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Types of car insurance: What they cover and what they cost

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Car insurance is made up of several different types of coverages. Here we explain how accidents, injuries and damages are covered under each type of car insurance and how these coverages shield drivers from having to pay for repairs and medical bills. You can also learn about special types of policies, including non-owners and SR-22 certificates.

Contents:

Car insurance coverage types

Liability

Bodily injury liability covers the following for those you injure in an accident that’s your fault:

  • Medical expenses
  • Funeral expenses
  • Loss of income
  • Pain and suffering
  • Legal defense if a lawsuit results from the auto accident

Property damage liability covers:

  • Damage you cause to another driver’s car
  • Damage to other’s property, such as fences

What it costs:

  • Bodily injury liability and property damage liability costs $510, on average, annually for minimum coverage.

Coverage recommendations:

If your net worth is:

  • less than $50,000 choose at least 50/100/50
  • between $50,000 and $100,000, choose at least 100/300/100
  • more than $100,000, choose at least 250/500/100

Liability car insurance is required in all states except New Hampshire (where you still must show you’re financially able to pay for an accident you cause – and liability auto insurance is the easiest way to do that). You can get by with bare-bones coverage, your state required minimum liability requirement  to drive legally, or buy higher amounts for more protection. It pays out up to the amount of coverage you buy.

Collision

What it covers:

  • Damage to your car if you hit another car or object, or are hit by a car or object
  • Damage to your car if it is flipped  or rolled over

What it costs:

  • Collision coverage costs an average of $488 a year.

Coverage recommendations:

  • If your car is less than 10 years old, you should consider buying collision.
  • If your car is more than 10 years old, buy collision if your car is worth $3,000 or more.
  • Buy collision if you can’t afford to replace it if you crash it.

In all states, collision coverage is optional. It is typically fairly affordable, and it’s wise to have it if you have a newer car. If you finance or lease your car, you will be required to buy collision coverage. Collision coverage come with a deductible, the amount you pay before insurance kicks in, and pay out up to the cash value of your car.

Comprehensive

What it covers:

  • Damage to your car from flooding, hail, wind and fire
  • Vandalism to your car
  • Stolen cars
  • Damage from hitting animals, such as deer, elks or moose
  • Damage from falling objects, such as trees

What it costs:

  • Comprehensive coverage costs an average of $172, a year.

Coverage recommendations:

  • If your car is less than 10 years old, you should consider buying comprehensive.
  • If your car is more than 10 years old, buy comprehensive if your car is worth $3,000 or more.
  • Buy comprehensive if you can’t afford to repair your car.
  • Buy comprehensive if you live in a region prone to flooding, hail or animal strikes.

Comprehensive insurance is usually optional, but you may be required to buy it if you took out a loan to purchase your car or lease a car. Comprehensive coverage come with a deductible, the amount you pay before insurance kicks in, and pay out up to the cash value of your car.

Uninsured/underinsured motorist coverage (UM/UIM)

What it covers:

  • Uninsured/underinsured motorist property damage (UMPD) insurance covers damage to your car if hit by an uninsured driver or a driver with insufficient coverage
  • Uninsured/underinsured bodily injury coverage pays medical bills for you, your passengers and members of your family if injured in an accident caused by an uninsured driver or driver with insufficient coverage
  • Uninsured motorist  bodily injury coverage pays your medical expenses if you are injured in an accident caused by a hit-and-run driver

What it costs:

  • Uninsured motorist coverage costs an average of $83 a year.
  • Underinsured motorist coverage costs an average of $52 a year.

Coverage recommendations:

If you have collision insurance, UMPD, which is optional in most states, is not a must-have since collision offers better coverage. But without UM/UIM bodily injury coverage, you could be stuck either paying for your own injuries or suing a driver with limited financial resources to try to recoup your costs. What happens after an accident with an uninsured/underinsured driver depends on your state insurance laws.

 In no-fault states:

  • Your own insurer would pay out for medical expenses under personal injury protection (PIP). But typically personal injury protection limits in no-fault states are quite low, so even a minor accident could leave you with expenses after a claim payment. And, though your health insurance may help pay your leftover medical expenses, it won’t pay for lost wages, or pain and suffering, which is where UM/UIM bodily injury coverage can help.
  • No-fault (PIP) coverage does not cover physical damage to your car, so you need UMPD or collision to make a claim for your vehicle’s damage if you don’t have collision.

In a “tort” state, which means a state where you can sue for damages:

  • To get compensated for an accident caused by an uninsured/underinsured driver, you may have to sue for damages, which is a complicated and costly process. And, it is likely the driver won’t have much money or any assets even if you take him to court.
  • Your MedPay, if you have it, will cover you up to your limits in this instance, but if your limits are too low to cover all your costs, you will be stuck either paying out of pocket or having to litigate.
  • If you have PIP coverage and no collision, it will only cover medical expenses -- not physical damage to your car -- so you need uninsured motorist property damage to make a claim for your vehicle’s damage.

Uninsured motorist coverage and underinsured motorist coverage are required in some states, and in other states it’s optional. It’s a wise idea to carry this type of coverage as one in eight drivers isn’t insured, according to the Insurance Research Council. It pays out up to the limit you buy, which is usually the same as your liability limits.

Personal injury protection (PIP)

What it covers, for you, your passengers, family members and those you allow to drive your car, regardless of who is at fault for the accident:

  • Medical expenses
  • Lost wages (you are reimbursed a percentage of your income)
  • Funeral expenses
  • Cost for house cleaning, child care and other tasks you may not be able to perform if injured (loss of essential services)
  • Also covers you and your family members if hit by a car while walking

What it costs:

  • The average annual PIP cost is $198.

Coverage recommendations:

  • If PIP is optional in your state, buying PIP coverage is a good idea if you have little savings to live on should you be injured and lose your income for a period of time.

Personal injury protection (PIP) is required in the 12 no-fault states, optional in 10 states and the District of Columbia, and not available in 28 states, according to the Insurance Information Institute. Your PIP limits set the maximum amount that will be paid per person for any combination of covered expenses. PIP limits vary by state but are usually in the range of $1,000 to $10,000. Some states allow you to choose your PIP limits and others set it to a certain amount. You can always choose to buy additional PIP coverage beyond your state required amount.

Medical payments coverage (MedPay)

What it covers, for you, your passengers, family members and people you let drive your car, regardless of who is at fault in the accident:

  • Reasonable and necessary medical expenses, such as hospital visits and stays, surgery, dental, nursing and X-rays etc.
  • Funeral expenses
  • Injuries if hit by a car or bike while walking (in some states)
  • Injuries while a passenger in another driver’s car

What it costs:

  • MedPay costs an average of $22 a year.

Coverage recommendations:

  • If you have health insurance that covers car accidents, MedPay isn’t a must-have.
  • Even so, MedPay can work with your health insurance to cover costs for an accident, and is very affordable, so is worthwhile to carry.
  • You may be able to use MedPay to pay your health insurance deductible or co-pays.
  • If you have a high health insurance deductible, MedPay is advisable.

MedPay insurance is required in just one state – Maine, though if you opt to buy car insurance in New Hampshire, you must include MedPay coverage in your policy. In other states, it is an optional coverage. MedPay pays out, up to your limit, for each individual in the accident. It is usually available for up to $10,000 worth of coverage.

Gap insurance

What it covers:

  • Gap insurance, commonly also called loan-lease insurance, pays the difference between the actual cash value of your car and the amount you owe your lender for the vehicle.
  • To make a gap claim, your car must be declared a total loss due to an incident covered under comprehensive and collision coverages.
  • Sometimes gap insurance comes with a limit to the payout, for instance, up to 25 percent of the actual cash value of the car at the time it was totaled.

What it costs:

  • Gap insurance costs about $20 a year, according to the Insurance Information Institute.

Coverage recommendations:  

  • Buy gap insurance from an insurance company, not from your car dealer.
  • Gap insurance sold at dealerships can cost hundreds of dollars more than a policy sold from a car insurance company.

Gap insurance may be required if you finance your car, and is required if you lease your car. Do not buy gap insurance if you own your vehicle outright. To purchase gap insurance, your lender must be a financial institution – not an individual person – and your policy must have comprehensive and collision coverages on it.

Full coverage

The term “full coverage” is often misunderstood. Many people mistakenly believe that full-coverage means you are insured for all damages and injuries in any accident. That’s not always the case. Rather, full-coverage is used to describe a car insurance policy that includes comprehensive and collision insurance, in addition to liability insurance.

You should opt for full coverage if you have a newer car, you drive a lot and own a home and have assets to protect. A full-coverage policy with limits of 100/300/100 and a $500 deductible costs an average of $1,864 a year.

Choosing your coverage

Deciding how much insurance to buy depends on a few factors. Bare-bones coverage may be a good choice if you have few assets or have an old car and don’t drive much.  But if you have a home and investments, consider buying more insurance. If you don’t, you’re at risk for having your money and house taken to cover the cost of an accident. If you financed or leased your car, you will be required to get comprehensive and collision coverage in addition to liability limits of 100/300/100.

Use our How Much Car Insurance Do You Need? tool to get a recommendation.

Alternative car insurance policy types

SR-22

What is an SR-22?

  • An SR-22 is a form that your car insurance company files on your behalf with the state, typically after you’ve been convicted of a major violation, not a type of insurance.
  • Your car insurance company uses an SR-22 form to prove to the state that you are carrying the legally mandated coverage you need to drive.
  • Some violations that typically would require you to have an SR-22 include DUI, reckless driving and driving without insurance.  An FR-44 is required in some states, and is basically the same as an SR-22 but is used when the state mandate you carry even higher liability limits.

How do I get an SR-22?

  • To get an SR-22, you must use an auto insurance company that provides SR-22 filing services – not all do.
  • You must then buy a policy with at least the minimum limits that the state requires you to carry.
  • Your insurer will get the form for you, fill it out and file it with the state.
  • Once the SR-22 form is filed by your insurer, you’ll need to maintain the related insurance coverage for the state-mandated period of time, usually three years.

Non-owner car insurance

What is a non-owner car insurance policy?

You might not own a car, but if you still drive, non-owner car insurance is for you. Non-owner policies are liability car insurance policies and are for:

  • High-risk drivers who are required to buy a liability policy to keep their driver’s license
  • Drivers who don’t own a car and rent frequently (but make certain the non-owner policy covers rentals)
  • Drivers who don’t own a car and want to keep continuous coverage

How do I get a non-owner insurance policy?

You buy a non-owner policy in the same way you buy a standard policy. Typically, non-owner coverage is less expensive than an owner’s policy, usually about $300 a year, though depending on your record, where you live and other factors, it could be more. To buy a non-owner insurance policy, call our licensed agents at 1-844-252-4551.


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