Auto Insurance Basics: Understanding Standard Policies

Standard auto insurance is the type of car insurance obtained by average-risk drivers from traditional insurance companies. It is typically offered to drivers with clean driving records, no recent lapses in coverage, valid licenses, and good credit. The cost of standard auto insurance varies depending on factors such as age, location, driving history, vehicle type, and credit history. Standard auto insurance policies usually include liability coverage, collision coverage, comprehensive coverage, uninsured and underinsured motorist coverage, and personal injury protection.

Who needs standard auto insurance?

Standard auto insurance is for drivers who are not considered high-risk. This includes drivers with few or no claims or tickets, no recent lapses in coverage, active and valid licenses, and good credit. Most drivers fall into the standard insurance category.

Drivers who are under the age of 25 or over the age of 75, have multiple speeding tickets or other moving violations on their record, have a DUI, have a salvage title on their car, have a foreign driving license, or have had a significant coverage lapse in the past may not qualify for standard insurance.

Standard auto insurance is offered to drivers who are low risk but may have less-than-perfect credit or a minor violation on their driving record. This includes drivers with a few blemishes on their driving, credit, or insurance record.

Standard auto insurance is also dependent on the state. For example, in California, Hawaii, Massachusetts, and Michigan, credit history is not a rating consideration.

What does standard auto insurance cover?

Standard auto insurance is the type of car insurance purchased by average drivers who are not considered high-risk. This includes drivers with clean driving records, no recent lapses in coverage, valid licenses, and good credit. Standard auto insurance is typically obtained from traditional insurance companies.

Standard auto insurance policies usually offer the following types of coverage:

Liability Coverage

Liability coverage is mandatory in almost every state. It compensates third parties for bodily injury and property damage if you are at fault in a car accident. This can include the other driver, their passengers, their vehicle, as well as injured pedestrians and property owners. However, liability coverage does not compensate you or your passengers. The minimum liability coverage required varies by state, but it is generally recommended to purchase more than the state-mandated minimum to adequately protect your assets.

Collision Coverage

Collision coverage is not required by law, but it is often required by lenders or leasing companies if you have a financed or leased vehicle. It covers the cost of repairing or replacing your car if it is damaged in a collision with another vehicle, object, or as a result of flipping over. Collision coverage typically has a separate deductible, and even if you are at fault, your insurance company will reimburse you for the repair costs minus the deductible.

Comprehensive Coverage

Comprehensive coverage, like collision coverage, is not legally required but is usually mandated by lenders or leasing companies for financed or leased vehicles. It covers damage to your vehicle caused by events other than a collision, such as vandalism, theft, flood, hail, fire, and animal damage. Comprehensive coverage also has a separate deductible, and some insurers may offer a zero-dollar deductible for glass repairs or replacements.

Uninsured and Underinsured Motorist Coverage

Uninsured and underinsured motorist coverage is required in many states. It pays for medical bills and property damage for you and your passengers if the at-fault driver doesn't have insurance or doesn't have sufficient coverage. This coverage also includes hit-and-run accidents and situations where you or your family members are injured as pedestrians by an uninsured or underinsured driver.

Personal Injury Protection (PIP)

Personal injury protection is mandatory in states with no-fault insurance laws. It covers medical bills, lost wages, and, in some cases, replacement services for daily tasks that you are unable to perform due to injuries sustained in a car accident. PIP provides coverage regardless of who is at fault in the accident.

Medical Payments Coverage (MedPay)

MedPay is optional in most states and covers your medical bills and, in some cases, funeral costs, regardless of who is at fault in the accident. However, it does not cover lost wages or other expenses covered by PIP.

What doesn't it cover?

Standard auto insurance policies typically do not cover the following:

• Vehicle customizations and modifications: Any changes made to the vehicle that differ from the standard factory model are generally not covered by standard auto insurance. This includes aftermarket parts, custom paint jobs, or any other additions that modify the vehicle's appearance or performance.
• High-risk drivers: Drivers who are considered high-risk due to factors such as multiple traffic violations, accidents, or a history of claims may be denied coverage by standard insurance companies. They may need to seek non-standard or specialized insurance options.
• Losses above liability limits: Standard auto insurance policies have specific liability limits, which vary by state and insurance provider. If the costs of damages or injuries from an accident exceed these limits, the policyholder may be responsible for covering the excess amount.
• Certain types of vehicles: Antique, high-performance, or very high-value cars may not be covered by standard auto insurance policies. These vehicles often have unique risks and values that fall outside the scope of standard coverage.
• High-risk behaviours: Engaging in risky behaviours such as driving under the influence (DUI) or accumulating multiple traffic violations can result in higher insurance rates or even denial of coverage. Standard auto insurance policies typically do not cover losses or damages resulting from high-risk behaviours.
• Specific coverage options: While standard auto insurance provides basic coverage, it may not include certain optional coverage types. These can include gap insurance, rental reimbursement insurance, roadside assistance insurance, and more. These additional coverage options may need to be purchased separately, depending on the policyholder's needs and preferences.

How does it work?

Standard auto insurance is a type of car insurance offered to average-risk drivers. These are drivers who are neither high-risk nor very low-risk. This includes drivers with few or no claims or tickets, no recent lapses in coverage, active and valid licenses, and good credit.

When applying for auto insurance, drivers are typically placed into one of three categories: nonstandard or high-risk, standard, and preferred. Standard auto insurance is obtained from traditional insurance companies by standard drivers.

When you purchase auto insurance, you pay a premium in exchange for financial protection in the event of a car accident or other covered incident. The amount of money you pay for your policy is the premium. The insurer will then pay for covered expenses up to applicable limits.

Auto insurance works on the concept of indemnity, ensuring the policyholder will be made whole or returned to their original financial position. If your car is damaged or you are sued over an accident you caused, your insurance policy could help pay for repairs, replacements, medical bills, and any other expenses for which you are deemed liable.

Every policy is based on coverage limits, or the maximum amount your insurer will pay on a claim. Some types of coverage also carry deductibles, or the amount you must pay before the insurer covers the remaining costs.

When determining whether to offer coverage, insurers consider the driver's record, accident history, vehicle type, car usage, credit history, and location. This helps the company estimate the likelihood of the driver getting into an accident, filing a claim, and costing the insurer money through a higher-than-average claim rate.

In most states, drivers are required to carry a minimum amount of liability coverage. Liability coverage pays for costs associated with an accident for which you are found legally at fault. This generally includes bodily injury and property damage coverage.

In addition to liability coverage, standard auto insurance may also include:

• Personal injury protection or medical payments coverage
• Comprehensive and collision coverage
• Uninsured/underinsured motorist coverage

Standard auto insurance generally does not cover vehicle customizations and modifications, losses above liability limits, or high-risk drivers who are denied coverage by a standard insurance company.

How much does it cost?

The cost of a standard auto insurance policy can vary widely depending on several factors, including age, gender, zip code of residence, marital status, driving record, and vehicle make and model.

The national average annual car insurance cost in the United States is $1,766 for full coverage and $497 for minimum coverage. However, these rates can differ significantly from state to state. For example, Wyoming has an average full coverage annual rate of $970, while Florida's average rate is $3,090.

Your personal characteristics and driving history will also impact your insurance rates. Young drivers, those with a recent DUI, and drivers with poor credit tend to pay higher insurance rates. Additionally, factors such as your insurance history, credit history, and vehicle type will be considered when determining your insurance rate.

When purchasing a standard auto insurance policy, it's important to shop around and compare quotes from different insurance providers, as rates can vary significantly.

Frequently asked questions