WHAT IS Auto INSURANCE?
Get the right Auto Insurance Policy
Car insurance helps provide financial protection for you, your family, other passengers, and your vehicle. You can choose the amount of protection by selecting your coverages and limits. An auto insurance policy can provide coverage for:
- Accidents
- Liability
- Medical expenses
- Property
- Vehicles
But to make the best decisions about purchasing other types of auto insurance coverage you might need, you’ll want to understand what’s covered, what’s not covered and what’s optional. In addition to understanding types of coverage, you’ll also want to consider coverage amounts.
With so many different coverages, it's hard to know what's right for you.
Understand Auto Insurance
To better understand your policy, there are several insurance terms you should know:
Coverage
Insurance coverage is the amount of risk or liability that is covered for an individual or entity by way of insurance services.
Limits
An insurance limit is the maximum amount of money an insurance company will pay you for a covered loss. You'll typically find that the higher your coverage limit, the higher your premium may be. Limits often apply to different types of coverage within a policy.
Premium
An insurance premium is the amount you pay to your insurer regularly to keep a policy in force. You may be able to pay premiums monthly, quarterly, every six months or annually, depending on your insurance company and your specific policy.
Deductible
An insurance deductible is the amount you pay out of pocket before your insurance will help pay for a covered loss. Example, if you carry a $500 deductible and have $10,000 in damages after a fire in your home, you'll likely pay $500 before your insurance covers the remaining $9,500. (The amount of coverage you have depends on the limits you choose.)
Common Coverages
Liability
Comprehensive
Liability
Liability insurance covers you in the event you are in a covered car accident and it is determined the accident is a result of your actions. Liability insurance will cover the cost of repairing any property damaged by an accident as well as the medical bills from resulting injuries.
It is usually a good idea to have liability auto insurance that is above your state's minimum liability coverage requirement, as it will provide extra protection in the event you are found at fault for an accident, as you are responsible for any claims that exceed your coverage's upper limit.
Collision
Comprehensive
Liability
If there is a covered accident, collision coverage will pay for the repairs to your car. If your car is totaled (where the cost to repair it exceeds the value of the vehicle) in an accident, collision coverage will pay the value of your car.
If your car is older, it may not be worth carrying collision coverage on it, depending on the value. On the other hand, if you have a more expensive car or one that is relatively new, collision insurance can help get you back on the road.
This may be required by some banks and lenders.
Comprehensive
Comprehensive
Personal and Bodily Injury
What if something happens to your car that is unrelated to a covered accident - storm or hail damage, your car is stolen, you live on a flood plain or hit a deer? Will your insurance company cover the loss?
Liability insurance and collision coverage cover accidents, but not these situations. These situations are covered by Comprehensive coverage.
Similar to collision coverage, this may be required by some banks and lenders.
Personal and Bodily Injury
Personal and Bodily Injury
Personal and Bodily Injury
Personal injury protection pays the medical bills and rehabilitative costs for you and your passengers after you're injured in a car accident. PIP also extends to instances when you're a passenger in someone else's car, or if you're hit by a car while a pedestrian or cyclist.
PIP insurance is different than bodily injury liability insurance in that, while PIP coverage pays for your own expenses, liability insurance pays for the medical expenses of drivers and passengers in other cars when you are at fault for an accident.
Un/Under - Insured Motorist
Personal and Bodily Injury
Un/Under - Insured Motorist
Uninsured motorist insurance reimburses you when an accident is caused by an uninsured motorist—or in the case of a hit-and-run.
You can also purchase underinsured motorist coverage, which will cover costs when another driver lacks adequate coverage to pay the costs of a serious accident.
Umbrella Insurance
Personal and Bodily Injury
Un/Under - Insured Motorist
Umbrella Insurance provides an additional layer of personal liability protection. A single policy covers all underlying policies you own (auto, home, motorcycle, boat, etc.) and kicks in if the liability limits on these policies are exhausted.
Umbrella Insurance is for everyone. Even if you don't own a home or have a lot in the bank, if you are found liable for damages, your earnings, retirement savings, or college fund could be in jeopardy.
Who is Covered and When?
Your auto policy will cover you and other family members on your policy, whether driving your insured car or someone else’s car with permission. Your policy also provides coverage if someone not on your policy is driving your car with your consent.
Your personal auto policy only covers personal driving, whether you’re commuting to work, running errands or taking a trip. Your personal auto policy, however, will not provide coverage if you use your car for commercial purposes—for instance, if you deliver pizzas or operate a delivery service. Note, too, that personal auto insurance will generally not provide coverage if you use your car to provide transportation to others through a ride-sharing service such as Uber or Lyft. Some auto insurers, however, are now offering supplemental insurance products (at additional cost) that extend coverage for vehicle owners providing ride-sharing services.
