Understanding Car Insurance
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If you live in any state but New Hampshire, you're required to carry some kind of car insurance — and New Hampshirites probably should carry some, too, even if it's not required. Folks tend to throw out a lot of car insurance lingo that can obscure what exactly you are legally required to have. Forget about also knowing what you probably should expand that to and which types of add-ons are nice perks to have.
Shopping with EverQuote can help you filter out the best policies fast while making sure you meet your local insurance requirements. Here's what to know about the different types of car insurance, how to get the best coverage for yourself, and how to meet local requirements.
Types of Insurances for Cars
Car insurance is a policy you pay into that protects your financial interest in your vehicle, your medical payment requirements should you be injured, and any damage you may do to another's property or injury you cause them.
Each type of car insurance covers a different facet of these potential problems. For example, the coverage you use if you hit a pedestrian is different than what you use if a tree falls on your car. Understanding the differences can help you not only meet state minimum insurance requirements properly but also choose the coverage that best protects your financial interests.
These are the different car insurance policies:
- Liability coverage: Any damages or injuries you cause to others fall under liability insurance. Every state besides New Hampshire requires some level of liability coverage.
- Collision coverage: Damage you cause to your own car falls under collision. This would cover something like crashing into something such as a signpost. If you have a car loan, your lienholder may require you to hold collision coverage. Otherwise, it is optional coverage.
- Comprehensive coverage: Damage to your car from things like fire, flood, hail, vandalism, falling objects like tree branches, or crashes with wild animals falls under comprehensive coverage. This is another type of coverage a lienholder may require you to hold for the duration of your loan.
- Uninsured motorist coverage: Uninsured motorist coverage pays for property damage and injuries you or your passengers receive in an accident with a driver who does not have liability insurance. You may be surprised how many people do not carry state-required minimum liability coverage. The Insurance Information Institute estimates that about 14% of drivers nationwide are uninsured. Uninsured motorist coverage is required in some states.
- Underinsured motorist coverage: In the same vein as uninsured motorist insurance, underinsured motorist coverage can bridge the gap in costs that remain after an accident with someone who does not have enough liability coverage to cover your property damage or medical bills.
- Personal injury protection: Also referred to as "PIP," this covers medical bills for you or your passengers regardless of liability in the accident. This can include ambulance, hospitalization, surgery, dental, or funeral costs as well as lost wages and costs related to hiring help while convalescing.
- Medical payments coverage: Also referred to as "Med Pay," this offers similar coverage to PIP but excludes lost wages and hired help.
Consider your personal financial resources and purchase the most complete coverage you can afford. This will help you avoid extreme costs or legal trouble after an accident. Remember that your lienholder may require you to have full coverage while you have a loan, which means a policy with liability, collision, and comprehensive insurance. You may be able to decrease monthly insurance costs by getting a higher deductible. This can help you afford broader coverage.
Car Insurance Add-Ons and Optional Coverage
There are some further car insurance add-ons and optional coverages that are nice to have in case of car trouble. While these are not required insurance coverage, they can be a smart add-on to your policy:
- Roadside assistance: Many insurance policies permit the addition of roadside assistance. This is an affordable way to secure coverage should you need a vehicle tow, a battery jump, or a refill if you run out of gas.
- Rental coverage: Increase the amount of time you have access to a paid-for rental car while repairs are done to your vehicle with rental coverage. Not all insurance policies cover the cost of a rental car for the full length of your repairs. If you add optional rental coverage, you can increase the length of time your insurer pays for a rental car.
- Mechanical breakdown insurance: Car insurance does not usually cover mechanical issues, like repairing air conditioning or engines. But if you add mechanical breakdown insurance to your policy, you could get coverage for these major mechanical fixes.
Add-ons come with an increase to your monthly insurance payment. Mechanical breakdown insurance generally has a deductible. Consider the cost and savings potential as you add these optional coverages.
What Car Insurance Do I Need?
The car insurance coverage types you need depend on what your state law requires and how much coverage you need to protect your assets in the event of an accident.
Find out your state minimum requirements by checking with your Department of Motor Vehicles. You'll see that some states require only property damage and bodily injury liability. Others require these plus uninsured/underinsured motorist and personal injury protection or medical payment coverage as well. When you work with the experts at EverQuote, we can help you find the coverage you need locally.
Understanding How Policies Are Written
Your state car insurance requirements are often written in a structure like 50/100/50. This structure designates how much coverage goes to each category of your policy. Categories include bodily injury per person, bodily injury per accident, and property damage per accident.
In the above 50/100/50 policy, if you caused an accident with a $60,000 car carrying three passengers, each passenger's injuries would be covered up to $50,000 each but no more than $100,000 in total. Property damage to the vehicle would cover up to $50,000 in costs or value. Getting too low of a policy can leave you underinsured after an accident. This means you could be sued for costs exceeding your coverage limits.
To evaluate how much insurance you need, consider how much you could afford to pay out over your coverage limits if needed. Consider the value of the assets you own — such as your home, vehicles, or cash accounts — that you could be sued for. Then adjust your policy limits accordingly.
What's the Difference Between Coverage in At-Fault and No-Fault States?
The kind of coverage you buy has to do with whether you live in an at-fault state or a no-fault state. In at-fault states, you make claims against the liability insurance of the person who caused the accident. Their insurer pays out for repairs to your car and any medical bills.
In no-fault states, you make a claim against your insurance for minor injuries in your car accident. Your insurer pays for these bills. If you have more severe injuries in a no-fault state than would be covered by your PIP or Med Pay coverage, you can sue the at-fault driver.
Working with an experienced insurance professional can help you understand whether you live in an at-fault or no-fault state and which policies you should carry accordingly.
Review the insurance requirements of your state:
Shopping for Car Insurance With EverQuote
There's a lot of information out there when you're shopping for car insurance — and a lot of noise. The best way to get the right coverage is to connect with experts directly to compare different auto insurance. EverQuote offers the flexibility of connecting with agents or insurance carriers over the phone or completely online. This way you can find the best personalized shopping experience without spending days getting quotes and comparing policies on your own.
Different carriers offer different benefits and discounts. Pinning down the best coverage for the best price is a skill professionals cultivate. Mix and match these savings and benefits with your desired coverage to find your best-fit policy when you connect with EverQuote experts to find the coverage that will protect you the most on the road.