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Guide to car insurance coverage

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Car insurance coverage explained

No one ever plans to be in an accident, but there are around 16 million auto accidents in the United States every year. According to the Centers for Disease Control and Prevention, more drivers die in car crashes in the US than any other high-income country. That’s why car insurance is a necessity, especially in the US.

Shopping for car insurance is far from easy. Understanding your coverage options is a good place to start so you can compare level of coverage and choose the right policy for you.

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Basic coverage

Minimum coverage auto insurance is required in almost every state except Virginia and New Hampshire. Minimum coverage is determined by the state and vary from state to state. Auto Insurance typically covers medical fees, vehicle repair damages, bodily damage, legal fees and property damages.

  • Bodily injury liability. Covers injuries to another person in an at-fault accident including medical care, legal help and funeral costs.
  • Property damage liability. Covers damages to someone else’s property in an at-fault accident including repairs to vehicle, buildings or fences.
  • Personal injury insurance. Covers healthcare after an accident regardless of fault, including ambulances, nursing care and lost income.
  • Uninsured motorist coverage. Covers costs caused by another driver if their insurance can’t pay enough.

Optional insurance coverage to consider

Unlike liability, personal injury protection, and uninsured motorist coverage, which are required by most states, the following coverage types are all optional. These optional coverage features offer extra protection against all the other mishaps that might happen to you or your car.

  • Comprehensive. Ensures you are covered for the expense of replacing or repairing your vehicle, regardless of fault, and damages that aren’t within your control, such as natural disasters, terrorism, explosions and fire, glass damage, falling objects, vandalism, damage from animals and theft. In some cases, it also covers the expense of transportation, emergency repairs and repairing damages caused by another vehicle.
  • Medical payments. Helps you with your medical costs resulting from a car accident — no matter who’s at fault. It covers you and your passengers can pay for such expenses as ambulance fees, surgery, funerals, dental care, prosthetic limbs and hospital visits. Medical payments coverage doesn’t only apply to auto accidents. It can also protect you outside of your vehicle, such as when you’re walking or riding your bike.
  • Collision. If you’re at fault in an accident, your liability insurance kicks in and pays for the other driver’s costs. For your own vehicle repairs, you’ll need collision coverage. Collision coverage pays for costs if your vehicle is damaged.
  • Gap Insurance. When you buy a car, it immediately starts depreciating. Here’s the issue: If your car is stolen or totaled, your insurer will pay only what the vehicle is worth. Meanwhile, you’re still stuck paying back your entire loan. This creates a gap between how much money you receive from your insurer and what you still owe to your bank.
  • Umbrella. Protects you beyond the coverage offered by your basic insurance. It’s especially recommended for individuals with significant assets — those who stand to lose a lot from getting sued. It will pay for what you owe beyond what’s covered by your home, auto or renters insurance.

What coverage do I need and how much will it cost?

When you’re hunting around for the lowest price car insurance, you’ll see a lot of options with big differences in price. When you’re comparing whether to add certain kinds of coverage, consider both the minimum state requirement and whether any optional coverage is worth it for you.

You don’t want to find yourself underinsured, particularly if you depend on your car and you can’t afford to repair it yourself. The cheapest car insurance isn’t always the right one for your needs, even if saving money is your number one priority. Consider how you’d pay for your car if it was stolen or totaled in an accident. Could you afford a new car without insurance?

Liability claims, for example, could total much more than the bare minimum if you crash into someone’s garage or a car full of passengers. If you’re looking for the cheapest coverage, it pays to play around with maximum coverage and monthly payments. An extra $5 a month could cover you for extra hundreds of thousands in coverage. But for an older car that’s worth less than your annual premium, consider cutting comprehensive and umbrella coverage.

How much car insurance do I need?

Answer four quick questions and compare the right car insurance coverage for you.

Question 1 of 2

Compare how much car insurance you need

Cheapest ratesGood coverageHighest coverage
Bodily injury$25/50$100/300$300/500
Property damage$25,000$100,000$300,000
Personal injury$10,000$100,000$300,000
Uninsured motorist$50,000$100,000$300,000
Comprehensive$1,000$1,000$1,000
Collision$1,000$1,000$1,000
Gap coverage$50,000$50,000$50,000
Medical payments$0$1,000$5,000

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How much does coverage cost?

CoverageAnnual costCoverage detailsRequiredWorth it?
Collision$300Damage to your carNoYes
Comprehensive$135Non-accident damage like theft & weatherNoOnly for newer cars or high risk areas
Property damage liability$1,000 – $2,000At fault damage to propertyYesYes
Personal injury protection$50 – 100Your post-accident injuries regardless of faultYes in 15 statesYes
Bodily injury liability$1,000 – $2,000At fault post-accident injuries to othersYesYes
Uninsured motorist5% of annual premiumDamages caused by uninsured driverYes in 22 statesYes
Umbrella$150 – $300Damages above and beyond other coverageNoOnly for high value assets
Medical payments$50 – 100Post-accident injuries for you & passengersNoOnly as health insurance supplement
Gap insurance$20 – $30Damages if car is stolen or totaledNoOnly for loans over car value

Compare car insurance companies

Name Product Roadside assistance New car protection Available states
Allstate
Included free
Yes, cars under 2 years old
All 50 states
Enjoy having your own dedicated agent to help you get the best discounts and coverage.
Liberty Mutual
Included free
Yes, cars under 1 year old & 15,000 miles
All 50 states
Car insurance through Liberty Mutual will give coverage options for almost any situation.
Root
Included free
No
AZ, AR, DE, IL, IN, IA, KY, LA, MD, MI, MS, MT, NM, ND, OH, OK, OR, PA, TX, UT
Root offers simple, affordable insurance that’s ideal for good drivers. Try the Root app for 2 weeks and see how much you could save. Available in 20 states.
Esurance
Optional
Yes, cars under 1 year old & 15,000 miles
All states except AK, DE, HI, MT, NH, VT, WY
Esurance offers a modern online and mobile experience that helps you take your insurance on the go. Available in 42 states.
Metromile
Optional
Yes, cars under 1 year old & 15,000 miles
CA, IL, NJ, OR, PA, VA, WA
Drive less than 30 miles a day? Save on the coverage you need with pay-per-mile insurance from Metromile. Get a low monthly rate then pay just a few cents per mile. Available in CA, IL, NJ, OR, PA, VA and WA.
USAA
Included free
No
All 50 states
USAA offers affordable car insurance with highly rated customer service to millions of military members and their families. Only available to military members, veterans and affiliated military members.

Compare up to 4 providers

Compare quotes from top car insurance companies

Rates last updated September 23rd, 2018
Company Median annual rate Learn more
Allstate $1,488 Read review
Liberty Mutual $2,365 Read review
Esurance $3,555 Read review
USAA $4,366 Read review
Erie $4,045 Read review
Travelers $1,429 Read review
Progressive $1,574 Read review
Geico $1,068 Read review
State Farm $2,212 Read review
Chubb $2,271 Read review
Kemper $1,056 Read review
NY Central Mutual $1,814 Read review
Preferred Mutual $2,732 Read review
Average $2,306 Compare more reviews

How to know when you’re covered

Feature
Comprehensive
Third Party Fire and Theft
Third Party Property Only
Damage to other people’s property
  • Yes
  • Yes
  • Yes
Hitting a car
  • Yes
  • Maybe
  • Maybe
Hitting a pole
  • Yes
  • No
  • No
Hail
  • Yes
  • No
  • No
Hit and runs
  • Yes
  • No
  • No
Hitting an animal
  • Yes
  • No
  • No
Windscreen repair
  • Optional
  • No
  • No
Storm or flood
  • Yes
  • No
  • No
Fire
  • Yes
  • Yes
  • No
Theft
  • Yes
  • Yes
  • No
Emergency accommodation, transport and repairs
  • Yes
  • Yes
  • No
Towing costs
  • Yes
  • Yes
  • No
Hire car
  • Yes
  • Yes
  • No
Replacement of keys
  • Yes
  • No
  • No
Contents inside the car
  • Yes
  • No
  • No
New car replacement
  • Yes
  • No
  • No
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What you won’t be covered for

While exclusions may vary between providers, you generally will not be covered for:

  • If the damage was caused by mechanical failure, depreciation, rust, wear and tear or changes made to the vehicle
  • Loss of income from being unable to drive
  • If the damage was incurred due to your vehicle not being safe or participating in a race
  • Damage that was caused intentionally
  • Any damage incurred if the person driving didn’t have a license, was drunk or on drugs
  • If the person driving was not covered by the policy

What is agreed vs. market value?

Agreed vs. market value determines the value of your car and how much it’s worth for car insurance purposes. This amount will affect whether your car is written off, repaired or replaced under the terms of your insurance policy.

With market value, your car is insured for its current market value at any given time, including depreciation. With agreed value, you and the insurer agree on a specific amount your car is worth for your policy terms.

Market value

  • Pays the expected value of your car on the open market at the time of the accident
  • Not the trade in value or collector value
  • Doesn’t include warranty cost, vehicle transfer costs, stamp duty or dealer profit

Agreed value

  • The car value you and the insurer agree to when you apply or renew

Is market value or agreed value best for me?

When deciding if market value is right for you, you need to consider if the reduced amount will be enough to replace your lost vehicle. Is the money you save on your premium worth the additional cost you will have to pay to purchase a new vehicle? If you drive an older vehicle that’s 10 to 15 years old, replacement cost may not be as great a concern as saving on your premiums.

Bottom line

Comparing car insurance coverage quotes means understanding the ins and outs of each type of coverage to decide if you need it and what’s covered. Compare car insurance companies and get multiple quotes to find the right policy and coverage for you.

Find the cheapest rates

Compare the best car insurance companies near you.

Your information is secure.

Roslyn McKenna

Roslyn McKenna is an assistant publisher for car insurance at finder.com. With a love of everything nerdy, Roslyn puts her passion for writing to good use by empowering our readers to get what they want from their money. Her goal is to help people get a great deal on car insurance so they can enjoy the ride.

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