Car insurance is more than just a legal requirement or an added expense. It protects you, your passengers and others on the road.
Beyond your state’s minimum requirements and your financial lender’s, there are many coverage options. Bankrate’s insurance editorial team explains your choices. They include: Liability coverage, which pays for injuries to third parties.
Liability Coverage
Liability coverage is mandatory in most states and covers the other driver’s medical bills and vehicle repair costs if you cause an accident. It also pays for damage to other property, such as fences, mailboxes or buildings. You can often purchase additional car insurance protection, such as personal injury protection, uninsured/underinsured motorist, rental reimbursement and original equipment manufacturer (OEM) coverage. Each coverage has its own dollar limits and deductibles. Find out more at Insurance Agency Outsourcing Services.
If you’re involved in a serious accident, you want enough liability coverage to protect your assets from lawsuits without jeopardizing your personal finances. For this reason, most people opt for high bodily injury per person and property damage limits. You may also consider purchasing an umbrella policy to provide additional liability protection. Some insurers offer a telematics or black box car insurance option that calculates your rates based on your driving habits, which can include how fast you drive and when, how hard you brake and how often you use your phone while you’re on the road.
Collision Coverage
Collision coverage helps pay for damage to your vehicle when it’s hit by another car or an object, such as a tree, guardrail or mailbox. Unlike liability coverage, collision insurance typically pays regardless of who is at fault for the accident. It may also help cover medical and funeral expenses for you or anyone in your vehicle who’s injured by an uninsured/underinsured driver.
Some insurers offer disappearing deductibles (also known as haggle-free deductibles) for collision and comprehensive coverage, where your insurance company reduces your deductible by a certain amount each year that you go without filing a claim. This can help lower your premium over time, but it’s important to weigh this option carefully as it can increase the overall cost of your policy.
When deciding whether to drop collision coverage, consider the value of your vehicle and your ability to pay out of pocket for repairs or a replacement. Also, keep in mind that comprehensive coverage is generally a must-have if you lease or finance your car.
Comprehensive Coverage
If a ladder falls on your car while you’re driving or if your windshield gets shattered, comprehensive coverage kicks in to cover the damage. Depending on the insurer and policy, comprehensive typically pays for incidents such as theft, fire, natural disasters, falling objects, vandalism, riots or contact with animals (like birds or deer).
Insurance professionals recommend buying higher property damage limits than the minimum required by your state. This is because the cost to repair or replace your car rises as it ages, and because of other factors like your credit score and driving record.
To get the best rates, keep your credit history and driving record clean, and consider adding collision and comprehensive coverage to your policy. You’ll likely have to pay a deductible, which is the amount you agree to pay out of pocket before your insurance company starts paying on a covered claim. The deductible typically ranges from $100 to $500. It’s also important to understand your insurer’s coverage limits, as well as the car’s actual cash value (ACV), which declines over time.
Uninsured Motorist Coverage
Uninsured motorist coverage, or UM, pays for your injuries and the damage to your car from an accident caused by a driver who doesn’t have any auto liability insurance. This is a mandatory coverage in some states.
In some states, your insurance company can stack UM coverage with your liability limits to increase your overall coverage limit. It can also cover you for a hit-and-run incident and for damage caused by a phantom vehicle (an unidentified car that drives into yours).
Twenty two states require UM bodily injury coverage and fourteen require UMPD property damage coverage. UMPD is similar to collision, but it pays for damage to your car from an uninsured or underinsured driver and may have a lower deductible than your collision deductible. You’ll usually have to identify the driver and/or the vehicle for your UM coverage to apply. UMPD is optional in most states. Most people who have it add it to their collision coverage.