Car insurance is required by most states for anyone operating a motor vehicle, so it’s crucial that drivers understand their policy and factors affecting their rates, such as coverage limits, deductibles, and driving habits. Not only can additional coverage protect you and your assets beyond minimum state requirements, but there is much more available that could protect both of these. Continue reading to gain a better understanding of car insurance.
1. What is Coverage?
Car insurance is an agreement between you and your insurance provider that details precisely what coverages are included and their costs. Your agent should work with your individual needs to customize a policy that best addresses them.
Most states mandate drivers carry at least some liability coverage that pays for property damage and injuries caused by them to others, and optional coverage may also be available. Comprehensive and collision coverages cover damage to your car from incidents other than crashes, such as fire, theft, and vandalism. Each coverage has a deductible amount that you must meet before receiving coverage from your insurance provider.
2. What is Collision Coverage?
Collision coverage provides protection for damage done to a policyholder’s car in an accident, less the deductible they select. It also assists in covering expenses when they cause the incident—for instance, rear-ending another car during stop-and-go traffic conditions.
Financial lenders usually require this coverage if a vehicle is being financed or leased, to minimize their risk if the driver defaults on his loan payments or lease agreement. It differs from comprehensive coverage, which pays out for events beyond your control while driving, such as hitching a ride with an unexpected deer or heavy hailstorm.
3. What is Comprehensive Coverage?
Driving can bring freedom and spontaneity, but with it comes some responsibilities—one being purchasing adequate coverage to protect your vehicle against accidents or damage that might arise unexpectedly.
Comprehensive, or “other than collision,” coverage protects vehicles against theft, vandalism, hailstorms, and flooding, as well as hitting an animal. When choosing this additional coverage, it’s important to take into account both its cost and deductible; financing or leasing agreements typically mandate it.
4. What is Uninsured Motorist Coverage?
Uninsured motorist coverage (UM) protects you in case of an accident caused by drivers without sufficient or adequate insurance policies to cover costs resulting from injuries caused by them, including hit-and-run drivers. It also covers injuries resulting from hit-and-run drivers.
When purchasing car insurance, when shopping around, get quotes from multiple providers with similar coverage levels for an accurate comparison. Make sure that each quote contains details such as the year, make, and model of each vehicle as well as any unique safety features or aftermarket equipment. Body injury liability and property damage liability coverage are mandatory in many states, while additional types of auto insurance may be optional but still worth considering.
5. What is Underinsured Motorist Coverage?
Uninsured motorist coverage (UM or UIM) is an essential form of auto insurance that pays damages caused by drivers without sufficient coverage (like in New Hampshire and Virginia) who cause an accident. Some states legally mandate it, while it’s often sold as an add-on policy supplement to existing liability policies.
UIM comes in two forms, covering medical costs for injured parties and property damages for your car. Each form has a limit that must be reached before insurers begin paying out claims; both are subject to your $500 policy deductible, and all may incur fees of their own.
6. What is Rental Reimbursement Coverage?
Many drivers assume rental reimbursement coverage is automatically included with their full-coverage auto insurance, but it may not always be. Instead, this add-on option covers rental car expenses while your car is being repaired because of a covered claim.
Like liability, collision, and comprehensive policies, rental reimbursement does not require a deductible payment and can be invaluable in an emergency. Most insurers will set daily reimbursement limits; any costs exceeding this will become your responsibility.
7. What is Medical Payments Coverage?
Medical payments coverage (MedPay) pays for up to a specified limit of medical expenses related to an accident regardless of who was at fault, in a first-party manner. MedPay may act either in addition to or instead of your liability coverage policy.
MedPay coverage, also referred to as Personal Injury Protection or PIP in some states, helps protect drivers by limiting their ability to sue another driver following an accident. MedPay may also cover health insurance deductibles and copays in some cases, and its premium is typically just a fraction of your overall premium cost.
8. What is Uninsured/Underinsured Motorist Coverage?
Uninsured/underinsured motorist coverage (UM/UIM) is an optional car insurance component designed to reimburse damages when an at-fault driver doesn’t carry enough or any insurance at all. UM/UIM coverage typically applies to both property damage and bodily injury expenses.
Some states and banks require UM/UIM insurance policies when financing a vehicle. To get a quote, you’ll need your driver’s license number, vehicle information, and details about your health, assets, and driving history ready—this will streamline the process considerably! Online comparison tools or working with an independent agent may help you locate the best deal.
9. What is Personal Injury Protection (PIP)?
Personal Injury Protection, commonly known as PIP, offers coverage for medical costs and lost wages associated with an accident, regardless of who caused it. PIP typically applies regardless of fault.
PIP coverage in certain no-fault states also extends to funeral expenses and services that assist with daily tasks that can no longer be accomplished by you. Depending on your residence, PIP may be mandatory or optional. PIP may provide coverage to other individuals as well, such as pedestrians and passengers in your car. PIP usually works in concert with health insurance policies to avoid double coverage and ensure access to healthcare.
