Choosing auto insurance that fits your needs is important. Understanding some of the basics, such as the common coverages and available options, can help you makesmart choices.
Read more below or visit our Auto Coverage Guide to learn more about what to consider when shopping for auto insurance.
What types of things will I have to select when I purchase an auto insurance policy?
When you purchase an auto insurance policy, you'll have to make choices in three main categories, deciding what you need and want for:
What are the main coverages offered by an auto policy?
Below are some simplified descriptions of common auto insurance coverages. All coverages are subject to the limits, terms and conditions of the actual policy you purchase.
Bodily injury liability coverage generally pays damages for bodily injuries to the driver and passengers of the other vehicle when you are responsible for an accident. It also provides coverage to defend you if you are sued because of an auto accident.
Property damage liability coverage generally pays for damages to another person's property (e.g. their car) when you are responsible for an accident. It also provides coverage to defend you if you are sued because of an auto accident.
Medical payments coverage generally covers you, household relatives and your passengers for medical expenses that result from injuries sustained in an auto accident. It also covers you as a pedestrian if you are hit by a vehicle.
Some states have personal injury protection (PIP) in place of or in addition to medical payments coverage. This is also known as no-fault coverage. PIP can generally pay for medical expenses, funeral expenses, loss of income and other expenses for injuries or death due to bodily injury sustained as the result of a car accident.
Uninsured or underinsured motorist bodily injury coverage generally pays for damages for bodily injury to you and your passengers when caused by another in an auto accident and the person legally responsible either has inadequate or no insurance. This coverage varies greatly by state. In some states it may be a combined coverage, while other states may offer it as two separate coverages (e.g. one for uninsured motorists and one for underinsured motorists).
Collision coverage generally pays for damage to your car if it hits another car, object, or overturns. A deductible applies to this coverage.
Comprehensive coverage generally pays for damage to your car if it is stolen or damaged by certain causes other than collision, such as fire, theft, hail or vandalism. This coverage is commonly referred to as "comp." A deductible applies to this coverage.
Are there other coverages available, and how do I know if I need them?
If you're looking for broader coverage, most auto insurers offer other optional coverages. Below are basic descriptions of some "extras" offered by many insurers. Again, all coverages are subject to the limits, terms and conditions described in the actual policy.
Extended transportation expense (rental reimbursement) coverage generally covers rental car expenses when your car is damaged and out of use due to a covered loss.
Towing and labor coverage generally pays for towing and labor costs when your car is disabled (for example a "jump start," locked out, flat tire, etc.). Labor costs are generally limited to labor that is performed at the place where the car was disabled.
Repair or replacement collision coverage generally provides additional coverage when your car is a total loss as the result of a collision. This coverage increases the amount your insurer will pay under collision coverage to the cost of a similar new car. The cost of the new car must be less than the cost to repair your damaged car.
Loan/lease coverage can be useful for cars that are leased or financed, in the event of a total loss. It generally covers the gap between the remaining unpaid principle on your loan or amount due on your lease, and what your insurer would pay under comp or collision (minus the deductible—you are responsible for the deductible). This coverage is commonly also known as "gap coverage."
Which of these coverages, if any, might be a good fit for you is really based on your individual circumstances. For example, if you just financed a new car, you might want to consider loan/lease coverage. It can prevent you from finding yourself upside-down in your loan if you total your new car.
What is a "limit of liability" and what limits should I purchase?
A limit of liability is the most your policy will pay out under a particular coverage.
Often, you'll see the limits for bodily injury liability coverage expressed as two numbers, such as $100,000/300,000. This is known as "split limits." With split limits, the first number is the most the policy would pay for injuries to any one person as the result of an accident. The second is the most the policy would pay for all injuries as the result of any one accident, no matter how many people were injured. Sometimes you'll see a third number, which is the property damage liability limit, per accident.
Limits of liability vary by company and by state. To help you think about what limits might be right for you,visit our Auto Coverage Guide »
What is a deductible and how do I choose one?
A deductible is the amount you must first pay out-of-pocket before certain coverages kick in. In auto insurance, deductibles are only applicable to certain coverages, such as comprehensive or collision.
When choosing a deductible, make sure you choose an amount that you'd be comfortable paying out of your own pocket in the event of a loss. A higher deductible should lower your premium.
If you have any questions about choosing coverages, limits or deductibles, call an insurance agent or your insurance company.