What expenses does car insurance cover? It depends

Buying a car that fits your budget and needs is a big deal. But there’s another big decision you’ll need to make alongside that: insuring your car to protect yourself and your loved ones in the event of an accident.

There are several types of car insurance coverage to consider, giving you the freedom to choose a highly personalized policy, but it shouldn’t be complex. Understanding the basic features of common policies will ensure you meet your state’s and lender’s minimum coverage requirements while protecting yourself from unexpected costs associated with car accidents.

How does car insurance work? 

Auto insurance acts as a buffer between you and any financial loss that arises after an accident or other damage beyond your control. See the article : Does your credit score affect your car insurance?. Drivers pay a specific price, called a premium, to an insurance company, and in return, the insurer agrees to pay any potential loss covered by their policy.

But which claims are covered depends on the type of auto insurance you pay for. Almost all states require some types of coverage, such as bodily injury and property damage liability, while others are optional. Drivers have the option to pay for additional coverage beyond their state’s minimum requirements to meet their insurance needs.

Types of car insurance coverage and what they cover

Common types of coverage include liability, collision, and comprehensive coverage, which protect you against damage, accidents, or theft. Read also : Temporary Insurance: How To Get Short Term Car Insurance (2022). Some states require drivers to have uninsured or underinsured motorist coverage, which protects you against drivers with little or no insurance.

Here’s an overview of some common types of auto insurance and what they cover. (We’ll dive into the specifics in the following sections.)

Liability coverage 

What it is: Liability coverage helps protect you against the cost of medical bills and property damage that can result if you are found at fault in an accident. On the same subject : St. Petersburg Car Insurance: Best Cheap Rates (2022). Nearly every state in the US requires drivers to carry a minimum level of liability insurance.

What it covers: Liability insurance pays for both bodily injury and property damage if you are responsible for an accident.

Bodily Injury (BI): If you are at fault in an accident, BI will help pay for any injured person’s medical expenses, such as a hospital visit or medication. BI can also help you pay legal fees if someone injured during the accident wants to sue you for their pain and suffering.

Property Damage (PD): If you damage someone else’s property in an accident you cause, PD can help you pay for repairs. For example, if you are driving and hit a neighborhood welcome sign, PD may cover damage to the sign. It is important to note that PD generally does not pay for damage to your own vehicle.

Coverage Limits – The maximum amount your insurer will pay depends on the coverage limit outlined in your insurance contract and the minimum limit for the state in which you reside. For liability insurance, the limit is set as three separate numbers, each of which represents an amount your insurance company is willing to pay up to for damages or injuries sustained during an accident.

For example, your auto insurer might offer you a liability coverage plan that has a “30/50/10” limit. This means that your insurer is willing to pay up to $30,000 for bodily injury sustained per person, $50,000 for total bodily injury sustained in the accident, and $10,000 for property damage sustained in the accident.

Comprehensive coverage 

What it is: Comprehensive insurance is optional coverage that protects you against non-collision-related damage.

What it covers: Comprehensive coverage pays for damage to your vehicle caused by:

Coverage limits: There is a limit to the repairs your insurer will cover, which is usually the actual cash value of your car minus depreciation and deductibles.

Collision coverage 

What it is: Collision insurance covers damage to your vehicle if it hits another car or an object. It is usually required by your lender if you have an outstanding car loan, but it may be optional if your vehicle is fully paid off.

What it covers: Collision insurance pays for any auto repairs needed for your vehicle after an accident involving:

It’s important to note that collision coverage only covers repair and replacement costs for your own vehicle; it does not cover damage to another vehicle.

Coverage limits: There is a limit to the repairs your insurer will cover in the event of an accident, which is generally equal to the actual cash value of your car minus depreciation and deductibles.

Personal injury protection 

What it is: Personal Injury Protection (PIP) covers medical bills, hospital bills, and other costs associated with a car accident that are not already covered by your health insurance policy. Some states require drivers to obtain PIP, while other states consider it optional.

What it covers: PIP pays for medical expenses and possibly funeral expenses or lost wages, regardless of who is at fault in the accident. It may also cover pedestrians who have been hit by a vehicle while walking or bicycling.

Coverage limits: PIP covers medical expenses and lost wages only up to the limit determined by your insurance contract. If your expenses exceed your limit, you may be able to file a lawsuit against the driver responsible for the accident to cover the difference.

Uninsured and underinsured motorist coverage 

What it is: Uninsured motorist (UM) coverage protects you in the event you are hit by a driver who does not have auto insurance. Underinsured motorist (UIM) coverage protects you if you are hit by a driver who has insurance, but not enough to cover the damages sustained. UM and UIM are required in some states, but not all.

What it covers: UM and UIM help pay for injuries to you and your passengers, as well as damage to your vehicle.

If the driver responsible for the collision does not have insurance:

If the driver responsible for the collision does not have enough insurance:

Coverage Limits: If your state requires UM/UIM coverage, the limit may be equal to the amount of liability coverage. If optional, you may be able to select your own coverage limit.

Medical payments coverage 

What it is: Medical payments insurance helps you pay for the medical expenses of the driver and passengers involved in an accident, regardless of who is at fault. This coverage is only required in some states. If your state doesn’t offer medical payments insurance, you may be able to replace it with PIP coverage.

What it covers: Medical Payments pays for necessary medical expenses for you and your passengers after an accident, such as:

Coverage Limits: The maximum amount your insurer will pay is set as a dollar amount per person per accident. If you can select your coverage limit, consider reviewing your health insurance plans to determine how much you need to cover out-of-pocket costs.

For example, let’s say your health insurance requires you to pay a $100 copay for visits to the emergency department. If your coverage exceeds this amount, you will pay your copay and possibly cover additional medical costs as well. But, if you select a medical payment coverage limit less than this amount, you may be personally responsible for paying the difference.

Roadside assistance coverage 

What it is: Roadside assistance is an optional coverage that can be added to your auto insurance policy and is designed to cover the costs of a damaged or disabled vehicle.

What it covers: Roadside assistance helps you pay for repairs, such as:

Coverage Limits: This coverage is limited by the insurer and may be based on the number of calls per year or the type of service available. For example, the insurer may help you exchange your flat tire for a spare, but may choose not to cover the cost of repairing or replacing the tire with a new one.

Gap insurance 

What it is: Gap insurance is optional coverage that covers the difference between a vehicle’s current value and the amount you owe on your car loan if your car is damaged or destroyed in an accident.

What it covers: If your car is damaged, totaled or stolen, a typical insurance plan would only pay the amount your car is currently worth. Gap insurance helps cover the difference between your car loan amount and the value of your car, so you don’t have to pay a loan on a car you can’t drive. This coverage is generally only offered to the original loan holder of a new vehicle.

For example, let’s say you bought a car two years ago and still owe $20,000 on the car loan. Since the day you bought your vehicle, its actual value has decreased to $17,000. If your car is stolen, your typical auto insurance policy may cover the current value of $17,000, while you must pay the remaining $3,000. With a gap insurance policy, the last $3,000 will be covered so you no longer owe money on your car loan.

Coverage limits: The maximum amount your insurer is willing to cover in a gap policy may be set as a dollar amount or a percentage of your car’s current value, and may charge a deductible.

For example, if you bought a new car for $30,000 and you still owe $25,000 at the time your car is totaled. Your car insurance policy covers the current value, say $23,000. Without gap insurance, you would pay the $2,000 difference. But with it, gap coverage can help you pay the $2,000, less deductibles.

New car replacement 

What it is: If you bought a new car, it may depreciate by the time it leaves the lot. Because of this, new car replacement insurance helps you cover the cost of buying a new car of the same make and model as your current vehicle if it is totaled. It’s an optional coverage, usually only available for cars less than a few years old and with a specific mileage.

What it covers: New car replacement helps pay for the cost of replacing your current vehicle. For example, let’s say you bought a new car and when you drive out of the parking lot, the car is completely wrecked. Without a new car replacement, the insurance company can only pay you for the current depreciated value of the car. But with it, your insurer can reimburse you enough to pay for the exact same make and model, minus deductibles.

Coverage Limits: This coverage may be limited by vehicle age or mileage. For example, an insurance company may require that your vehicle be less than two years old or have less than 24,000 miles to qualify for coverage.

What doesn’t car insurance cover?

After reviewing various types of car insurance policies, you may think that everything is covered. But in reality, there are still some expenses that the car owner is responsible for, even with the maximum amount of insurance coverage, including:

The takeaway

Nearly every state in the US requires drivers to carry property damage and bodily injury liability insurance. Other types of coverage, such as uninsured/underinsured motorist coverage and PIP, may be required depending on the state in which you reside. Your auto lender may also have specific coverage requirements to qualify for financing.

When determining what coverage is right for you and your vehicle, consider your state and lender’s requirements, the age and value of your car, and your current health insurance policy to close any gaps in coverage.

Is it cheaper to pay insurance all at once?

If you pay your auto insurance premium upfront for the entire term (usually six months or a year), some insurance companies will lower your premium. Progressive, Farmers, and Allstate are examples of companies that may offer a discount for paying in full.

Is $200 a month for insurance too much? Yes, $200 a month for car insurance is pretty expensive, especially for the minimum coverage. The average cost of auto insurance ranges from $60 per month for state minimum coverage to $166 per month for full coverage.

Is insurance cheaper if you pay in full?

“When you choose to pay your auto insurance premium in full, you will definitely save money. Most insurance companies offer a discount on your policy premium when you choose to pay your premium in full every six or 12 months. When you pay in full, your policy is in place for the entire term of the policy.

Is it cheaper to pay the full insurance?

In 2021, drivers who paid their premiums in full saved about 4.7% on average, according to Zebra, an insurance comparison website. And saving money isn’t the only potential advantage of paying in advance. With your premium payment out of the way, you’ll have one less monthly bill to worry about.

Is it better to pay out of pocket or insurance?

If the cost to repair your car will be less than your deductible, or even a little more, you should handle the repairs out of pocket. For example, if the damage to your car costs $300 to repair and the deductible is $200, you would save $100 by filing a claim.

What happens when you pay your insurance in full?

When you pay your premium in full, you are paying for the months to come. Your money goes out of your pocket and into the coffers of the insurance company before you drive and before you can file a claim.

Is insurance cheaper if you pay every 6 months?

“Paying your auto insurance premium in full every six months will save you money. Depending on the insurance company, this could substantially lower your premium compared to monthly payments.

What happens when you pay your insurance in full?

When you pay your premium in full, you are paying for the months to come. Your money goes out of your pocket and into the coffers of the insurance company before you drive and before you can file a claim.

Is it better to pay car insurance monthly or yearly?

Paying your insurance premiums annually is almost always the least expensive option. Many companies give you a discount for paying in full because it costs the insurance company more if the policyholder pays their premiums monthly, since it requires manual processing each month to keep the policy active.

Can you cancel insurance paid in full?

If you pay your full premium up front, you’ll usually get a refund when you cancel your policy. If you pay your premium monthly, you may or may not get a refund depending on when you cancel.

Is car insurance cheaper if you pay in full?

Auto insurance premiums don’t automatically go down when you pay off your car, but you can probably lower your premium if you drop coverage that’s no longer needed.

What are 3 main factors when determining your car insurance rate?

The biggest factors that affect auto insurance rates are state coverage requirements, age, and the make and model of the car. The more coverage you are required to purchase in your state and the more valuable your vehicle is, the more you will pay for auto insurance.

What 3 factors determine the cost of your auto insurance? Some factors that can affect your car insurance premiums are your car, your driving habits, demographics, and the coverages, limits, and deductibles you choose. These factors can include things like your age, your car’s anti-theft features, and your driving record.

What are the two factors that determine what you pay for auto insurance?

Many factors help determine the cost of auto insurance

• Your driving record – The better your record, the lower your premium. …
• How much you use your car – The more miles you drive, the more chance of an accident you have, so you’ll pay more if you drive your car for work or use it to travel long distances.

What are 5 factors that will be considered when you purchase car insurance?

Auto insurance companies use many factors to determine how much your auto insurance premiums will be. These factors include the type of vehicle, driving history, claims history, and the state you live in, and may also include your age, gender, credit score, and zip code, depending on your auto insurance regulations. condition.

Does insurance cover things that are your fault?

If the situation is clear or one party admits they caused the accident, the at-fault driver’s auto insurance must pay for property damage and medical bills and, in some cases, additional compensation for other damages, such as pain. and the suffering. .

Is Utah a no-fault state? What is the Utah No Guilt Law? Utah is a “no-fault” state. This means that regardless of who was at fault for the accident, injured parties seek payment of the first $3,000 of medical expenses from their own insurance company.

What things does auto insurance typically not cover?

5 things your car insurance may not cover

• Natural disasters. Vehicle damage due to hail, flooding, or other types of severe weather is not covered by your state minimum auto insurance policy. …
• Personal items inside your vehicle. …
• Commercial use. …
• Vehicle accessories. …
• Pet injuries.

What is usually covered in car insurance?

While different states require different types of insurance and there are several additional options (such as gap insurance) available, most basic auto policies consist of: bodily injury liability, personal injury protection, property damage liability, property, collision, comprehensive, and uninsured/underinsured motorist.

What is typically not covered under liability insurance?

Liability insurance provides protection against claims resulting from injury and damage to persons and/or property. Liability insurance covers legal costs and payments for which the insured party would be responsible. Provisions not covered include intentional damages, contractual liabilities, and criminal prosecution.

What is not covered by an auto insurance policy?

What does car insurance not cover? Auto insurance typically won’t cover excluded drivers, unlisted cars, stolen personal belongings, intentional damage to your vehicle or another driver’s, routine repairs and maintenance, and more. .

How does insurance determine whose fault is it?

The adjuster will collect details about the accident. This may include reviewing the police report, interviewing the parties involved, and evaluating photos of the damage. Based on their review, the adjuster works with the insurer to determine who is at fault for the accident.

How do you determine fault?

Evidence and witnesses are key to determining fault in car accidents. If the fault is not clear at the accident scene, there may be traffic cameras that recorded the accident. By reviewing the footage, it is possible that driver failure could be assigned sooner rather than later in this way. Photographic evidence can also help.

How does insurance work when it’s not your fault?

When you are not at fault in an accident, the other driver’s insurance should cover damage to your car and your medical bills, up to your policy limits. If it takes time to determine fault, you can file a collision claim with your insurer, which will then seek reimbursement from the at-fault driver’s insurer.

How are insurance claims decided?

If the police don’t decide who is at fault, or if the insurance company doesn’t agree, your insurance adjuster will investigate the accident and use the details to determine fault. The insurance company will use photographs, maps, witness statements, medical records, and special algorithms to calculate fault.

How much does the average person spend on insurance per month?

The national average monthly cost of health insurance for someone in an unsubsidized Affordable Care Act (ACA) plan in 2022 is $438.

How much does the average American spend on health insurance per month? POR Anna Porretta Updated October 1, 2022 In 2020, the national average cost of health insurance is $456 for an individual and $1,152 for a family per month. However, costs vary among the wide selection of health plans.

How much does the average American pay for insurance?

The average American family pays an estimated $1,779 per month. What about employer coverage? The average American worker paid $5,969 in 2021 for employer-sponsored group health insurance. The total cost of annual premiums (employer and employee) in 2021 for employer-offered coverage increased 4% during 2020 to $22,221.

How much does the average American pay for car insurance?

The national average cost of car insurance is $1,630 per year, according to NerdWallet’s 2022 rate analysis. That works out to an average car insurance rate of around $136 per month.

How much should you spend on insurance a month?

A good rule of thumb for how much you spend on health insurance is 10% of your annual income. However, there are many factors to consider when deciding how much to spend on health insurance, including your income, age, health status, and eligibility restrictions.

How much do people typically spend on health insurance?

The average monthly cost of health insurance for a 40-year-old is $477, or almost $6,000 per year. Keep in mind, however, that premiums vary widely based on where you live, along with your age, family size, and type of insurance plan.

How much does the average person spend on healthcare a year?

Health spending per person in the US was $11,945 in 2020, which was more than $4,000 more expensive than any other high-income nation. The average amount spent on health per person in comparable countries ($5,736) is about half that of the US.

How much does the average American pay out of pocket for healthcare?

According to a recent report, consumers’ out-of-pocket spending on health care will reach an estimated $491.6 billion, or about $1,650 per person, in the US.