Drive Protected: The Complete Auto Insurance Handbook

What is Auto Insurance?

Auto insurance is designed to protect drivers from financial losses due to accidents, thefts, or other damages involving their personal vehicles. In its most basic form, it’s an agreement between you and the insurance company that says you’ll pay a premium, and they’ll cover the agreed upon costs if you have an insurable claim.

By covering some or all of the costs associated with vehicle damages or accidents, auto insurance provides financial protection and peace of mind. The specific coverage provided depends on the insurance policy purchased.

There are six main types of auto insurance coverage to choose from:

• Liability insurance
• Collision insurance
• Comprehensive insurance
• Uninsured/Underinsured motorist coverage
• Medical payments coverage
• Personal injury protection

Auto policies are highly customizable, with various levels of each protection type available based on your budget, state regulations, and risk tolerance. Knowing what each covers is important for choosing adequate coverage for your situation.

Liability Insurance

Liability insurance is a standard coverage in auto insurance policies. It covers any damage or injuries that you may cause to other people or their property while operating your vehicle. Liability insurance can be divided into two main components - bodily injury liability and property damage liability.

Bodily injury liability covers medical expenses, lost wages, pain and suffering for people injured in an accident that you caused. This protects you from financial costs if you injure others with your vehicle. Typical policy limits for bodily injury liability are $100,000 per person and $300,000 per accident.

Property damage liability pays for damage you cause to another vehicle or property like buildings, fences, poles etc. Typical limits for property damage are $50,000-$100,000.

Liability insurance is mandatory in most states, with minimum required limits varying by state. It's important to carry enough liability coverage to protect your assets in case you are sued. Many experts recommend $100,000-$300,000 for bodily injury and $100,000 for property damage as a good starting point.

Collision Insurance

Collision insurance covers damage to your car resulting from a collision with another vehicle or object, like a tree or guardrail. This is different from comprehensive coverage, which covers damage from non-collision incidents like theft, vandalism, or natural disasters.

When you file a collision claim, you will need to pay a deductible before your insurance covers the remaining damage costs. Deductible amounts typically range from $250 to $1,000, but you can choose a higher deductible for lower premiums.

Collision insurance is required by most lenders if you have a car loan or lease. It is also highly recommended for all drivers since any at-fault accident could cost thousands in repairs. Though it adds to your premium, collision coverage provides essential protection for your vehicle investment.

Comprehensive Insurance

Comprehensive insurance covers damage to your vehicle that occurs from non-collision incidents, including theft, vandalism, fire, hail, flood, hitting an animal, or other hazards. It will help pay to repair or replace your vehicle if it's damaged by something other than a collision with another car or object.

Comprehensive insurance typically has a deductible amount that you select, often $500-$1,000, which is the amount you would pay out-of-pocket before insurance coverage kicks in. It's recommended for newer vehicles since repairs can be expensive, but is optional for older cars where repair costs may exceed the vehicle's value.

• Covers glass damage, theft, weather damage, fire, vandalism
• Deductible is often $500 - $1000
• Recommended for newer vehicles

Uninsured/Underinsured Motorist Coverage

Uninsured/underinsured motorist coverage provides financial protection if you're involved in an accident with a driver who doesn't have insurance or who has very low liability limits. Here are some important details about this type of coverage:

Covers injuries from uninsured drivers - This pays for your medical bills, lost wages, and pain and suffering if an uninsured driver hits you. Without this, you would have to pay these expenses out of pocket.

Underinsured vs uninsured - In addition to covering fully uninsured drivers, this also covers damages exceeding the at-fault driver's liability limits, up to your UIM limits.

Typical limits - Most states require minimum limits of $25,000 per person and $50,000 per accident for UIM, equal to liability limits. Higher limits provide more protection.

May be required by lender/lease - If you finance or lease a vehicle, the lender may require UIM coverage to protect their asset. Make sure to ask about any requirements.

Medical Payments Coverage

Medical payments coverage is optional auto insurance that covers medical bills resulting from an accident, regardless of who is at fault. It differs from health insurance in that it only covers medical expenses from auto accidents. Typical limits for medpay coverage range from $1,000 to $10,000, but higher limits may be available.

Medpay coverage kicks in after you meet your deductible, if one applies. It supplements your health insurance by covering accident-related costs like ambulance fees, hospital stays, surgery, rehabilitation, and funeral expenses for you and your passengers.

Unlike health insurance, medpay coverage is not restricted to in-network providers. You can see any licensed medical provider, even out-of-network ones. This gives you more flexibility in choosing doctors after an accident.

Medpay is optional in most states, so you'll need to request it from your insurer if you want the coverage. It provides an extra layer of protection by covering your medical bills regardless of who was at fault in the accident. This can spare you from paying high deductibles and co-pays associated with your health insurance.

Typical medpay policy limits range from $1,000-$10,000. Higher limits like $25,000 or $50,000 may also be available for added protection. The cost for medpay coverage is usually relatively low, so it can be worth considering if you want more coverage for accident injuries.

Personal Injury Protection

Personal injury protection (PIP) coverage is a type of no-fault coverage that helps pay for medical expenses and lost wages after an accident, regardless of who was at fault. PIP coverage applies to both the policyholder and passengers in their vehicle.

PIP coverage varies significantly from state to state. In some states it is mandatory, while in others it is optional or not offered at all. States that require PIP coverage typically have minimum coverage limits set by law.

Like other types of coverage, PIP may have deductibles and maximum payout limits. For example, a policy might have a $1,000 deductible and pay up to $10,000 total for medical bills and lost wages per person per accident. Higher limits may be available for added premium cost.

The key benefit of PIP is that it provides immediate assistance with medical and wage expenses without having to determine fault or negotiate with insurance companies. This allows policyholders to focus on recovery rather than financial stress after an accident.

How Much Auto Insurance Do You Need?

The amount of auto insurance coverage you need depends on several factors. At a minimum, you need to meet your state's requirements. But beyond that, experts recommend analyzing your personal situation to determine adequate coverage levels.

State Minimum Requirements
All states except New Hampshire require drivers to purchase at least a minimum amount of liability insurance. Requirements vary significantly by state, with minimum liability limits ranging from as low as $10,000 to as high as $50,000 for injuries per person. Make sure you understand your state's minimums as a starting point.

Factors That Affect Coverage Amounts

Your Assets and Income
The more assets and income you have, the higher your risk, and the more liability coverage you may want to protect those assets in case you are sued after an at-fault accident. Review the limits on your policy and consider raising them if you own a home or have significant savings.

Type of Vehicle
The make, model, age and value of your vehicle impact how much collision and comprehensive coverage you need. Get quotes with different deductibles to find the right balance of premiums and out-of-pocket costs.

Driving Record
Drivers with accidents or violations may need higher liability limits in case their driving record leads to a lawsuit. Review your limits if your record is not spotless.

Comparing Auto Insurance Quotes

Getting auto insurance quotes from multiple providers is key to finding the best rate. Rates can vary widely between insurers, so it pays to shop around. When comparing quotes:

• Get quotes from at least 3-5 different insurance companies. Online quote tools make this easy.
• Compare types of coverage and limits. Make sure you are comparing "apples to apples."
• Ask about available discounts for things like good driving record, anti-theft devices, bundling policies, and more.
• Consider ratings and complaint histories. Choose a highly rated insurer with a good reputation for customer service.

Taking the time to gather multiple quotes and do an in-depth comparison allows you to make an informed decision on the best value auto insurance policy for your situation.

How to Lower Your Auto Insurance Costs

There are several effective ways to get cheaper auto insurance premiums. Here are some of the best strategies for lowering your annual insurance costs:

Raise Your Deductible

Raising your deductible - the amount you pay out of pocket when you file a claim - can substantially reduce your premiums. For example, increasing it from $200 to $500 could lower your costs by 10% to 40%. Just be sure you have enough savings to cover the higher deductible if you need to file a claim.

Maintain a Good Driving Record

Insurance companies reward safe drivers with lower rates. Avoid accidents and traffic violations, and take an accredited defensive driving course every few years to brush up your skills and possibly earn a discount. Minor speeding tickets can increase your premiums by 20-30% for 3-5 years.

Shop Around Frequently

It pays to shop around every 1-2 years by comparing quotes to find the insurer offering the best rate. Loyalty rarely gets rewarded with lower premiums. And new insurers may offer very competitive pricing as they try to grow their customer base. Using online comparison sites makes getting quotes fast and easy.

When to File an Auto Insurance Claim

There are several common situations when you should file an auto insurance claim:

• At-fault collisions: If you cause an accident that damages your vehicle, you can file a collision claim to have your insurer pay for repairs or replace the totaled vehicle, minus your deductible.
• Hit-and-run crashes: If another driver hits your car and flees the scene without providing insurance information, you can make a claim under your uninsured motorist coverage.
• Comprehensive claims: Damage to your car from non-collision events like hail, floods, fire or theft should be covered under comprehensive insurance. Report the incident to make a claim.
• Underinsured motorist claims: If the at-fault driver's liability limits are insufficient to cover your losses, turn to this coverage to pay the difference.

Knowing exactly what your policy covers will determine when you need to submit a claim to your insurer versus paying for damages out-of-pocket. Read over your policy or consult your agent.

Tips for Getting an Auto Claim Paid

One of the most important things when filing an auto insurance claim is making sure you get paid properly and in a timely manner for the damages. Here are some tips for getting your auto claim paid:

Report the Incident Quickly
- Notify your insurance company as soon as possible after an accident or incident requiring a claim. Many policies require reporting within 24 hours. The quicker you report, the faster the claims process can start.

Document Everything
- Take ample photos of the damage to all vehicles and property involved. Document the scene, weather and road conditions, any injuries, and more. Get contact info for witnesses. Save all related receipts and documents.

Be Truthful with Your Insurance Company
- Provide accurate details about what happened. Lying or exaggeration can be considered insurance fraud and delay or void your claim.

Negotiate Your Settlement
- Review the claim thoroughly and don't immediately accept an offer. You can negotiate for a higher settlement within reason. Consult an attorney for help determining fair value if needed.

Get Help from an Attorney if Needed
- If you have any disputes with the insurer, an attorney can advocate for your claim and make sure you maximize your payout.

Auto Insurance FAQs

Here are some of the most commonly asked questions about auto insurance:

What happens if I miss my insurance payment?

If you miss your auto insurance payment, your coverage will likely lapse after a grace period, leaving you uninsured. Contact your provider immediately if you think you may miss a payment.

Will my rates increase after an accident that wasn't my fault?

In most cases, your rates should not go up after an accident that was not your fault and you did not file a claim. However, some insurers may still consider you higher risk.

Do I need insurance on a car I only drive part of the year?

Yes, you need auto insurance anytime you drive a car. Consider a storage policy if you only drive seasonally.

What is the difference between collision and comprehensive coverage?

Collision covers damage from a crash with another car or object, while comprehensive covers damage from non-collision events like weather, theft, vandalism, etc.

Will my insurance cover me when driving a rental car?

Typically yes, but be sure to check your policy. Many cards and policies offer rental coverage, but exclusions may apply.

Do I need special insurance when using my car for rideshare or delivery?

Yes, standard policies exclude commercial use. You'll need a rideshare insurance policy from your provider or the TNC company.

Am I covered if I lend my car to a friend and they have an accident?

Generally yes, as long as the friend has your permission to drive the vehicle. But be sure to check your policy's permissive use rules.