When you shop for an auto insurance policy, you'll likely see phrases like "property damage liability," "comprehensive coverage," and "bodily injury liability." You'll see details on coverage amounts, policy stipulations, and limitations of the coverage.
With so many concepts at work within a single insurance quote, you may wish to think of a car insurance policy like a collection of small policies that combine to offer you the desired amount of coverage for your vehicle.
Educating yourself on your policy will not only help you find the best discounts, but it can also ensure you always have the right amount of coverage while you’re driving.
If you have one, take a look at your car insurance policy. Did you know that your policy rate may change depending on the number of miles you drive? It may indicate that you drive 12,000 miles a year, but in reality, you only drive about 6,000 miles a year. Informing your insurance company of this discrepancy might help you save money on your policy.
Here are the nuts and bolts of an average vehicle insurance policy, and what you need to know when shopping for the best coverage for you and your vehicle.
In the United States, all states except New Hampshire and Virginia require that drivers have car insurance. The two states that don't require a policy have other driver requirements, though, such as requiring drivers to post a bond or prove they have enough money to cover an accident.You may even need car insurance if you don't own a vehicle but get behind the wheel of someone else’s vehicle. An automobile accident may come with significant costs for medical and repair bills, and an insurance policy is designed to ensure financial stability in the event of an accident.
Good drivers nearly always score great discounts by proving that they are not at risk for accidents. In addition, you may be able to find a low-mileage discount.
The majority of automobile insurance policies will feature coverage that will pay for injuries sustained by the driver and passengers, as well as the damage to the vehicle or other property involved in the accident.
An essential item you'll see on your insurance policy or a car insurance quote is a series of numbers that will indicate the dollar amount of coverage offered by the policy. Commonly, you'll see these numbers in a sequence like 100/300/50.
With 100/300/50 insurance, for example, the policy offers $100,000 for total bodily injury liability for each person, $300,000 total coverage for bodily injury liability, and $50,000 for property damage liability. "Bodily injury liability" and "property damage liability" are just two of the possible coverage types you may see in a car insurance policy.
Here are the primary coverage types you may find listed in an automobile insurance policy:
Liability Coverage – There are two types of insurance coverage offered within the liability category. Property damage liability covers the costs to help repair another person's vehicle that you damaged. Bodily injury liability covers the medical costs of the other driver or passengers.
Uninsured Motorist Coverage – Sometimes referred to as "underinsured" motorist coverage, this part of your policy helps pay for medical bills or repairs to your car if an uninsured driver hits you or you're the victim of a hit-and-run accident.
Collision Coverage – When you're in an accident, collision coverage will repair your vehicle after an accident. This coverage isn't always mandatory unless you have a leased car or currently pay a car loan.
Comprehensive Coverage – If your vehicle is vandalized or experiences a significant disaster and requires repair, you'll use comprehensive coverage to help with repairs. Comprehensive coverage requires a deductible be paid first, which is an amount to be paid for repairs before the insurance policy begins its reimbursement.
Personal Injury Protection (PIP) – It's not available in every state, but personal injury protection will help pay for expenses sustained after an accident that may include child care or lost wages. Personal injury protection may also cover some medical expenses.
Medical Payments Coverage – If you require a visit to the hospital or need X-rays or surgery after an accident, you'll use your medical payments coverage to pay the costs. This coverage also helps pay for medical costs for passengers in the vehicle.
One of the essential pieces of information you'll need to share with another driver when you're involved in a car accident is your auto insurance policy number. You'll also need to give this number to your insurance company when you make a claim.
Your insurance policy number will always appear on the identification card associated with your policy. Your car insurance company may send you paper cards to keep in your vehicle, or you may access your identification card through a smartphone app or your insurance company's website.
Other areas you may find your policy number include:
The insurance declaration page for your policy
The billing statement for your insurance policy
Tip: Your insurance company might call your policy number an account number. You can also call your insurance company directly to get your specific policy information.
For many families, couples and individuals, a personal vehicle insurance policy is all you need to drive legally. However, if you use your vehicle for business purposes, you might need a commercial policy. Additionally, you may need a commercial policy if your vehicle is owned by one of the following:
Corporation
Rented business
Employee-owned business
Sole proprietorship
Sole proprietorship with a DBA
Tip: Your insurance company might call your policy number an account number. You can also call your insurance company directly to get your specific policy information.
Why does my large vehicle need commercial vehicle insurance?
Some vehicles, like large pickup trucks, dump trucks and tow trucks are heavy enough that they can cause substantial damage when involved in an accident. A semi-truck will probably cause more damage if it’s in a collision than a Honda Civic might.
You may need a commercial policy if your vehicle is above a certain weight or size. Your state may even require that you register your truck as a commercial vehicle, even if you don't own a business.
The major difference between a commercial auto policy and a personal auto policy is the coverage limits allowed on each. Many commercial limits allow payments of more than a million dollars. Commercial policies may also cover non-owned vehicles, different types of road equipment used alongside company vehicles as well as commercial trailers.
If you don't own a vehicle but regularly drive, you may need to purchase a non-owner car insurance policy. These policies are sometimes also called non-driver insurance.
A non-owner car policy tends to be one of the most affordable options for maintaining vehicle coverage if you don't own a car.
In addition to shielding the driver from lawsuits where the driver is found to be the at-fault party in the accident, non-owner car insurance may also include the following protections.
Medical payments from injuries
Rental car liability coverage
Uninsured motorist coverage
There are some limitations with non-owner car insurance policies. For instance, a non-owner car insurance policy won't cover damage to the car you're driving as would be the case with a traditional car insurance policy.
Compare car insuranceA short-term car insurance policy is one that only provides coverage for a few days or weeks. Also called temporary car insurance, these policies may act as supplemental insurance on an existing policy or as a completely separate policy used during international travel or other temporary driving circumstances.
Tip: You may not need a short-term car insurance policy if you're renting a car. Some vehicle insurance policies cover you when you rent a car. A quick call to your insurance company can help you figure out whether you need an additional policy for a rental.
How long is a short-term car insurance policy?
Most automobile insurance policies provide coverage for a standard number of months. Policies commonly renew each six months and require payment in full or monthly. For short-term insurance policies, the coverage time may last just a few hours, or it may offer coverage for up to a month.
While it’s possible to have more than one car insurance policy, the question to ask yourself is, "Should I have more than one policy?”
One of the most common reasons people have multiple car insurance policies is that they have a classic car or a commercial vehicle that isn't used in the same manner as any other car the family owns.
Classic car vehicle coverage is often quite affordable and limited in scope with policies costing just a few hundred dollars a year with the expectation that a driver will only take the car out a few times a year.
However, it's important to speak with your vehicle insurance company before deciding to place one or more cars on a different policy. One of the best options for saving money on vehicle insurance is through multi-car discounts. You might miss out on valuable discounts if you own two cars that are on two different policies instead of a single policy.
Selling a car or moving to another state or country might warrant a call to your insurance company. Canceling a car insurance policy isn't too complicated, but there are a few things to remember during the process. The most important consideration is to make sure that you don't accidentally cancel your policy too early and leave yourself uninsured.
Here are the details you'll want to share with your insurance company to avoid any hiccups after cancellation:
Give your new address to the insurance company so that they can send a final bill or cancellation notice.
Give your insurance company a date for cancellation, so you're not uninsured for any length of time.
It's vital that you avoid a lapse in coverage if you're moving to a new insurance company because of liability and protection during an accident. It's also crucial to have consistent coverage because insurance companies often only provide discounts when the insured has maintained coverage.Additionally, maintaining vehicle insurance is important because an insurance company may deny an insurance policy application when a driver has experienced a lapse in coverage without good cause.
Car insurance policies contain a ton of important information, including the types of coverage you have, your policy number as well as any coverage limitations you may have. Getting familiar with your insurance policy an essential part of understanding how car insurance works.
Even if you already have a car insurance policy, you might not be aware of every facet of coverage, and spending some time reading through your policy can prove helpful.
Once you're aware of how your car insurance policy works, get multiple quotes to find the best auto insurance.