How do you know what kind of car insurance is right for your needs? The truth is that there are many different types of coverages to choose from, and if you have coverage that isn’t suited to protect your assets, the insurance company won’t pay out when you need them to. That’s why it’s so important to understand the types of coverage and how they apply to you.
Here are 13 things you need to know:
1. Liability Coverage
Liability coverage is the most common type of car insurance available. This coverage protects you if you are at fault in an accident that damages another person’s property or injures another individual. These damages may include bodily injury, medical expenses, lost wages, pain and suffering, or property damage. If the other driver is uninsured or underinsured, your liability coverage can also cover the cost of repairing or replacing your car.
Every state requires a certain level of minimum liability coverage, which varies by state and insurance company. If you own a high-end luxury vehicle that may be worth more than $50,000 in some states, consider an increased liability policy to protect your assets.
2. Personal Injury Protection
Personal injury protection is often referred to as “no-fault” coverage, and it’s required in some states, including Florida, New Jersey, New York, Pennsylvania, Michigan and Hawaii. This will pay for medical treatment if you are in an accident that is your fault or the fault of an individual who does not have car insurance.
This coverage can also provide additional payments such as lost wages, child care and funeral services. Typically, PIP will pay up to $50,000 for each person injured in the accident and $10,000 total for all injuries per accident. This type of policy may not be required in your state; however, it’s a good idea to have it in place if your state does offer the coverage.
3. Uninsured/Underinsured Motorist Coverage
Your uninsured or underinsured motorist policy pays for your medical expenses, lost wages and pain and suffering if you are hit by an individual who does not have car insurance or doesn’t have enough insurance to cover the full cost of the accident. Even in states that require drivers to carry a minimum amount of liability coverage, many drivers are still uninsured.
In some situations it is possible for you to collect under your own uninsured or underinsured motorist coverage if you have higher limits than the policy held by the driver who hit you. If you do not have this extra protection, you may be able to collect under your car insurance company’s Personal Injury Protection coverage.
4. Collision Coverage
Collision coverage will pay for damages to your vehicle after an accident that is your fault or the fault of a driver who does not have car insurance and cannot pay for repairs. Some policies will also cover the cost of towing.
If you have a car with low mileage, collision coverage can be an unnecessary expense because your car is likely worth less than the deductible. However, this type of coverage may be necessary if you drive a newer or expensive vehicle that would cost more to repair or replace. Before dropping this type of coverage from your policy, consider how much it would cost to pay out of pocket for damages.
5. Comprehensive Coverage
If you own a car that’s not worth a significant amount of money, you may be able to save on your car insurance by dropping the comprehensive coverage. Rather than getting this type of policy, consider a “pay-as-you-go” option that involves paying for damages to your car as they occur.
6. Personal Effects Coverage
If you have an expensive camera or other valuable equipment that is easily stolen, consider purchasing personal effects coverage to protect against theft or damage. This will help replace items if your home is burglarized and may cover damages to valuables even outside of the home.
Home insurance policies will often offer this type of coverage as an option, but some people choose to purchase it separately for a potentially lower deductible and more flexibility. If you have a valuable collection that would be costly to replace, such as jewelry or collectibles, you might also consider adding a rider to your homeowner’s policy.
7. Rental Reimbursement Coverage
If you rent a car while yours is being repaired, rental reimbursement coverage will help pay for the extra expense. Although it won’t typically cost more to have this policy in place, some insurance companies charge an added fee.
8. Emergency Roadside Assistance Coverage
Having emergency roadside assistance can make certain situations less stressful. Getting locked out of your car or running out of fuel can lead to serious problems if you are far from home, but having roadside assistance can put your mind at ease by helping you find a safe location and getting the problem fixed quickly.
Not all insurance companies offer this service, so consider purchasing it separately rather than paying for it with comprehensive or collision. You may also be able to purchase it as an add-on through a membership program such as AAA.
9. Teenage Driver Coverage
Regardless of whether you have a teenage driver in your household, young drivers are typically more likely to get into accidents and may cost more to insure. Having car insurance can help protect your teen against financial damages in the event of an accident.
It’s important to consider the limits of any insurance policy, however. If your teen is found at fault for an accident that caused serious damage or injuries, you may be responsible for paying out-of-pocket costs through your own policy or facing a lawsuit from other drivers who were hurt as a result of the accident.
10. Additional Insured or Named Driver Coverage
If you give your children access to your car, consider buying additional insured or named driver coverage to protect yourself against any accidents caused by them. This will cover damages related to non-family members who are allowed to use your vehicle and provide some protection against lawsuits if they get into an accident.
11. Temporary Car Insurance
If you rent a car or borrow one for an event such as a road trip, you may need temporary car insurance to cover the vehicle while it’s in use. Rather than purchasing this type of policy separately, consider adding it onto your current car insurance through the rental company or owner of the vehicle that you’re borrowing.
12. Ride-Sharing Coverage
If you drive for a ride-sharing service such as Uber or Lyft, you may need an umbrella policy to cover the costs of damages that may occur when transporting passengers in your car. An umbrella policy can help protect against high expenses when accidents involving damage occur. Although this is not required by law, it is a good idea to have if you drive for any ride-sharing service.
13. Job-Specific Coverage
If your job requires you to transport goods or people as part of your job duties, talk with your insurance agent about how to make sure you are properly covered in the event of an accident involving one of these items. In some cases, your employer may offer a plan that covers you while you’re on the clock. If not, or if this coverage does not meet your needs, you might consider adding job-specific insurance to protect yourself and others involved in an accident.
Do I need permission from my insurance company to rent a car if I have comprehensive coverage?
No, you do not need permission from your insurance company before renting a car as long as you intend on using the rental vehicle only for the duration of your current comprehensive coverage.
Will my insurance company raise my rates if I get into an accident?
Unfortunately, that’s entirely up to your insurer. Some companies may increase your rates after one accident while others might not do anything at all. Consider contacting your car insurance agent for further information about whether or not you should expect an increase in your rates.
What happens if I don’t have enough insurance coverage to pay for my collision deductible?
If you do not have enough insurance coverage to cover your collision deductible, you may be responsible for paying out-of-pocket costs up front and filing with your insurer later. It’s important to make sure you have enough estimates to cover your deductible before getting into any accidents, otherwise you may find yourself in a difficult spot financially.
What happens if I get into an accident with someone who is uninsured?
If the other driver is uninsured, you’ll be covered under the liability portion of your policy for injuries and damages that are not your fault. If they’re at fault and you find yourself with extensive damage or injuries, then you’ll likely need to file a lawsuit against that individual and deal with the lawsuit’s outcome.
What is named driver coverage and why would I want it?
Named driver coverage allows multiple drivers on one policy to be insured under the same policy. This is beneficial for married couples and family members who share a car where each person on the policy has their own coverage limits and deductible.
As A Rule
So, to summarize everything that we’ve discussed in this blog post. You need to take a few moments and think about your needs before you go out there and get insurance for the first time or change providers. Keep these 13 tips in mind when comparing rates so you can make sure you have the right amount of coverage at the best possible price! Comment below if any of these points helped you decide on getting new car insurance!