| bodily injury to each person | bodily injury for each accident | Property damage for each accident | |
| California | $15,000 | 30 thousand dollars | $5,000 |
| Alaska | $50,000 | $100,000 | $25,000 |
| Texas | 30 thousand dollars | 60 thousand dollars | $25,000 |
Your state’s minimum auto insurance requirements may not provide adequate financial protection if the costs of the accident exceed your limits. A licensed insurance agent can help you determine how much liability coverage you need. Additionally, in no-fault cases, each insurance company pays drivers for the insured’s injuries, regardless of who is at fault.
Liability coverage does not pay medical expenses for you or your passengers, nor does it cover the costs of repairing or replacing your vehicle.
Collision and comprehensive coverage
Collision coverage helps pay for the repair or replacement of your vehicle if it is damaged in a covered traffic accident. If your car is damaged due to fire, theft, or any other event other than a collision, comprehensive coverage helps get it repaired or replaced. Likewise, this type of coverage can help pay for a damaged windshield repair or a stolen car replacement.
State laws do not require these coverages. But if you have a car loan or are renting a car, you will usually be required to assume collision and comprehensive coverage until you pay off the loan or the lease ends. If you drop these coverages, the lender may buy them for you and collect a fee for the insurance.
Personal injury protection and medical payment coverage
Depending on your situation, optional or mandatory personal injury protection (PIP) may cover these costs regardless of who is at fault:
- Medical and hospital expenses: often up to a percentage or a limit
- loss of wagesIncome compensation
- loss of servicesPaying money to non-family members to do work such as housework
- funeral costsCovering part of the funeral costs
No-fault insurance states may have a minimum amount of PIP coverage that you have to carry, such as the $50,000 limit in New York.
Medical payments coverage, or med pay, can help pay for medical and/or funeral costs for you and your passengers, and possibly deductibles and co-payments not covered by your health insurance.
Coverage for uninsured and uninsured drivers
If a hit-and-run driver or a motorist without auto insurance crashes your car, uninsured motorist coverage can provide coverage. This insurance helps pay for medical expenses for you and your passengers and the costs of repairing your car. If the driver at fault doesn’t have enough coverage to pay for your injuries or vehicle damage, fully uninsured driver coverage can help pay the difference.
This insurance is usually grouped and listed as UM/UIM (Uninsured Motorist/Uninsured Motorist) coverage. Some states require drivers to carry uninsured motorist coverage in minimum amounts.
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The term “full coverage” usually refers to a policy that includes all state-mandated coverages, plus collision and comprehensive insurance. However, there is no uniform definition of “full coverage,” so you may find that coverage types and limits vary by insurance company.
What does car insurance not cover?
A standard auto insurance policy does not cover all types of losses. Sometimes even a full coverage policy will only provide some of the protection you need. Typically, standard personal car insurance policies do not cover the following:
- Any difference between the insurance settlement and the car loan amount is still due.
- A car that is rented while your car is being repaired after a covered accident, although in some states, you may be entitled to lease a car for a limited time if your car is declared a total loss.
- Mechanical breakdowns, roadside assistance, towing costs, and general wear and tear.
- All-terrain vehicles, commercial vehicles, motorcycles, off-road and recreational vehicles.
- Vehicles driven for a ride-sharing service such as Uber, Lyft, or other commercial purposes.
- intentional damage.
- Accidents while driving in Mexico or racing your car.
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Some renters or homeowners’ insurance policies may cover personal items stolen from your vehicle when it is not your policy. Review the exclusions in your policy contract.
Additional car insurance coverage options
Adding optional covers to your policy can increase your protection. While some insurance companies offer a wide range of optional coverages, others only offer a few. Common optional car insurance coverages include:
Guaranteed Vehicle Protection Insurance (GAP): If you total a vehicle, the insurance company offers a settlement based on its actual cash value. This value may be less than the amount still owed to the lender. For example, the insurance provider might offer a $15,000 settlement while you still owe the lender $18,000. Gap insurance can cover up to $3,000.
Classic car insurance: Although new cars depreciate quickly, vintage, classic and exotic cars can increase in value over time. Classic car insurance allows you to negotiate the value of the car with the insurance company. After a covered loss, this type of insurance can help pay for the higher cost of specialized repairs or restoration.
Reimbursement of car rental costsIf your car is damaged in a covered accident, rental car reimbursement coverage can help pay for the rental car while you’re in the shop. However, if the other driver is at fault, the driver may offer you rental car coverage.
Custom parts and equipmentCosmetic modifications or equipment you’ve added, such as custom wheels or a navigation system, usually aren’t covered by standard auto insurance policies. Covering custom parts and equipment helps pay for the cost of restoring customizations after a covered loss.
Rideshare driver coverage or delivery: If you drive for a moving or delivery company, this coverage can help protect you and your vehicle when the company’s insurance doesn’t cover you. For example, while waiting for the next passenger or order.
Roadside assistanceWhen you break down, roadside assistance coverage can help pay for flat tire changes, fuel delivery, locksmith services, and towing.
What type of car insurance do you need?
The car insurance you need depends on state laws, lenders, and your unique needs and requirements. State laws and lenders require you to carry certain types and levels of coverage.
Most states mandated physical and property liability coverage does not provide adequate financial protection if accident costs exceed your coverage. Increasing your limits helps protect your assets.
Comprehensive coverage and collision coverage helps repair and replace your vehicle if it is damaged or stolen, especially if you are the driver at fault. In general, you should forgo collision and comprehensive coverage when your car’s market value drops to a few thousand dollars. But you can also consider dropping collision and comprehensive coverage after you pay off your car loan.
Car owners who drive for delivery services or ride-sharing can add an endorsement to their auto insurance policy or purchase a separate policy. If you often drive to work, find out if you are covered under your non-owner employer auto insurance policy. If your employer does not carry non-owner coverage, ask your insurance agent if you need to purchase a commercial auto insurance policy.
What type of insurance is required by law?
Most states require drivers to carry minimum levels of bodily injury liability coverage and property damage liability coverage. Some require additional coverages, such as medical payments, PIP, and uninsured/uninsured driver protection. If you’re not sure how much coverage you need, check with your state’s insurance or department of motor vehicles.
How is auto insurance priced?
Insurance companies set your premium based on individual factors, such as:
- Personal characteristics: Age, marital status, gender, location
- date: Claims, coverage, and credit history as well as your driving experience and history.
- trolley: Annual mileage and vehicle type
- coveragesAmounts, types and discounts
What is the car insurance premium?
As indicated in the auto insurance policy contract, the car insurance premium is the amount you pay on the policy for coverage. For example, a premium of $500 for a six-month policy term. Some insurance companies allow you to make monthly premiums or offer discounts if you pay the entire premium upfront.
What is discount auto insurance?
The deductible is the amount of money you must pay out of your own money before the insurance company pays the claim. For example, if you file a $2,000 collision insurance claim and have a $500 collision deductible, the insurance company will pay the maximum $1,500.
What is GAP Insurance?
Gap insurance covers the difference between the insurance settlement amount and the amount you still owe on the car loan. For example, if you total a car and get an insurance settlement of $20,000 but still owe $25,000, a gap insurance policy will help you pay the remaining $5,000.
bottom line
An auto insurance policy protects you in several ways. Without insurance, if you are at fault in an accident, the other driver can sue you for medical and property damage costs. When shopping for an auto insurance policy, consider state and lender requirements, vehicle usage, and your budget. The financial protection of auto insurance outweighs the cost of the policy premium.