With driving comes both great freedom and responsibility. Part of being an informed and lawful driver means understanding basic car insurance. Auto insurance basics may seem overwhelming, but it is well worth your time and effort to familiarize yourself with them. While different states require varying amounts of coverage, every state will mandate some amount of coverage. Your personal auto insurance is designed to transfer some risks of driving from yourself to the insurance company. This coverage can lessen the financial burden of an accident and give you peace of mind while driving.
Ready to have auto coverage explained? Read on!
Basic car insurance coverages
Wondering what basic car insurance is? It’s a type of insurance policy that can help cover you from the financial and legal consequences related to the use of your vehicle. Depending on where you live, you may be obligated to obtain a specific type of coverage. Be that as it may, at a minimum, your auto policy should include basic liability and property damage coverage.
In total, there are six basic car insurance coverages which include:
- Bodily injury - is a type of liability coverage that can help pay for the medical costs of injuring another person if you cause an accident. For example, bodily injury could cover the costs of a hospital bill if you are responsible for a crash and the driver of the other car breaks their foot.
- Property damage - Both bodily injury and property damage are types of liability coverage. Property damage can help pay to repair or replace damaged property such as a house, vehicle, or office after an accident.
- Med Pay / PIP - are two types of additional insurance policies that some states offer that can be used to cover medical expenses for the policyholder, passengers, or family members after an accident. Generally, PIP coverage covers a wider array of services, including rehabilitation, physical therapy, lost wages, and even funeral costs. Depending on where you live PIP may be mandatory, therefore, it is best to check in with your insurance provider to discuss your options.
- Comprehensive coverage - can help reimburse you for losses and/or theft or damage caused by events such as fires, falling objects, hail, earthquakes, vandalism, or contact with an animal such as a deer. Comprehensive coverage usually requires the application of a deductible.
- Collision coverage - can cover the costs of damage or repairs to your vehicle that result from a collision with another car or an object such as a tree or telephone pole. Collision coverage may also cover damage from potholes or flipping over. This type of policy is usually sold with a separate deductible.
- Uninsured / underinsured motorist (UM) - unfortunately not everyone drives with sufficient coverage. Uninsured or underinsured motorist insurance can offer coverage to you or a family member riding in your car when your car is hit by an at fault driver who has no or not enough insurance to cover your losses. This coverage might also cover costs if you are the victim of a hit and run or injured as a pedestrian. Please note UM coverage can vary from state to state.
Explanation of why car insurance is important
No explanation of car insurance is complete without a dive into state minimums. State requirements for auto insurance, including the minimum amounts needed for coverage, vary greatly. Almost every state requires liability insurance, which is given as a split limit of three numbers, ex. 50/25/50. The first number here represents the amount per person that could be paid for bodily injuries incurred by the accident. The second number is the amount that could be paid, up to a maximum total, for all bodily injuries incurred in the accident. The third number describes the payment that could be issued for all property damaged in the accident. Remember, liability coverage is for others involved in your accident, not for you or your vehicle.
In addition to the legal consequences of driving uninsured or underinsured, car insurance can provide financial protection and peace of mind in the event of an accident.
Benefits of full coverage v. basic car insurance
An essential part of auto coverage knowledge is the difference between full coverage and basic car insurance. Full coverage insurance is a comprehensive auto policy that includes liability, collision, and comprehensive insurance. Contrary to its name, a full coverage policy does not mean that everything is covered. However, this type of policy can offer flexibility and lower out-of-pocket costs in the event of an accident. For example, you could tailor your full coverage policy to include roadside assistance and rental car reimbursement. Be aware that a full coverage policy may result in a higher premium than your basic auto insurance coverage. This type of coverage usually covers a broader range of potential accidents and risks than basic car insurance.
How to choose a basic auto insurance policy
Think you are ready to select a basic auto insurance policy? Before you can determine the right coverage, you should reflect on your circumstances, needs, and budget. For instance, if you live in a dense, urban, area with high traffic and crime, it could be worthwhile to pursue comprehensive coverage in case of theft or vandalism against your vehicle. Also, take a moment to look up the specific auto insurance requirements mandated by your state. Depending on whether you live in a no-fault state, you may be required to obtain a minimum amount of PIP coverage.
Car insurance may have a reputation for being boring or hard to fully understand but skipping out on your basic car insurance education is not an option! Driving without the proper coverage can be dangerous. Learning the auto insurance basics can provide you with peace of mind and lessen the financial blow of a covered accident.
Want to take a closer look at your auto insurance policy or discuss your custom coverage options with a trusted agent? Give Infinity Insurance Agency, Inc. a call at 1-855-478-3705 and receive a free quote today!