Car insurance is required by all states in the United States, with minimum coverage requirements varying by state. Understanding exactly what factors determine car insurance coverage and costs can help you be sure to get the right protection for you and your vehicle. Car insurance helps cover injuries to you, your passengers and other parties involved in an accident. When a collision occurs, insurance also covers damage to your vehicle or other involved vehicles. Some insurance types also cover damage to your vehicle for weather-related damage or similar considerations.
Liability coverage is the most basic form of car insurance and the most common requirement for driving in America. This coverage ensures that costs arising from accidents in which the driver is at fault are covered up to a specific amount. The amount required varies by state, but it can be thousands of dollars for personal injuries or property damage occurring in an incident.
Collision coverage covers the costs of repairing damage to your vehicle arising from a collision with another object. This type of coverage is subject to a deductible, with the owner paying part of the cost of repairs up to a predetermined limit. Most car financing lenders require collision coverage for the duration of the financing agreement.
When a car is lost, stolen, or totaled, gap coverage can come into play. Gap insurance covers the difference between the current market value of the car and the initial purchase cost at the time of the financial agreement. Owners without gap coverage may only receive reimbursement up to the current market value of the vehicle under many common insurance policies.
Comprehensive coverage compensates you for damages to the vehicle sustained through something other than a collision. The can include damage from like falling limbs, rocks, fires, floods, or striking an animal with your vehicle. This type of coverage is common on more expensive vehicles, because their repair costs can be substantial after even minor events.
Uninsured motorist coverage provides you protection after collisions involving motorists who are not carrying the required amount of insurance. When another driver is at fault in a collision, your insurance might not cover certain expenses unless they are specifically outlined in your agreement. This could leave you burdened with the full cost of repairs and needing to seek compensation through the courts. Uninsured motorist coverage can help with bills arising from this type of accident. Each state has its own definition for what constitutes an uninsured or underinsured motorist.
It's important to choose the right insurance policy for your vehicle and your financial situation. Inexpensive options with few benefits can save money in the short term, but they could be risky if a major accident would leave you unable to pay a high deductible, for example. The right amount of coverage will vary by vehicle and state, along with the circumstances in which you normally drive your vehicle. Making the right decision on car insurance can save you time and hassle in the future.