Basic Or Standard Auto Insurance: Which Offers Better Coverage?

When buying auto insurance, there are two main types of coverage to choose from: standard and basic. Standard insurance is offered to average-risk drivers with only a few blemishes on their driving, insurance, or credit histories. It provides minimum liability coverage, uninsured motorist limits, and personal injury protection (PIP). Basic insurance, on the other hand, provides a set amount of medical expense coverage and does not include benefits such as income continuation and bodily injury liability coverage. It's important to understand the differences between these two types of policies to make an informed decision about which one is right for your specific needs and situation.

Basic auto insurance policy coverage

Basic auto insurance policies vary by state, but they generally consist of six types of coverage: bodily injury liability, personal injury protection, property damage liability, collision, comprehensive, and uninsured/underinsured motorist coverage. Each type of coverage is priced separately, so there is variability in policy limits and pricing.

Bodily injury liability coverage applies to injuries that the policyholder or a designated driver causes to someone else. This coverage is very important because if you are involved in a serious accident, you may be sued for a large sum of money. It is recommended that policyholders buy more than the state-required minimum liability insurance to protect their assets, such as their home and savings. This coverage also extends to family members listed on the policy who are driving someone else's car with their permission.

Medical payments or personal injury protection (PIP) covers the treatment of injuries to the driver and passengers of the policyholder's car. PIP 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 covers damage caused by the policyholder or someone driving the car with their permission to someone else's property. This usually means damage to another vehicle, but it can also include damage to lamp posts, telephone poles, fences, buildings, or other structures.

Collision coverage pays for damage to the policyholder's 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. Collision coverage is generally sold with a separate deductible, and it will reimburse the policyholder for the costs of repairing their car, minus the deductible.

Comprehensive coverage reimburses the policyholder for loss due to theft or damage caused by something other than a collision with another car or object. This includes events such as fire, falling objects, missiles, explosion, earthquake, windstorm, hail, flood, vandalism, riot, or contact with animals. Comprehensive coverage will also pay to repair a cracked or shattered windshield. It is usually sold with a separate deductible, although some insurers may offer the glass portion of the coverage without a deductible.

Uninsured and underinsured motorist coverage reimburses the policyholder, a member of their family, or a designated driver if they are hit by an uninsured driver or a driver who doesn’t have sufficient insurance to pay for the total loss. This coverage also offers protection in the event of a hit-and-run or if, as a pedestrian, the policyholder is struck by an uninsured or underinsured motorist.

Standard auto insurance policy coverage

Standard auto insurance is the auto insurance offered to average-risk drivers. With only a few blemishes on their driving, insurance, or credit histories, drivers usually qualify for standard auto insurance coverage. Standard auto insurance offers coverage to average-risk drivers who are neither high-risk nor very low-risk.

When it comes to choosing an auto insurance policy, there are two main types of coverage: standard and basic. A standard auto insurance policy typically provides minimum liability coverage, which will protect your assets, as well as coverage for uninsured motorists and personal injury protection (PIP). The specific coverage limits can vary, but a standard policy usually includes:

• Minimum liability coverage to protect your assets.
• Uninsured motorist coverage with limits of $15,000 per person and $30,000 per accident for bodily injury, and $5,000 for property damage. These numbers can often be adjusted to meet your personal needs.
• Personal Injury Protection (PIP) provides coverage for medical expenses resulting from an accident. The coverage limit for PIP is typically $250,000 per accident, but lower levels such as $15,000, $50,000, $75,000, or $150,000 are also available.

In addition to the coverage limits, a standard auto insurance policy also takes into account various factors to determine the premium charged. These factors include:

• Driving record: Maintaining a clean driving record with few or no accidents is important for qualifying for standard auto insurance.
• Insurance history: The length of time you have had auto insurance, any claims made, and lapses in coverage are considered.
• Vehicle type: The make and model of your vehicle can impact your eligibility for standard auto insurance. Some high-performance or high-value cars may not be covered under a standard policy.
• Credit history: In some states, insurers are permitted to review your credit history as part of the underwriting process.
• Location: Your location can also affect your eligibility for standard auto insurance.

It's important to note that the specific coverage and requirements may vary depending on your state and insurance provider. Additionally, if you don't qualify for standard auto insurance, there are alternative options available, such as non-standard policies or your state's assigned risk plan.

High-risk vs. average-risk drivers

When it comes to auto insurance, drivers are generally classified as either high-risk or average-risk. This classification plays a significant role in determining the cost and availability of car insurance. So, what distinguishes high-risk drivers from average-risk ones, and how does it impact their insurance options?

High-Risk Drivers

High-risk drivers are those who are considered more likely to file insurance claims than the average driver. Insurance companies evaluate an individual's driving record, insurance history, and financial history to determine whether they fall into this category. Factors that contribute to a high-risk designation include:

• A history of multiple traffic violations, such as speeding tickets or running red lights.
• At-fault accidents, especially if there have been multiple incidents.
• Serious violations like Driving Under the Influence (DUI) or Driving While Intoxicated (DWI) convictions.
• Reckless driving behaviors, such as weaving through traffic.
• Lapses in insurance coverage or a history of uninsured driving.
• Poor credit history, as it is statistically linked to a higher likelihood of filing claims.
• Being a new or teen driver with limited experience.

High-risk drivers often face challenges in obtaining affordable car insurance. They may have to pay significantly higher premiums than average-risk drivers because insurance providers view them as greater liabilities. Additionally, some insurance companies may not be willing to offer coverage to high-risk drivers at all.

Average-Risk Drivers

Average-risk drivers, also known as standard risk drivers, are those who fall between the high-risk and low-risk categories. They typically have a relatively clean driving record, with only a few minor blemishes. Factors that contribute to an average-risk designation include:

• A good driving record with no recent accidents or serious violations.
• A stable insurance history with consistent coverage and few claims.
• A safe and contemporary vehicle with modern safety features.
• A strong credit history.

Average-risk drivers usually qualify for standard auto insurance policies, which offer affordable and consistent coverage. These policies are designed for drivers who are neither high-risk nor very low-risk. Standard policies typically include liability coverage, uninsured motorist protection, and personal injury protection.

Key Differences

The main difference between high-risk and average-risk drivers lies in their driving records, insurance histories, and overall risk profiles. High-risk drivers present a greater potential for claims and financial losses to insurance companies, leading to higher premiums or difficulty in obtaining coverage. On the other hand, average-risk drivers are more likely to obtain standard insurance policies with lower premiums due to their lower risk assessment.

It's important to note that the criteria for classifying drivers as high-risk or average-risk can vary between insurance companies, and the specific factors considered may differ. Additionally, the impact of being designated as a high-risk driver can vary in severity and duration, depending on the specific factors contributing to that classification.

Non-standard auto insurance

Age can also be a factor in determining whether a driver is considered non-standard. For example, if you are younger than 25 or older than 75, you may fall into the non-standard category. Additionally, if you have a history of speeding tickets, accidents, or driving under the influence, you may need a non-standard auto insurance policy.

If you are deemed too high-risk, an insurance company might cancel your policy. In this case, you would need to purchase a non-standard policy from a specialist company. Some large insurance companies control smaller companies that may offer better rates for non-standard insurance. Alternatively, you could look at your state's assigned-risk pool, which provides insurance to high-risk drivers as a last resort.

Minimum liability coverage

Liability insurance covers the cost of damage to another driver, their passengers, or their property, in the event of an accident where you are at fault. There are three components to liability coverage: bodily injury coverage per person, bodily injury coverage per accident, and property damage coverage per accident. For example, a policy with liability coverage limits of 15/30/10 would pay up to $15,000 per person for bodily injuries, with a total limit of $30,000 for all bodily injuries in the incident, and $10,000 for property damage.

The minimum liability coverage required varies by state. For example, Texas law mandates a minimum coverage of 30/60/25, while New York requires 25/50/10. It is important to note that the minimum liability limits might be too low to cover the costs of a multi-vehicle accident or a totaled car. In such cases, the policyholder might have to pay out of pocket, and the other driver could sue. Therefore, it is recommended to purchase more than the state-required minimum liability insurance to adequately protect your assets.

In addition to liability coverage, standard auto insurance policies typically include uninsured/underinsured motorist coverage and personal injury protection (PIP). Basic auto insurance policies, on the other hand, may not include these coverages, leaving you vulnerable to uninsured or underinsured drivers, and offering limited medical expense coverage only to you and your family members.

Frequently asked questions