Key Takeaways
- Most states require drivers to have car insurance, with specific minimum coverage amounts.
- Car insurance can include multiple coverages like liability, collision, and comprehensive.
- The cost of car insurance depends on factors like coverage level, location, and car value.
- Filing a claim involves reporting the incident, and insurance companies assign claims adjusters to assess damages.
- Deductibles affect insurance costs; lower deductibles usually mean higher premiums.
Car accidents can be expensive, especially if your vehicle is badly damaged or anyone is injured. Car insurance helps cover the bills and protect you from potentially devastating financial liability. Various types of car insurance cover different scenarios like liability and collision. Insurance requirements and costs can vary by state and coverage choices.
Filing a claim is crucial if a car is damaged or an accident occurs. We’ll explain how to do it.
Understanding Car Insurance Coverage Options
A car insurance policy consists of several types of coverage, some of which are mandatory in most states, while others are optional. New Hampshire allows drivers to forgo car insurance entirely if they can prove they have enough funds to cover the costs of an accident. Virginia allows drivers to opt out of insurance by paying a $500 annual fee.
The most common types of car insurance are:
- Bodily injury liability coverage. If you’re involved in an accident that results in an injury to another driver or their passengers and you’re at fault, this coverage will help pay any associated costs up to the limits on your policy. It is required in the District of Columbia and 49 states, including in New Hampshire and Virginia if you choose to buy car insurance. The sole exception is Florida, which only requires bodily injury liability for taxis.
- Property damage liability coverage. This coverage pays for any damage you cause to another driver’s vehicle or other property, such as a neighbor’s fence. It’s required in every state, including in New Hampshire and Virginia if you buy car insurance.
- Collision coverage. Collision insurance can cover damage to your vehicle up to the limit of your policy in the event of an accident. It is optional in every state.
- Comprehensive coverage. Also known as “other than collision,” comprehensive insurance covers damage to your vehicle from causes other than vehicle accidents, such as flooding, a fallen tree, or a fire. It also covers you if your car is stolen. Like collision coverage, it is optional.
- Medical payments (MedPay)/personal injury protection (PIP). Mandatory in some states and optional in others, MedPay and PIP cover medical bills and related costs if you or a passenger in your car are injured in an accident.
- Uninsured or underinsured motorist coverage. If you’re ever in an accident with someone who doesn’t have car insurance or whose insurance isn’t sufficient to cover the damage they have caused, these coverages can cover that shortfall. It is mandatory in some states and optional in others.
If you’re leasing a car or have an outstanding auto loan, you might also consider a separate type of policy known as gap insurance. In the event that your car is declared a total loss after an accident, gap insurance will cover any difference between what your auto insurance company pays you and what you still owe on your lease or loan.
In addition to the coverages above, many insurers also offer more specialized types of policies, such as antique or classic car insurance and rideshare insurance for people who drive for companies like Uber or Lyft.
Note that if you use your car for work purposes, you may need a commercial car insurance policy rather than a personal one.
Individuals Covered by Your Car Insurance Policy
In general, your personal auto insurance policy covers you and any other drivers listed on the policy, such as your spouse. Car insurance also typically covers anyone who isn’t listed but occasionally drives your car with your consent—though you should read your policy’s fine print to be sure.
Factors Influencing Car Insurance Costs
According to AAA, annual premiums for full-coverage insurance (liability plus collision and comprehensive) averaged $1,681 to $1,922, depending on the size of the vehicle, in 2023. Still, your costs could be much higher or lower.
The cost of car insurance depends on a wide range of factors, including your driving record, where you live, and the value of your car. Prices can also differ from company to company for the same coverage.
A major variable is the policy’s coverage limits. States that mandate certain types of coverage also set minimum required amounts for them. For example, a driver in North Dakota must have at least $25,000 per person and $50,000 per accident in bodily injury liability coverage plus $25,000 in property damage liability coverage, often expressed as 25/50/25. That’s just the minimum; drivers can and often should buy more coverage than that, especially if they have significant assets to protect from a lawsuit. For example, rather than 25/50/25, a driver might buy 100/300/100 or 250/500/100, which will naturally cost more.
Still another factor in the case of collision and comprehensive coverage is the deductible you choose. That’s how much you’ll have to pay out of pocket before your insurance kicks in, and the lower the deductible, the more the insurance will cost. For example, a policy with a $500 deductible will be more expensive than one with a $1,000 deductible.
Filing a Car Insurance Claim: What You Need to Know
If you’ve been in an accident or your car has been damaged in some other way, you should notify your insurance company as soon as possible. It will assign you a claims adjuster, whose job is to assess the damage and determine how much the insurer is obligated to pay you under your policy. (If you disagree with the amount, you can challenge it.)
Ask your insurer what information it needs to process your claim. It might, for example, request that you send photos of your damaged car via text, email, or through the insurance company’s app. You should also save any documentation, such as a police report if there is one, and a receipt if you had to pay for your car to be towed. If another driver was involved, you’ll want to provide their name and insurance information to your insurer.
Your insurer may have a list of approved repair shops that it works with, although you are also free to choose your own. When your car is repaired, the insurance company may pay the shop directly or reimburse you if you pay. Either way, you’ll be responsible for covering your policy’s deductible.
What Is Car Insurance?
Car insurance is a policy that helps cover the costs in case of an accident or other damage. Depending on the coverages included in your policy, it helps pay for medical bills, car repairs, replacement of damaged property, and more.
Where Is Car Insurance Required?
Some type of car insurance is mandatory in almost every state. However, New Hampshire allows drivers to choose not to buy car insurance. Virginia allows drivers to opt out of car insurance by paying an annual fee. To learn the requirements where you live, check your state’s department of motor vehicles website.
How Does Car Insurance Work If the Car Is Totaled?
If your car will cost more to repair than what it’s worth, it’s known as totaled, or a total loss. How car insurance works depends on the type of incident that totaled your car, as well as the coverages included in your policy. If it was an accident deemed to be another driver’s fault, their insurer typically covers the cost using their property damage liability coverage. If they’re uninsured or don’t have enough coverage to pay the full value of your vehicle, you may be able to rely on your uninsured/underinsured motorist coverage, if you have it.
If you’re found to be at fault for the accident, or you hit an object like a tree or fence, your collision coverage pays you the value of the vehicle, minus your deductible. If a storm or falling tree damaged your car beyond repair, your comprehensive coverage would do the same. However, you need to have purchased these optional coverages for them to apply—you can’t add them after the damage has occurred.
The Bottom Line
Car insurance provides financial protection by helping to cover costs associated with car accidents and other damage to your vehicle. Multiple types of coverage are available, including bodily injury liability, property damage liability, collision, comprehensive, medical payments/PIP, and uninsured/underinsured motorist coverage. While some are optional, a few are mandatory in nearly every state. Check your state’s department of motor vehicles website for info on what’s required there.
Costs can vary due to factors like coverage levels, deductibles, and state and insurer requirements, as can the claims process steps.
