member of your family, or a designated driver if one of you is hit by an uninsured driver or a driver who doesn’t have enough insurance to pay for your total loss. This coverage also offers protection in the event a covered driver is the victim of a hit-and-run.

What does vehicle insurance cost?

The cost of vehicle insurance varies depending on a range of factors, including the driver's age, gender, location, driving history, credit score, and the type of vehicle they drive.

Average Cost of Vehicle Insurance

The average cost of car insurance in the US is $2,150 per year for full coverage, or $467 per year for state minimum coverage, according to Forbes Advisor's analysis. However, Bankrate's research puts the average cost of full coverage at $2,311 per year, and minimum coverage at $640 per year. ValuePenguin's analysis found the average cost to be $767 per year for minimum coverage.

Cost by State

The cost of vehicle insurance also varies by state. For example, Wyoming's average full coverage annual rate is $972, while Louisiana's is $3,114, according to NerdWallet. Idaho, Vermont, and Ohio are among the cheapest states for full coverage, while New York, Florida, and Louisiana are the most expensive, according to Bankrate.

Cost by Company

The cost of vehicle insurance also depends on the company providing it. USAA, Auto-Owners, and Geico are among the cheapest companies for full coverage, while Erie, Mercury, and Progressive are the cheapest for state minimum coverage, according to Forbes Advisor.

Cost by Age

Age is a significant factor in the cost of vehicle insurance, with younger and older drivers typically paying more. According to Forbes Advisor, the average cost of car insurance for an 18-year-old driver is $8,765 per year, while for a 30-year-old driver, it is $2,948 per year. The cost decreases as drivers get older, but it starts to increase again once they reach their 70s.

Cost by Gender

In most states, gender also influences the cost of vehicle insurance. Males tend to pay more than females, especially at younger ages. However, this difference decreases as drivers get older, and by age 40, the national average cost of full coverage is only 1% more for men than for women, according to Bankrate.

Cost by Driving History

A driver's history also impacts the cost of vehicle insurance. For example, the average cost of car insurance after a speeding ticket is $2,633 per year, according to Forbes Advisor. The cost increases to $3,537 per year after a DUI and $3,005 per year after an at-fault accident.

Cost by Credit Score

A driver's credit score also affects the cost of vehicle insurance. Forbes Advisor found that drivers with poor credit pay about 76% more than drivers with good credit, or $1,600 more per year.

What is covered in the event of an accident?

When it comes to vehicle insurance, there are several types of coverage that determine what is covered in the event of an accident. While the specific details of what is covered can vary depending on the insurance company and the policy, here is an overview of the common types of coverage and what they include in the event of an accident:

Liability Coverage

Liability coverage is typically the minimum required type of insurance in most states. This coverage pays for expenses if you cause an accident, including medical expenses for the other driver and passengers, as well as property damage. However, it does not cover damage to your own vehicle. The minimum amount of liability coverage required can vary by state, so it is important to check the requirements for your specific location.

Collision Coverage

Collision coverage pays for repairs or replacement of your car after an accident, regardless of who is at fault. This includes accidents with other vehicles, as well as collisions with objects such as fences or utility poles. It also covers incidents like rolling your vehicle. While collision coverage is not required by law, it is often required by lenders if you are still paying off your car loan.

Comprehensive Coverage

Comprehensive coverage helps pay for damage to your vehicle that is not caused by a collision. This includes natural disasters such as hail, flooding, or tornadoes, as well as damage caused by animals, vandalism, theft, and falling objects. Comprehensive coverage is typically optional, but it can provide valuable protection for your vehicle in a variety of situations.

Medical Payments Coverage (MedPay)

MedPay covers your own medical expenses after an accident, regardless of who is at fault. This includes your passengers' medical expenses as well. MedPay coverage is often quick to pay out and usually does not require a deductible. While it is not required in all states, it can provide valuable peace of mind and financial protection in the event of an accident.

Personal Injury Protection (PIP)

Personal Injury Protection (PIP) is similar to MedPay in that it covers your own medical expenses after an accident. However, PIP also covers additional costs such as lost wages and funeral expenses. All auto policies in Texas include PIP coverage, but it may not be required in other states. PIP may require a deductible, so be sure to check the details of your policy.

Uninsured/Underinsured Motorist Coverage

This type of coverage protects you if you are hit by a driver who does not have insurance or does not have enough insurance to cover your medical and repair bills. It also covers hit-and-run accidents. While insurance companies are required to offer this coverage, it is typically optional for drivers to purchase. This coverage can provide valuable protection in the event that you are involved in an accident with an uninsured or underinsured driver.

In addition to these common types of coverage, there are also other optional coverages that can be added to your policy, such as rental reimbursement coverage, towing and labor coverage, and gap insurance. It is important to carefully review your insurance policy and understand what is covered in the event of an accident. This will help ensure that you have the protection you need and that you are not paying for coverage that you do not need.

What is the process for obtaining vehicle insurance?

The process of obtaining vehicle insurance can be done in several ways, including shopping online, calling companies directly, or working with an insurance agent or broker. Here is a step-by-step guide on how to obtain vehicle insurance:

Gather Information:

Before starting, collect essential information such as the name, address, date of birth, and driver's license information for all drivers on the policy. Also, gather vehicle details like the make, model, Vehicle Identification Number (VIN), current mileage, and address where the vehicle is registered.

Determine Coverage Needs:

Each state has minimum car insurance requirements, but you may want additional coverage. Common types of coverage include bodily injury and property damage liability, uninsured/underinsured motorist coverage, comprehensive coverage, medical payments coverage, and personal injury protection insurance.

Choose How to Shop:

You can purchase insurance directly from a company, use a captive agent who works for a single insurer, or work with an independent agent or broker who can offer policies from multiple insurers. Consider your preferences for convenience, price comparison, and the level of guidance needed.

Compare Companies:

Get quotes from at least three companies, ensuring you are comparing policies with similar coverage limits and deductibles. Consider not only the price but also read reviews and ratings of each insurer to assess their customer service and claims satisfaction.

Buy the Policy:

Choose a company and policy that suits your needs. Set a start date for your policy and pay your first premium. You will receive proof of coverage and a welcome package with information on accessing your account and insurance cards.

Cancel Old Policy (if applicable):

If you are replacing an existing policy, ensure there is no gap in coverage by setting the cancellation date of the old policy and the effective date of the new policy on the same day. Contact your former insurer to cancel and expect a refund for any unused portion of your premium.

What does vehicle insurance look like?

Vehicle insurance is a legal contract between an individual (the policyholder) and an insurance company. It is a long document with several sections, outlining the terms and conditions of coverage for the policyholder's vehicle(s) against various risks, such as accidents, theft, and damage. The insurance policy is typically provided as a packet or binder, with the declaration section usually on the first page.

The declaration section includes:

• The insurance provider's official header
• The name of the policyholder and their address
• The vehicle insurance policy number
• The car insurance policy expiration date
• Listed drivers and vehicles covered by the insurance
• Types of insurance coverage issued, such as collision insurance and comprehensive insurance
• Limits of said insurance coverages, and the maximum payout in the event of a claim
• The deductible amount, or how much the policyholder pays in the event of a claim
• The annual insurance premium, or how much the policyholder pays per year
• Listed endorsements, or any insurance riders

The agreement section outlines the amount the policyholder has agreed to pay for their coverage. This is not a binding agreement, and if payments stop, the provider will stop coverage.

The definitions section defines terms used in the policy, such as who is considered a family member.

The insuring agreement section outlines the specifics of the insurance coverage and how it will cover the insured. It lists the types of insurance and the maximum payout in the event of a claim, as well as scenarios where the policyholder would not be covered.

The conditions section outlines the terms and conditions for being a policyholder, including the process and timeframe for filing a claim. It also outlines the process for cancelling the policy.

The coverage types section lists the types of insurance coverages included in the policy, such as liability insurance, collision coverage, comprehensive coverage, personal injury protection insurance, and uninsured motorist coverage.

The coverage payment limits section includes the exact amounts the insurance provider will cover after a claim.

The deductibles section lists the amount the policyholder must pay in the event of a claim before the insurance provider pays out.

The exclusions section lists the circumstances where the insurance will not provide coverage, such as fraudulent damage, impaired driving, and using the car for business purposes.

The endorsements and riders section outlines any add-ons to the policy that affect how coverage is provided, such as family protection, waiver of depreciation, and loss of use.

In addition to the above sections, a vehicle insurance policy also includes the policy form, which explains the benefits and limitations of the policy, and an insurance ID card, which serves as proof of insurance and includes the insurance company name and vehicle identification number.

Frequently asked questions