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The constant need to pay for something every month may lead you to question the true purpose of car insurance. Without a general knowledge of car insurance, those who are fairly new to owning a car may get frustrated at the high cost alongside what seems to be a lack of return. Nonetheless, car insurance provides a number of benefits for every driver and vehicle owner. This guide will cover everything there is to know about car insurance and provide answers to some of the most frequently asked questions.

What Is Car Insurance?

Car insurance, similar to any other type of insurance, is a financially protective measure. You pay an insurance provider small amounts on a regular basis and, in return, you have financial coverage when an emergency happens. With regard to car insurance, you pay your insurance provider so you can drive with peace of mind and know that your vehicle will be covered in the event of an accident.

What Happens if I Have an Accident?

What Types of Car Insurance Are There?

In addition to knowing what exactly car insurance is, you have to know how accidents can affect it. The truth is that your car insurance rate typically goes up after an accident. After an accident, you may notice an increase in your premium for a variety of reasons. For one, you may be placed in a higher risk pool; this means that your insurer will reassess your rate of risk and may raise your rates depending on the circumstances. Furthermore, a car accident will likely disqualify you for a safe driver discount. Lastly, an erasure of premium benefits means that you are no longer protected from an increase in the rate the second time around. Something else you need to be aware of when it comes to car insurance and accidents is your deductible. Deductibles are an out-of-pocket cost that you will be responsible for if you file a claim with your insurance. The higher your deductibles are, the lower your premiums will be. If you want to be responsible for the lowest possible out-of-pocket expense in the event of an accident, you can pay a higher monthly premium.

A comprehensive guide for car insurance would never be complete without introducing to you some of the basic types of car insurance. By identifying different types of coverage, you are better equipped to choose the right one for you. Furthermore, going through this list will give you ample knowledge as to how each works and which policy would benefit you the most. Here are the different types of car insurance:

Liability Coverage

Liability coverage is fairly easy to understand. If you are at fault for a car accident, it is your obligation to cover the car repairs of the other driver. If you have liability insurance, your insurance provider will pay these obligations on your behalf. If you have liability only, your car repair expenses and medical bills are not covered by your insurance company.

Bodily Injury Liability

Property Damage Liability

One of the sub-categories of liability coverage is bodily injury. This type of liability insurance is required by law in most states. If you are at fault for a car accident that injures another person or driver, this liability coverage will help in paying for his/her medical expenses and a loss in income due to his/her injury. Furthermore, bodily injury liability insurance can also aid in paying for any legal fees if you are sued.

The second sub-category of liability coverage is property damage. This type of liability insurance is quite similar to bodily injury liability, with the only difference being that it focuses on property damages rather than bodily injuries. Whether it is another car or another person's property, this type of coverage can help with the repair expenses.

Uninsured or Underinsured Motorist Coverage

This type of insurance comes into play if you are in an accident where the other driver is at fault and s/he does not carry any type of car insurance. If this occurs, you can file a claim with your own insurer up to the limit of your uninsured driver coverage. Underinsured driver coverage can be used the same way. The difference with underinsured coverage is that the driver at fault does have some coverage, but it is not sufficient to cover all of the damages.

Personal Injury Insurance

Personal Injury Insurance

Personal injury insurance, also known as PIP or personal injury protection, typically covers your medical expenses and lost wages. This type of insurance is also referred to as no-fault coverage because it pays out the claim, regardless of which driver was at fault. If you’re in an accident and you have PIP, you can still receive the benefits, no matter who is at fault. This type of insurance also covers service replacement of someone injured in a car accident, rehabilitation costs, and funeral costs.

Collision Insurance

Collision insurance covers the repair or replacement of your vehicle if you are involved in an accident with another vehicle or an object, such as a tree or a fence. It also covers single vehicle accidents. On another note, this insurance does not cover damages not related to driving, damages to another person’s vehicle, and any medical bills, whether they are yours or someone else’s. Collision coverage is likely required if you owe money on your car or have it leased. If your car is paid for in full, you can choose whether or not you carry collision insurance. You should consider how much it would cost to replace or repair your car in the event of an accident when deciding whether or not to carry collision insurance.

Comprehensive Insurance

Comprehensive insurance is considered one of the highest forms of protection that a driver can get. Comprehensive car insurance helps cover the cost to repair or replace your vehicle if it’s stolen or damaged in an incident that is not a collision. Comprehensive coverage would cover damage from fire, vandalism, falling objects, or natural disasters. Like collision insurance, if you owe money or have your vehicle leased, comprehensive coverage is likely required by your lien company. If your vehicle is paid in full, you can choose whether or not you carry comprehensive insurance.

Medical Payments Insurance

Rental Reimbursement Coverage

This type of coverage is part of an auto insurance policy and may help pay your or your passengers’ medical expenses in the event of an auto accident. This type of insurance can be implemented regardless of who caused the accident. It may cover hospital or doctor visits, surgery, x-rays, prostheses, ambulance, medical technician expenses, professional nursing services, and health insurance deductibles. Keep in mind that this type of coverage is optional and is not available in all states.

Rental Reimbursement helps cover the cost of transportation, whether you rent a car or take public transportation, while your vehicle is being repaired after an insurance claim. This type of coverage does not apply if you need to rent a vehicle to be used while on vacation or if your vehicle requires routine maintenance work. Rental reimbursement only applies if your vehicle is involved in a covered insurance claim.

Roadside Assistance Coverage

Roadside assistance coverage is a type of coverage that can help when you have car trouble, whether you’re at home or on the road. Adding roadside assistance coverage to your insurance plan comes with several benefits: towing, lockout service, extrication, flat tire service, fuel delivery, and battery service. Roadside assistance is an option that may be available to add in with your auto insurance policy or purchased separately.

Do I Need Car Insurance?

You need car insurance for a variety of reasons. For one, liability insurance is a legal requirement and some states require drivers to have both property damage liability insurance and uninsured or underinsured motorist coverage. Not only is some coverage a legal requirement, but it also gives you peace of mind on the road. In the event of a car accident or damage to your vehicle, having insurance will give you the ability to cover these unexpected expenses. 

What Are the Car Insurance Requirements by State?

Minimum car insurance is what meets the legal requirement in the United States. When shopping for an auto insurance policy, you have to be aware of your state’s minimum car insurance requirements. Most of the time, this includes the four basic types of insurance – bodily injury liability, property damage liability, no-fault insurance, and uninsured or underinsured coverage.

Here are the states with a minimum of $25,000 bodily injury liability coverage per person and a $50,000 bodily injury liability coverage per accident:

  • Alabama
  • Colorado
  • Georgia
  • Idaho
  • Illinois
  • Indiana
  • Kansas
  • Kentucky
  • Mississippi
  • Missouri
  • Montana
  • Nebraska
  • Nevada
  • New Hampshire
  • New Mexico
  • New York
  • North Dakota
  • Ohio
  • Oklahoma
  • Oregon
  • Rhode Island
  • South Carolina
  • South Dakota
  • Tennessee
  • Vermont
  • Washington
  • Washington D.C.
  • West Virginia
  • Wisconsin
  • Wyoming

Property damage liability coverage is widely varied among the different states. With that in mind, here are the states with a minimum of $10,000 property damage liability coverage per accident:

  • Arizona
  • Arkansas
  • Delaware
  • Florida
  • Hawaii
  • Kansas
  • Michigan
  • Minnesota
  • Missouri
  • New Mexico
  • New York
  • Vermont
  • Washington
  • Washington D.C.
  • West Virginia
  • Wisconsin

This is the list of states that require a higher property damage liability of $15,000 coverage per accident:

  • Colorado
  • Idaho
  • Iowa
  • Maryland
  • Tennessee
  • Utah

Here is the list of states that require a much higher property damage liability coverage of $20,000 per accident:

  • Illinois
  • Montana
  • Nevada
  • Oregon
  • Virginia
  • Wyoming

Here are the states with a $25,000 property damage liability coverage per accident:

  • Alabama
  • Alaska
  • Connecticut
  • Georgia
  • Indiana
  • Kentucky
  • Louisiana
  • Maine
  • Mississippi
  • Nebraska
  • New Hampshire
  • North Carolina
  • North Dakota
  • Ohio
  • Oklahoma
  • Oregon
  • Rhode Island
  • South Carolina
  • South Dakota
  • Texas

How Much Coverage Do I Need?

When buying an insurance policy, you need to remember one important question: “How much coverage do I need?” You can easily answer this question by taking into consideration three things: your state’s minimum requirements, the cost of your premiums, and the total value of your assets.

The first thing to keep in mind when choosing auto insurance coverage is your state’s minimum insurance requirements. You can find minimum insurance requirements above or by searching the Motor Vehicle Department website for your state. You must be sure that you carry enough coverage to meet the minimum requirements in your state.

How Much Coverage Do I Need?

When you shop for car insurance, you should consider the cost of your premiums and your deductible. If keeping your monthly premiums as low as possible is important to you, it may make sense for you to choose a higher deductible. Remember, a low insurance premium may lead to a better credit score over time.

Lastly, when deciding how much coverage you need, you should consider the total value of your vehicle. You will want to be sure that you have enough insurance coverage to protect yourself financially. You do not want to choose policy limits that are lower than the total value of your vehicle. Furthermore, if you have aftermarket parts or customizations that are worth more than the cost to replace your vehicle, then you may want to consider taking out additional coverage on those items.

Speaking to an Agent

All of these things are important to keep in mind when purchasing auto insurance. Not only is car insurance a legal requirement, but it also adds to your credibility as a driver and offers financial protection in the event of the unexpected. We get it, buying insurance can be confusing and it’s easy to make a mistake when it comes to shopping for coverage on your own. That’s why we created this guide. We hope this information helps make buying insurance easy and answers any questions you might have about auto insurance. Don’t let buying insurance be overwhelming. Contact your local Acceptance Insurance Agent today and let us guide you through the process.

Thomas Kunstmann
Acceptance Agent,
Foley, AL

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