Having the right auto insurance coverage can keep you out of debt and in the fast lane for getting back on the road after an accident. Unless you live in New Hampshire or Virginia, drivers must maintain continuous auto insurance coverage to comply with state laws.
Penalties for driving without adequate insurance vary by state, but they can be severe. In addition, if you cause an accident and don’t have any coverage or not enough coverage, you are financially responsible for any damages to your car as well as to any other vehicles involved.
Because auto insurance is necessary, it’s essential to get the right coverage at the best rate. Learn more about coverage options and requirements for drivers.
One of the most common questions that drivers ask is, “How much car insurance do I need?” The coverage types and limits that you select directly impact your premium. Therefore, it’s important to determine your needs so you don’t buy too much or too little insurance.
Determine the value of your vehicle. If you total your car, insurance companies generally will not pay out more than what the car was worth at the time of the accident. Therefore, buying more coverage will not necessarily provide more benefits when you file a claim. If you drive a 20-year old car, you likely don’t need as much insurance as you would if you had a newer car.
Do you have adequate savings? Keep in mind you are legally responsible for any damages that you cause while operating your car. This includes damage to other people's vehicles and property as well medical expenses for anyone who is injured. If you don’t have an adequate funds in your savings account, you may want to purchase more insurance to protect you in an accident.
Even a minor fender bender can cost a few thousand dollars. If you’re involved in a serious accident involving multiple cars and injuries, you could find yourself facing a serious financial hardship if you don’t have adequate auto insurance coverage. Any expenses that are not covered by your car insurance benefits are your responsibility. If you don’t have the financial means to pay for those expenses, you may be sued in civil court.
Meet your state minimum requirements. When considering how much coverage you should buy, your state’s minimum coverage requirements serve as a starting point. Each state has different requirements, and some of these minimum requirements may not fully meet all of your needs. After meeting your state's minimum auto insurance requirements, you can choose to increase coverage limits as desired.
Some states also have other requirements beyond liability insurance. For example, they may have requirements for personal injury protection and uninsured motorist coverage. These required coverages pay for some of your own expenses in specific situations.
Buying just enough auto insurance coverage to meet your state’s minimum requirements can help to keep your premium down, but it may not provide you with the full amount of coverage that you need.
If you have an auto loan, the lender wants to be sure that its asset is protected. Therefore, auto lenders generally require you to have collision and comprehensive insurance as well. These are coverages that pay to repair or replace your own vehicle in specific situations.
Collision insurance specifically pays for your vehicle repairs or for a replacement if the vehicle is involved in a collision accident. It does not pay for repairs related to theft, fire or other types of losses. Comprehensive auto insurance provides coverage for weather-related damage like hail or a hurricane, vandalism, wildlife-related damage, theft and most other losses. Typically, auto lenders require you to have both of these coverages, and you must maintain that coverage until your car loan is paid in full.
There are other types of optional coverage that many drivers prefer. For example, you may want rental car coverage and towing reimbursement, which can save you a small fortune if you are involved in an accident. These are generally available for only a few dollars per month or less. Personal injury, personal property, gap, uninsured or underinsured motorist and other types of insurance are also available. Consider getting a quote for cheap full coverage auto insurance that includes all desired optional coverages to determine affordability.
These are the most common types of car insurance coverage you can get. These coverages will protect your car - and your wallet.
Liability coverage. Liability coverage is a hallmark of state minimum coverage requirements. This coverage only provides benefits for damages that you cause to others. Liability benefits will not pay for your vehicle repairs or medical bills related to an accident.
Typically, states break down this requirement in terms of bodily injury liability and property liability. A common way for this to be written is 20/40/30, for example. In this case, the state's minimum requirement would be $20,000 in bodily injury liability insurance for one person and $40,000 for two or more people injured in an accident. In this example, $30,000 for property liability is also required.
Comprehensive. In the event of an accident that is not a collision, comprehensive helps pay to replace or repair your vehicle. For instance, comprehensive coverage will kick in if your car is stolen or damaged from hail or fire.
Collision. Collision coverage helps cover costs if your vehicle is in an accident with another vehicle or an object such as a guardrail or tree.
Uninsured/underinsured motorist coverage (UM). UM coverage helps cover expenses from an accident involving an uninsured (driver with no insurance), underinsured (driver with not enough insurance) or hit-and-run driver. In some states, uninsured and underinsured motorist coverage are bundled together. Not all states require UM coverage.
Personal injury protection (PIP). Also called no-fault insurance, PIP coverage can help cover medical costs as well as lost job wages after an accident for yourself and your passengers. PIP is not available in all states.
Medical payments coverage (MedPay). MedPay is optional medical insurance coverage similar to personal injury protection but less comprehensive. MedPay coverage only pays for medical expenses resulting from an accident.
Gap insurance. Gap insurance is a type of car insurance that covers the gap between what you owe on the automobile and what it's actually worth.
Check with your insurer for other types of coverage offered that could benefit you. For example, if you own a classic car, you’ll want to look into getting coverage specifically for that type of vehicle.
Some drivers assume that their car insurance pays for all financial expenses they may incur related to accidents and vehicle damages, but this isn’t the case.
If you file a claim, your auto insurance doesn’t cover your deductible. You are financially responsible for this cost. Be sure you choose a deductible amount that you can afford to pay at a moment’s notice if you must file a claim. If you are looking for cheap full coverage auto insurance, consider increasing your deductibles as a way to lower your premium.
Some people also assume car insurance would completely pay off their auto loan if the car is totaled. In most cases, insurance companies pay benefits based on the replacement value of the car at the time of the accident. If you are upside-down on your auto loan, you likely will have to pay off the remainder of your car loan on your own. Buying gap insurance can help you avoid being in this type of situation. It pays off your auto loan balance in full in the event of a total loss situation.
Unless your auto insurance policy specifically states so, it typically will not cover any damages while using the vehicle for ride sharing purposes or for business purposes. This doesn’t include your normal commute to work.
Your policy also may not cover when you are driving a rental car, a friend’s car, a classic car or other particular vehicles unless specifically stated. Special insurance policies or riders are needed for RVs, mopeds, towing or hauling trailers and more.
Whether your car is financed with a loan, leased or owned outright, you are required to meet your state’s minimum auto insurance requirements. When you lease a vehicle, though, the auto leasing company often requires you to have more car insurance. In particular, you’ll likely need to buy collision and comprehensive coverage.Compare auto insurance rates
The good news is that you do not need to continue paying for full coverage on your auto insurance after the loan is paid off and the vehicle is owned free and clear. The lender requirement for collision and comprehensive coverage disappears. However, you may want to consider keeping these coverages on your policy.
Remember that collision and comprehensive insurance benefits cannot exceed the replacement value of your vehicle. Furthermore, they can increase your premium substantially. Therefore, if your car has minimal value and is owned outright, it may not be cost-effective to pay for this extra coverage. On the other hand, if your car is paid off but still has substantial value, you stand to lose a large amount of money if your car is damaged or totaled.
Before canceling your comprehensive and collision coverage, ask yourself if you can afford to pay for vehicle repairs out of your own pocket or if you would be able to afford a replacement vehicle at a moment’s notice. If not, it makes sense to maintain full coverage in most cases.
If you decide to take advantage of the premium savings associated with not having full coverage insurance, the good news is that you only need to contact your insurance provider to make policy adjustments. A quick phone call or logging into your account online could be all it takes. Remember, anytime you make a change to your coverage, you should shop around to ensure that you have the best rate available.
Insurance rates among major and regional carriers vary dramatically. Each insurance provider analyzes various factors uniquely, and they also offer different types of discounts. The best way to find affordable car insurance coverage is to gather personalized quotes.
At Squeeze, we provide you with a convenient, fast way to compare rates from reputable insurance companies. When you compare rates, you may discover exceptional savings on the coverage that you need.