Shopping for car insurance plays a crucial role in becoming a responsible driver.
Car insurance protects the finances of drivers and other road users. It ensures that, in the event of an accident, injured parties receive compensation. Injured parties can include injured road users, survivors of fatally injured road users, and the owners of the damaged property. This core purpose of auto insurance is why the bare minimum is liability coverage.
Table of contents
What Are the Features of Car Insurance?
Auto insurance policy features vary by state and company. Whether a state is a no-fault insurance area also plays a role in the available features you can add to your policy.
Liability
Liability coverage is required in every state. Beyond protecting his or her finances, it provides virtually no benefit to the driver. Instead, liability insurance covers other injured parties. Its two primary components are property damage liability and bodily injury liability. The minimum required coverage amounts vary by state.
Comprehensive
If you want to protect your vehicle from acts of nature and deviant behaviors, comprehensive car insurance plans offer this. Allstate explains that comprehensive coverage protects your vehicle against the following damages:
- Vandalism
- Theft
- Hail
- Fire
This coverage pays for necessary repairs to the vehicle. If the vehicle is stolen or the insurance company decides the damage received costs too much to fix, it will cut you a check for the estimated value instead.
Collision Coverage
Collision coverage is usually a part of comprehensive insurance. In fact, you generally cannot have one without the other. Both this and comprehensive insurance are often made mandatory by leaseholders and lenders. In the event of a crash, it pays for repairs to your vehicle.
Uninsured or Underinsured
This car insurance policy coverage pays for damages if the responsible party is uninsured or has limits too low to pay for damages. Some states also allow additional uses, while others do not. For example, in some states, you can also use this insurance type to pay for hit-and-run damages.
Personal Injury Protection
This type of insurance is most prevalent in no-fault insurance areas. In the event of an accident, it pays for your medical expenses and that of covered parties. It also pays for additional economic damages caused by your injuries, such as lost income or in-home services.
Medical payments coverage
This type of car insurance is also most commonly found in no-fault insurance areas. Like the previous coverage feature, it pays for medical expenses. Coverage extends to people in the household, even if he or she does not own or drive a vehicle. Covered medical expenses include X-rays, hospital visits, and medication.
Miscellaneous Add-Ons
Insurance companies have also further expanded their services to include several add-ons. Most of these do not cost a lot of extra money, so they are worth looking into:
- Roadside assistance
- Rental car reimbursement
- Gap coverage
- Ride-sharing coverage
What Are the Benefits of Car Insurance?
Auto insurance is expensive. In fact, for some unfortunate drivers, the cost of insurance is higher than their monthly car notes. This can tempt people into attempting to drive without it, but the consequences are not worth it.
Legal Compliance
One of the most important benefits is to ensure you remain compliant with the law. Some states treat car insurance lapses more seriously than others, but in all states, it is illegal to drive without insurance.
Financial Protection
Car crashes can lead to expensive consequences, such as deaths, severe injuries, destroyed sports cars and damage to public infrastructure. These expenses become the responsibility of the driver or drivers who take the blame. Insurance helps reduce the likelihood of that person paying out of pocket. Lapsing on your insurance can also lead to hefty fees in states like Nevada.
Compensation
When people suffer injuries or lose their loved ones, no dollar value can fix this. Even so, compensation can help cover medical expenses and ensure dependents survive without their breadwinners. Insurance helps ensure compensation so individuals and their families can move forward.
Who Needs Car Insurance?
Anyone who drives a vehicle or plans to will need auto insurance. This holds true even if the car does not belong to the individual in question. Note that state laws determine who else might need insurance. For example, in some states, married couples must share insurance policies or add each other to their individual insurance policies. Other states make it mandatory for everyone sharing an address to be added to each other’s insurance policy or share insurance policies.
Parents also need auto insurance for their children, especially young and inexperienced drivers. These drivers are more likely to cause or unsuccessfully avoid accidents. If they are not on the policy, the insurance company might not cover related damages. Unfortunately, because they are high-risk drivers, adding teens to policies can cause the cost to skyrocket. Parents can sometimes combat this by ensuring children complete driving school.
In some instances, businesses may also need car insurance. Insurance providers sell commercial policies to protect company vehicles and the people who drive them. Industries that are most likely to use these policies include the following:
- Car rental
- Construction
- Private transportation
- Security
- Commercial trucking
When Should You Use a Car Insurance Policy?
Auto insurance policies are most often associated with car crashes. Even so, there are many other times when you can take advantage of offers. The specific offers you have will also depend on your policy add-ons, your location and the insurer.
Breakdowns
If your car breaks down, roadside assistance can help resolve minor issues. These include recharging a dead battery, refueling the vehicle or changing the tires. Roadside assistance can also provide towing for your vehicle. If your vehicle goes in the shop, your insurance company might also reimburse you for the cost.
Theft
There is a sense of loss and violation that takes some time to recover from if someone steals your vehicle. If you do not have comprehensive car insurance, the cost falls on you. Drivers with comprehensive insurance might receive a check for what the insurer believes the vehicle is worth. If you have a loan on the vehicle, gap insurance covers the balance.
Natural Disasters
No matter how careful of a driver you are and how safe your neighborhood is, natural disasters can occur. These might range from lightning strikes to earthquakes and floods. In these and similar instances, your comprehensive coverage should foot the bill.
Injuries
The coverage type you have determines whose injuries your auto insurance pays for. For example, liability insurance only pays for other people’s injuries. If you have PIP or med pay, these cover yourself, occupants of your vehicle and family members.
What Are Some Examples of Using Car Insurance?
Example 1
Billy is a young driver who wants to save money on auto insurance, so he chooses the lowest limits and pays only $60 per month for liability insurance. One morning, a deer runs out in front of the car. He hits both the deer and a neighboring car. He calls his insurance company to report the accident. It reminds him that because he has liability-only insurance, it is not responsible for damages to his vehicle. However, it will cover damages to the vehicle he crashed into up to his coverage limits.
Example 2
Petra drives a Tesla and has comprehensive insurance on the vehicle. One night, a wind storm blows down a tree and it falls onto her Tesla. She calls her insurance company to report the damage, but the appraiser decides the cost of fixing the car is worth more than the car itself. She receives a check for $33,000, which was the value of her car at the time.
Steps for Getting Car Insurance
Getting auto insurance can feel frustrating, but it’s important to remember you are the customer. Insurance companies will beat a path to your front door for your business. Even if you are a new or high-risk driver, there are ways to get good deals:
- Gather information such as your driver’s license and vehicle details.
- Shop around for insurance rates and to see what companies give discounts for.
- Take advantage of discounts wherever possible.
- Choose an insurance company that provides coverage that matches your budget and needs.
- Remember to sign the paperwork.
Car insurance is a complex topic, so other questions might arise. MoneyMash can help you find answers to many of these and other insurance questions.
Quick Questions About Car Insurance
Safe and incident-free driving over a long period of time is the key to lower insurance costs. You can also go paperless, pay at least six months in full, bundle other liability insurance plans and complete a defensive driving class.
Whether roommates can share a policy and save money depends on the state and the insurance company. Your best bet is to keep calling around until an insurance company says yes.
If you live away from your spouse, you are legally separated or you are a victim of domestic abuse, call the customer care line. Some insurance companies might make exceptions. If they refuse to do so, look for a new insurer.
