What Is Car Insurance?
Car insurance is a type of property and casualty insurance that covers the policyholder from several forms of financial loss after an accident. Simply put, auto insurance is a policy between you and your insurance company that helps protect all drivers, passengers, and vehicles. Depending on your policy, your vehicle could be covered from many other forms of damage, too, even when you’re not driving it.
In most cases, having sufficient auto insurance coverage is required by law, so you don’t endanger other drivers and neglect financial responsibility on the road. But, it’s more complicated than that. Policies have different add-ons and coverages that come into play, all with the purpose of making you whole again after damage. Before you buy auto insurance, it’s helpful to know what it’s all about.
What Does Car Insurance Cover?
Car insurance is often broadly grouped into two categories: liability coverage and full coverage. What your car insurance covers depends on what kind of coverage you have.
If you have liability coverage, it only protects the other vehicle and passengers in the other vehicle if you are in an accident and deemed to be at fault. Your liability insurance will cover their injuries and the property damage you caused to them. Any expenses you incur to repair your car aren’t covered by liability insurance.
If you have full coverage auto insurance, your policy also covers your vehicle and your passengers if you’re in a wreck. Full coverage also typically includes financial protection from sources of damage other than accidents, such as theft, fire damage, weather damage, and more.
There are many stipulations to both coverages, so let’s look at what you need to know before you buy.
Car Insurance Coverage Types
The two types of car insurance coverage we mentioned, liability coverage and full coverage, both have many parts that are crucial to understanding what your policy covers and how it works. The aspects of liability coverage usually remain standard no matter where you are, although the amount of each coverage you need to have may change.
You may see some more variations in your car insurance options when it comes to full coverage. Full coverage auto insurance isn’t a specific policy but rather a combination of coverages.
Liability Coverage
Liability coverage is required by law in almost every state. It works by protecting the other drivers on the road with you at any given time. If you cause an accident, your liability coverage will cover the medical expenses and property damage you can cause to another driver.
The amount of liability insurance you need varies by state since liability limits are regulated at the governmental level. The government requires this coverage in the first place because car accidents can be costly events, and most people don’t have the amount of cash on hand needed to cover all expenses resulting from a serious accident on their own without the help of an insurance company.
Liability coverage consists of two main areas: property damage liability and bodily injury liability.
Property Damage Liability
Property damage liability helps cover any damage you directly cause to another person’s vehicle or property if you’re at fault in an accident. This includes damage to fences, homes, sheds, and more and the repairs to their car.
Bodily Injury Liability
Bodily injury liability covers the medical expenses of the injured party after an accident, which can include fees related to:
- Treatment
- Surgery
- Nursing
- Long-term care costs
- Loss of income
- Funeral costs
How Liability Car Insurance Works
Liability car insurance is a way to have all drivers bear some financial responsibility for their actions. It doesn’t cover the physical damage you can cause to yourself or your car. It covers damage you can cause to others.
This also means that you rarely invoke your own liability insurance. Someone else, such as the person you crash into or their insurance company, would file a liability insurance claim with your provider. In some cases, if the amount of damage you caused exceeds your liability coverage limits, you may then turn to some components of your full coverage, such as your collision insurance, to make up the difference.
The minimum amount of required liability insurance varies by state. While you only need to have your state’s minimum mandated amount to drive legally, most people increase their coverage levels, as having the bare minimum may not be enough after severe accidents.
Rethink your auto insurance premium with a free quote from the nation’s top companies.
Full Coverage
Full coverage is a term used to describe when you have more than just liability insurance. It often includes protection for your own vehicle, damages you or your passengers may suffer, and much more. Since it provides more forms of protection, having full coverage is more costly than having liability insurance only. But, it’s often well worth it, and most drivers on the road have full coverage.
Collision
Collision coverage helps pay to repair damage to your vehicle if you’re at fault in an accident that involves another vehicle or an object. This can include crashes with other cars, whether or not you’re at fault, or collisions with objects like trees, fences, or telephone poles.
Your lender requires collision insurance if you’re financing or leasing your vehicle. Lenders require clients to maintain full coverage auto insurance to protect their investment in your car.
Comprehensive
Comprehensive coverage helps pay to repair or replace your vehicle from the damage it can suffer when you’re not driving. For example, comprehensive insurance can cover damage from:
- Hail
- Fallen trees
- Fire
- Theft
- Vandalism
Personal Injury Protection
Personal injury protection (PIP) is a no-fault coverage that helps pay for your and your passenger’s medical bills. It could come to your aid if you or your party were injured in an accident. PIP can cover medical expenses like procedures, treatments, nursing, and medication after an accident. It can also extend to cover things outside of the accident that are impacted due to accident-related injury, like lost wages, childcare services, funeral expenses, and more.
Being a no-fault coverage means PIP can kick in whether you’re at fault in an accident or not. Depending on where you live, you may be required to have PIP as part of your car insurance coverage.
Some states are no-fault car insurance states, which basically means every driver turns to their own insurance after an accident regardless of who’s at fault – instead of looking to file a claim with someone else. This doesn’t eliminate the need for liability insurance. It just attempts to simplify the process for policyholders.
It does, though, add the need for PIP in most cases so drivers can be properly covered for injuries they may sustain by their own auto insurance. PIP is required in some states, optional in other states, and not offered at all in some states.
Medical Payments
Similar to PIP, medical payments coverage in car insurance can also reimburse you for medical expenses after an accident, although it usually isn’t as extensive as PIP is. It covers treatment, surgery, and nursing costs after an accident, but it may not cover lost wages.
Medical payments, often referred to as MedPay, is also no-fault coverage. It’s optional in most states, and it may not be necessary to have in states where PIP is required. In states with PIP and MedPay, the PIP coverage comes into play first, and if the costs aren’t fully covered, then MedPay can come in and make up the difference.
Uninsured/Underinsured Motorist Coverage
Uninsured and underinsured coverage are components of your auto insurance that can pay for your repairs or medical bills when you encounter an at-fault driver who doesn’t have enough – or any – auto insurance of their own.
If you’ve been in a crash and you’re not at fault, the other person’s liability insurance should come into play. What if they don’t have any, or what if they don’t have enough? Your uninsured and underinsured coverage can cover your repairs and medical bills.
Some states require both uninsured and underinsured coverage, some states require just uninsured coverage, and some states don’t require either. Some states also allow you to stack your uninsured motorist coverage, which effectively increases how much you have by combining your limits across multiple vehicles or policies when filing a claim.
Rethink your auto insurance premium with a free quote from the nation’s top companies.
More Car Insurance Coverage Options
You can already see how there’s a lot to keep in mind when it comes to covering your vehicle and safeguarding your finances, which is why it’s so important to go with the right insurance provider. Having the right coverage can also help you save money on car insurance.
But, before you go looking for auto insurance, it would be helpful to familiarize yourself with these optional yet common add-ons to a policy.
GAP Coverage
If your vehicle is totaled in an accident or stolen and never recovered, guaranteed asset protection (GAP) coverage helps pay the difference between your vehicle’s current worth and what you still owe on your auto loan.
GAP insurance comes into play after your car is deemed a total loss. If your vehicle’s value at the time of the incident is less than what you still owe in car payments, your GAP coverage can make up this difference.
For a simplified example, let’s say you wanted a car listed at $30,000. You paid $15,000 of it at purchase, so you got a $15,000 auto loan that you’re going to be paying for the next five years – which means monthly payments of about $250.
After one year, your car is deemed a total loss after a major crash. You’ve paid $3,000 toward your loan, which means you owe $12,000 still. If the insurance company deems that your car only had a value of $10,000 at the time of the crash, you’d be reimbursed $10,000. You still have to pay off your auto loan, but you’re now $2,000 short of the total. In this scenario, your GAP insurance could cover the difference.
Towing & Labor
Towing coverage is optional in most comprehensive policies, or it could be included as a part of roadside assistance you get with your vehicle. Towing coverage is usually reserved for breakdowns, as after accidents, the at-fault party will usually end up covering the cost to tow your vehicle if it’s undrivable.
Rental Car
You may also have the option to add rental car coverage. If your car is in the shop after an accident, this coverage will pay for you to rent a car.
How Much Car Insurance Do I Need?
Many states legally required minimum coverage limits to be obtained, which typically is far less than the amount of coverage you would actually need if you were involved in an accident and found liable.
A good rule of thumb is to get more auto insurance coverage than you think you’ll need – it’s better to be safe than sorry. This means getting about $50,000 to cover damage to other vehicles and at least $100,000 to cover medical expenses for each passenger of other vehicles.
It’s usually relatively affordable to increase your liability limits. It’s also fairly inexpensive to add uninsured motorist coverage if you have the option. Full coverage will always be more costly than liability insurance, but full coverage is a wise investment overall.
Adding GAP insurance can also be very affordable. It’s typically around $5 per month and well under $100 per year.
What Kind of Car Insurance Do I Need?
You always need your state’s required amount of liability insurance. Right now, only two states don’t require liability insurance, New Hampshire and Virginia. But, if you do purchase liability coverage in those states, there’s still a minimum amount you need to have.
On top of that, most drivers have some form of full coverage since their lender mandates it. Collision coverage becomes even more critical if you’re driving on highways often or commuting every day, causing the possibility of getting in an accident to go up. Comprehensive coverage is especially important if you store your car where it’s exposed to the elements rather than in a garage.
Also, high-end luxury cars are more expensive to replace, so you won’t want to skimp on coverage there. If you’ve paid top dollar for your car, you should get the most complete car insurance you can to protect your investment.
Even when it’s not forced, full coverage is a wise investment. With the right insurance in place, the proper protection should be affordable. If you think your rates are too high, shopping for car insurance is one of the best ways to save.
Knowing The Recommended Auto Insurance Coverage
Most insurers recommend getting more than the minimum amount of required liability insurance. It’s always good to have more than enough. A common number you’ll see thrown around is $100,000 of liability coverage per person. Raising your limit near the top of what you can reasonably afford isn’t a bad idea.
If you don’t have loads of extra cash lying around to pay for potential repairs to your car, you should get collision coverage. Additionally, if it’s not already required, you might want to opt for uninsured motorist coverage, especially if you’re allowed to stack it. According to the Insurance Information Institute, Mississippi, Michigan, and Tennessee have the highest percentage of uninsured drivers, with Florida and Alabama also having large numbers.
PIP and MePay may be required, but if they’re not, these are two more recommended auto insurance coverages to invest in if you can. You may just need one or the other. They’ll supplement your health insurance if you’re injured after an accident, and their no-fault coverage means they can always come into play.
Rethink your auto insurance premium with a free quote from the nation’s top companies.
How Much Is Car Insurance?
How much you pay for car insurance depends on many factors, like the state you live in, how much coverage you get, what kind of car you have, and more. You should expect to pay around $1,000 per year for car insurance, and it will likely be even more than that if you’re under 30 or if you have a spotty driving record with tickets and accidents.
Michigan, New York, Louisiana, and Florida are consistently ranked as some of the most expensive states to have auto insurance.
Additionally, your age is an essential factor in determining your premiums. Car insurance is more for younger drivers. For instance, on average, sixteen-year-olds pay twice as much for coverage as 20-year-olds. Younger drivers are simply a higher risk since they have less experience behind the wheel and tend to pay more for car insurance until about their mid-20s.
Drivers with poor credit history may have a hard time getting affordable auto insurance, too. Credit history plays a big part in your auto insurance score, a holistic number that insurers use to help determine your risk that significantly influences your premiums.
If you have bad credit, you’ll have a lower auto insurance score, which will indicate that you’re a more considerable risk to providers. Thus, you’ll likely pay more for car insurance.
How to Get the Best Auto Insurance
The first step to getting the best auto insurance for yourself is understanding the different coverages and options available to you and recognizing how much you can and should spend. Hopefully, some of the info here has helped with that so far, and speaking with independent car insurance agents can also help.
You’ll also need to know basic information about your car before you start shopping. You’ll need the make, model, year, and some personal information to get quotes. You may also need your vehicle identification number (VIN) and driver’s license number to get a policy.
Then, it’s time to shop around. Don’t wait until renewal time to shop around for insurance – you can shop around anytime. Also, if you’re not renewing with your current provider, you’ll need your new plan in place before your old one expires. You don’t want to be driving around without insurance. It’s illegal, irresponsible, and dangerous.
An independent car insurance agent can help you compare quotes from several car insurance companies to make sure you’re getting a good deal. You can also compare plans yourself with an online quoting tool.
You’ll also have the option to choose whether you want a liability-only plan or full coverage. A full coverage auto insurance quote will range in price depending on what exactly you add to it, but it generally includes comprehensive and collision coverage.
A full coverage car insurance quote can be $500 to $1,000 more than a liability-only quote. It seems like a lot, but the added cost will more than pay off after you get into an accident or your vehicle suffers damage. According to the Insurance Information Institute, the average collision claim was $3,574 in 2018, and the average comprehensive claim was $1,833.
So, repairing your car after an accident just one time can cost much more than the difference between full coverage and liability only, not to mention potentially covering other people’s vehicle repairs and medical bills after an accident.
Getting Car Insurance Quotes Online
Getting car insurance quotes online is a smart thing to do when shopping around. It’s convenient, and you can learn a lot about what you can expect to pay for coverage. You’ll also find out how to save money on auto insurance and whether you’re paying too much for coverage or not.
To get an auto insurance quote online with Clovered, you just need to know the following info about your car:
- The year
- The make
- The model
You’ll also have to enter some basic personal information so we can contact you and potentially get you discounts. You’ll need to indicate whether you’ve had a PIP claim within the past five years, too.
One of the crucial pieces of information is your address. In addition to determining your state-mandated liability limits, your address also indicates your population density and local crime rates, which are two factors that further impact car insurance premiums. These basic elements are common whenever you get a car insurance quote online.
With Clovered, you have the option to add another driver to the policy. If you’ve got other members of your household that will be driving your car even occasionally, you should add them to your car insurance policy. Unsurprisingly, adding a teen to your car insurance will raise the rate.
We partner with some of the best auto insurance companies in the nation, so when you compare car insurance quotes with Clovered, you see policies from the top insurers. Two of our partners, Progressive and Travelers, are among the country’s top 10 auto insurance companies in terms of written premiums. An agent will get back to you as soon as possible with your quotes from all possible options, and they can help you determine how to save on car insurance.
Getting a Policy with an Independent Car Insurance Agent
An independent car insurance agent is licensed to sell insurance from several carriers, which means they can compare coverages and premiums from different companies and find the best policy for you. Also, independent agents are often more localized, so they may better understand the particular needs in your area.
There are two types of insurance agents: captive and independent. A captive agent will only sell policies from and work with one car insurance company. An independent agency can work with several providers. They’ll be knowledgeable about rates from many auto insurance companies, and they may have an idea of which company could be a good fit for you.
Rethink your auto insurance premium with a free quote from the nation’s top companies.
Still on the fence? See what our customers have to say about Clovered and why they trust us.
We're only the best because we're backed by the best! Check out some of our amazing partners.
Insurance Carriers
Rethink your auto insurance premium with a free quote from the nation’s top companies.
