The Auto Insurance Guide: How to Protect Your Investment and Your Safety 2024

Auto insurance is a type of insurance policy which provides financial coverage for damages caused by a car, whether it is damage caused to the vehicle itself or damage caused to another person or property.

It includes property damage liability coverage, which covers the cost of repairs or replacements caused to another person's property due to an accident, as well as bodily injury liability coverage, which covers medical costs and other expenses for people injured in the accident for which you are at fault.

Additionally, it also provides coverage for medical and other expenses for passengers in your car. In summary, auto insurance provides financial protection for damages caused by a car, offering protection for both property and persons.

Understanding auto insurance—the basics

Auto insurance is a mutually beneficial contract between you and the insurance company wherein, in exchange for your paying a premium, the company agrees to protect you against potential financial loss from accidents or thefts. Furthermore, the company will also agree to pay any losses as outlined in your policy. All in all, auto insurance provides both security and peace of mind for you and your family.

Auto insurance provides coverage for a variety of needs

  • Property – such as damage to or theft of your car
  • Liability – your legal responsibility to others for bodily injury or property damage
  • Medical – the cost of treating injuries, rehabilitation and sometimes lost wages and funeral expenses

Most U.S. states require basic personal auto insurance, and these laws vary. We let you customize your coverage amounts through our a la carte pricing, so you get exactly the protection you need and can afford. Our policies are typically issued for six-month or one-year periods and will need to be renewed once the time frame has ended. Your insurer will send you a notice once it's time to renew and pay your premium.

What people/vehicles are included in my auto insurance policy and what conditions apply?

Your auto policy extends protection for you and other family members listed on the policy, when driving your own or another person's automobile (with their permission). Additionally, the policy provides coverage when somebody not on the policy is behind the wheel with your consent.

While the policy will be applicable to usual travel, like when commuting to work, running errands or taking a vacation, it does not provide coverage in the event you use your car for any professional activity such as delivering pizzas.

Furthermore, auto insurance will not cover car use while providing transportation services with a platform like Uber or Lyft. However, certain insurers now offer added insurance products (with an extra fee) that includes protection for those providing ride-sharing services.

Is auto insurance coverage mandatory?

State-specific regulations determine required auto insurance. Owners of financed vehicles may need to additionally meet the lender's criteria. Most states mandate:

  • Bodily injury liability – which covers costs associated with injuries or death that you or another driver causes while driving your car.
  • Property damage liability – which reimburses others for damage that you or another driver operating your car causes to another vehicle or other property, such as a fence, building or utility pole.

In addition, many states require that you carry:

  • Medical payments or personal injury protection (PIP), which provides reimbursement for medical expenses for injuries to you or your passengers. It will also cover lost wages and other related expenses.
  • Uninsured motorist coverage reimburses you when an accident is caused by a driver who does not have auto insurance—or in the case of a hit-and-run. You can also purchase under insured motorist coverage, which will cover costs when another driver lacks adequate coverage to pay the costs of a serious accident.

Typical types of auto insurance coverage include liability, collision, Comprehensive, Medical Payments, and Uninsured Motorist.

  • Collision reimburses you for damage to your car that occurs as a result of a collision with another vehicle or other object—e.g., a tree or guardrail—when you’re at fault. While collision coverage will not reimburse you for mechanical failure or normal wear-and-tear on your car, it will cover damage from potholes or from rolling your car.
  • Comprehensive provides coverage against theft and damage caused by an incident other than a collision, such as fire, flood, vandalism, hail, falling rocks or trees and other hazards—even getting hit by an asteroid!
  • Glass Coverage provides coverage from windshield damage, which is common. Some auto policies include no-deductible glass coverage, which also includes side windows, rear windows and glass sunroofs. Or you can buy supplemental glass coverage.

What is gap insurance and do I need it?

Collision and comprehensive insurance cover only the market value of your car, not what you paid for it—and new cars depreciate rapidly. This may create a "gap" between what you owe on the auto and what your coverage will pay if it is totaled or stolen. To fill this void, you may want to consider purchasing gap insurance to make up the difference. Gap coverage is often already included in your lease payments for leased vehicles.

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