You have the keys. You have the car. Now all you need is car insurance and you’ll be ready to hit the road. Here is a look at common car insurance coverage types.
What’s Covered by a Car Insurance Policy?
What Does Liability Insurance Cover?
Liability car insurance covers you when you cause property damage or injuries to someone else. For example, if you cause an accident and the other driver breaks their arm, your liability insurance would pay for their medical bills and for damage to their vehicle. Liability insurance also covers your legal costs if you are sued because of a car accident.
When you buy liability car insurance, you’ll have the option to choose your policy limits. You are required to purchase liability car insurance. It’s a good idea to buy more than the minimum requirement. That’s because you are still responsible for paying for any amount that exceeds your policy limits, and you could be sued for the balance. The best car insurance will include enough liability insurance to cover what you could lose in a big lawsuit.
What Does Uninsured Motorist Insurance Cover?
If a driver without insurance crashes into you, uninsured motorist coverage (UM) pays for your injuries and damages to your car. It also covers your passengers and family members who live with you if they’re hit by an uninsured driver.
Uninsured motorist insurance also covers you if you’re hit as a pedestrian. Underinsured motorist (UIM) coverage is similar to UM. It pays for your medical bills and other expenses if a driver who does not have enough insurance crashes into you.
Generally, UM is a good coverage to have. If you buy UM, the coverage amount will typically match your liability car insurance amounts. For example, if you have liability limits of INR 100,000 for injury to one person and INR 300,000 for injuries in one accident, you will buy UM in that amount.
What Does Comprehensive Insurance Cover?
Comprehensive insurance pays to repair and replace your car if it is stolen or damaged by fire, flooding, hail, vandalism, falling objects (like a tree branch) or a collision with an animal.
It is sold as optional coverage. But if you have a car loan or lease, your lender or leasing company will likely require you to carry comprehensive insurance cover.
Comprehensive insurance has an insurance deductible, which is the amount deducted from an insurance claims check. A higher deductible will lower your car insurance premium, but make sure you can afford to pay that amount out-of-pocket.
Medical Payments and Personal Injury Protection
Medical Payments are often referred to as “MedPay.” It covers medical expenses for you and your passengers regardless of who is at fault for the accident. MedPay is often sold in small amounts.
Personal injury protection (PIP) is a similar coverage that pays for medical bills and other expenses for you and your passengers, no matter who is at fault for the accident. PIP also covers other expenses such as lost wages, rehabilitation costs, funeral expenses and survivor benefits, and services you cannot perform due to injuries like house cleaning or child care.
Additional Car Insurance Coverage Options
Car insurance companies offer several optional coverage types that you can buy to tailor a policy to suit your needs. Here are some common coverage types.
- Accident forgiveness. If you cause an accident, this coverage will “forgive” you, meaning your rates won’t go up. Accident forgiveness rules vary by insurer, but generally, you’ll get one forgiven accident per policy for a specific timeframe, such as every three years.
- Rental reimbursement insurance. If your car is in the shop due to a problem covered by your policy (like an accident), rental reimbursement insurance covers rental car costs and public transportation costs.
- Rideshare insurance. In India, rideshare companies such as Uber provide rideshare insurance which ensures that the trip is insured against accidental bodily injury.
- Roadside assistance insurance. If you get stranded by a problem like a flat tire or dead battery, roadside assistance insurance covers services like a tow truck, refueling, locksmith and jump-starting a dead battery.
What Does Car Insurance Not Cover?
Most auto insurance policies won’t cover:
- Personal items (such as cell phones, purses and computers) stolen from your vehicle (that would fall under your homeowners or renters insurance)
- Items used but not permanently installed in your vehicle (such as GPS and stereo equipment)
- General wear and tear
- Mechanical breakdowns and repairs
- Driving your car for a business (you will need commercial auto insurance for work vehicles)
- Intentional damage
- The remaining balance on a car loan if your car is totaled and the depreciated value is less than the existing loan balance (you would need gap insurance to cover loan balances)
Related: How Does Car Insurance Work?
What Does Car Insurance Cover FAQ
How much car insurance do I need?
A good way to determine how much car insurance you need is to start with liability car insurance. A general rule of thumb is to buy enough liability car insurance to cover what you could lose in a lawsuit. You can be sued for damage beyond your coverage limits, so it’s prudent to buy liability insurance in amounts that protect your assets, savings and house.
If uninsured motorist coverage is available, it’s wise to buy it. It covers your medical bills and other expenses (like pain and suffering, and lost wages) if a driver without insurance crashes into you.
You can get coverage for car repair bills by adding collision and comprehensive insurance. If you need even more coverage, you can plug those gaps with optional coverage types like gap insurance and rental reimbursement insurance.
How do I get car insurance?
When you’re ready to buy a car insurance policy, the first step is to determine the types of coverage and the amounts that you will need. Then it’s a good idea to compare car insurance costs from multiple insurance companies. That’s because prices vary from one insurer to the next for the exact same coverage.
You can typically get car insurance quotes online or by speaking with an independent agent on the phone or in person. Be sure to compare quotes for identical coverage amounts and ask about discounts. Car insurance quotes are always free.
But keep in mind, cost isn’t everything. If you need to file an insurance claim, you want a company that has a good reputation for customer service. The best car insurance companies combine stellar service at a reasonable price.
What does full coverage car insurance mean?
The term full coverage car insurance typically refers to a policy that has liability insurance, collision insurance and comprehensive insurance.
Liability insurance pays for property damage or injuries you cause to someone else. Collision and comprehensive insurance cover damage to your car from a host of problems. These include car accidents, car theft, vandalism, fire, floods, falling objects, hail and collisions with animals.
Based in New York, Stephen Freeman is a Senior Editor at Trending Insurance News. Previously he has worked for Forbes and The Huffington Post. Steven is a graduate of Risk Management at the University of New York.