When shopping for car insurance, you will quickly learn there are several types of car insurance, and your premiums will vary greatly depending on the coverage you select. While the specific coverage levels vary from company to company and state-by-state
The good news is usually, there are only a few things you need to realize about your insurance coverage. How high your coverage limits are usually, and what’s going to always be covered. In other words, you must know what car insurance you have.
Types of Car Insurance
There are general seven different types of car insurance:
Property Damage Liability (PD)
With this coverage, you are protected against any damage you, or another driver using your car with your permission, causes to another’s property. While generally means a person’s car, it may also include buildings, fences sign posts or any other property you damage.
Property Damage Liability is similar to Bodily Injury Liability. The main difference between the two is what it pays out. About Bodily Injury Liability, your car insurance company will pay out to the injuries to what you were at-fault for.
Property Damage Liability also pays out to the other party when you are at-fault. It is pretty self-explanatory. It’s just that, it pays out for the property which you have damaged.
That property could be anything. Someone’s car, house, airplane, boat, etc. Any property in which you damage and are found to be at-fault for. Property Damage Liability will pick up the tab.
A very common example of when this coverage pays out is when you rear-end someone. A rear-end accident, is 100% at-fault. Regardless, whether the car in front of you slammed on their brakes. According to the rule of insurance, the driver behind the car in front of him/her should be aware of what is going on. There is no way to prove that the car in front of you slammed on their brakes. In this common case, your property damage liability coverage will pay out for the damages done to the car.
Property Damage Liability is also another coverage which can be reduced or increased. When you are looking for cheap car insurance as a young or new motorist, lowering this coverage may save you several bucks. However, like bodily injury, if you own any homes or assets it is highly recommended that you carry a sufficient amount of this coverage. And again, chances are that if you are on the hunt for getting cheap car insurance for a young driver, a young individual doesn’t own too many assets or any for that matter so there would be no point to carry such a high property damage limit.
How much Property Damage should you carry?
Similar to other Liability Insurance Coverages, most car insurance companies will usually recommend that you carry at least $50,000 in Property Damage Liability. The reason $50,000 is recommended because, if you are involved in an accident where you damage someone’s an expensive car, part of their home, or any other expensive property they own, you want to have enough coverage to cover for the expenses.
If your property damage liability only covers $10,000 and you own a home, you may be out of luck when you damage someone’s house in an accident that may cost them $35,000 fix. The $10,000 your car insurance will cover, but once you exhaust your coverage, you may be mailed a court date to settle the balance.
Bodily Injury Liability (BI)
his is perhaps the most basic coverage level. It covers you (as the policyholder) against injuries you cause someone else. You would also be covered if you are driving someone else’s a car with their permission.
Usually this coverage is shown in a split limit. You have to remember that the lower this limit, the lower your car insurance rate will go down. Sometimes this could save you some money especially when looking for cheap car insurance for a young driver. Furthermore, chances are if you are a young motorist, you may not have any assets so there is not point is carrying a high Bodily Injury limit. The lowest that you may take this coverage is the minimum state requirement. Your car insurance policy may show it as the following:
$25,000 each person/$50,000 each occurrence (remember these numbers I picked are just for example purposes yours may be different)
Bodily Injury Liability covers the passengers of the vehicle you hit in an accident if you are at fault. It covers for the cost of their injuries because you injured them. In a split limit bodily injury limits like the one shown above, means that your car insurance company will cover $25,000 maximum for each person that you injured to a max total of $50,000 for the total number of people injured in the car.
In addition to medical treatment for the passengers you’ve injured in the other car, this coverage also covers their lost wages and compensation for pain and suffering, your legal fees, bail bonds, and court costs.
If you are a homeowner, or own assets I don’t recommend you carry a low limit. The reason is very simple. God forbid, you get into a catastrophic accident, and you carry a low limit in Bodily Injury, if your car insurance coverage is not high enough to pay for these injuries, the opposing party may come back and sue you. Therefore, once your car insurance company exhausts this coverage, they (the opposing party) may go after the equity in your home or "your" assets including earnings and savings. But since this website is dedicated for getting cheap car insurance for young drivers, we will be under the assumption that you don’t own a home or have any assets. If you do, at least this part educated you on why you should keep it to a responsible limit.
What is a good responsible limit for Bodily Injury Liability?
Most insurance companies usually recommend those who are homeowners or have assets, to carry at least $100,000 each accident/$300,000 each occurrence in Bodily Injury limits of liability. This ensures that you at least are carrying enough limits to cover an accident that you may be involved in, in which you are at-fault and have injured the other party in their car or any pedestrians.
Personal Injury Protection (PIP)
Personal Injury Protection (PIP) or sometimes referred to as “no-fault insurance” is a very important coverage in your insurance policy. It falls under liability, but it’s not any liability to the other party. It actually covers the people who are hurt or injured in your vehicle regardless of the fault of the accident.
This coverage depends on what state you are in. We’ll take an example of the State of New York.
In New York, Personal Injury Protection Coverage is usually standard at $50,000 per person, per accident. Which means that if you were to get into an accident and you had passengers in your car that was hurt, your car insurance company will cover the expenses of the following:
- All the required medical, dental, hospital, and rehabilitation expenses
- For three years, 80% of your earnings to a maximum of $2,000/month $25/day for any other expenses you may require for one year
- Death benefit of $2,000
All the required medical, dental, hospital, and rehabilitation expenses For three years, 80% of your earnings to a maximum of $2,000/month $25/day for any other expenses you may require for one year Death benefit of $2,000
In most states, the PIP coverage covers the same thing. However, the amounts that you may carry may be different. If an insurer ever wants to carry higher limits, they can so as well.
If you are struggling with your car insurance rate, especially if you are a young driver, this coverage may be eating up most of your premium. For some, this coverage can be cheap and for others it may be expensive. It all depends on your driving record. If you call your car insurance company and try to see if you can add a deductible to this coverage it may lower your rate. Once again, every state is different.
For example, in New York, you have the option to take this coverage at no deductible or a $200 deductible. However, in New Jersey, your deductible ranges from $250 to $2,500 for this coverage which could make a difference in your rate. You may want to call your car insurance company and discuss this with them further to see how it affects your rate.
A deductible is money that will have to come out of your pocket during expenses before your car insurance will pay out. So for example, if in your PIP coverage you have a $200 deductible and you get into an accident, any bills up to $200 you will be responsible to cover and the car insurance company will start picking up the tab at the first dollar after $200. This term is very common in Comprehensive and Collision Coverages.
This is a coverage that comes standard if you have even liability insurance (liability insurance is mandatory in 99% of the states).
Uninѕurеd Mоtorist (UM) Insurance
Uninsured Motorist is another coverage under the Liability Insurance Coverages. It comes standard within your Liability Insurance Policy.
With reports estimating that between 10 and 16% of Americans will be driving without any kind of car insurance whatsoever over the following few years, the last thing you would like to have happened is discover yourself to be in an accident without virtually any insurance to back you way up. You could find yourself paying a lot of money to put your car back on the highway while you’re tied up in court for years. After all, if they couldn’t afford their insurance premiums consider some of the chances that they’ll be able to afford to fund your car too?
This coverage is similar to Bodily Injury. The main difference between the two is, that Bodily Injury covers the expenses for the passengers or people that get hurt when you are at-fault. Uninsured Motorist coverage covers the passengers or people that get hurt when someone else is at-fault who is not insured, hence, uninsured motorist, or escapes like a hit-and-run.
In your Policy Declarations Page, Uninsured Motorist is also given in a split limit just like Bodily Injury.
So for example, you may see: Uninsured Motorist: $25,000 per person/ $50,000 each occurrence Under this coverage, your Uninsured
For some reason, many people aren’t aware that when they get into accident and someone is not insured or flees the scene, that they are still covered for the medical bills that may come from the accident. Other states, also having a coverage known as the Uninsured Motorist Property Damage. If your state allows you to carry this coverage you may be in better luck because, about a hit-and-run, the damages to your car may be covered as well.Motorist limits cannot be greater than your Bodily Injury limits.
The Uninsured Motorist coverage, not only pays out when someone doesn’t have any car insurance but also pays out when someone is not carrying enough insurance.
Sometimes this coverage may offer some savings if you lower this limit to the state minimum. However, if it only saves you $1.00 or so, it may not be worth it to lower this coverage just to save $1.00. The ratio between what you will save to what you will be covered for won’t make sense. It is coverage that you can dance around with to see how much you could save if you do lower it.
This is a coverage that can be lowered.In some other states, in addition to, Uninsured/Underinsured Motorist, your state may also have Uninsured/Underinsured Motorist Property Damage (UMPD). UMPD coverage is very similar to Uninsured/Underinsured Motorist Coverage. The only difference is that in UMPD the damages are being covered to your property rather than injuries in the event when you are hit by someone who doesn’t carry car insurance or doesn’t have enough coverage to pay for your damages. Furthermore, UMPD may be an optional coverage in your state that you can add to your policy for additional premium. You may want to call your insurance carrier to see if your state offers this coverage.
Comprehensive Car Insurance
Three words for you: Acts of God. If your automobile catches on fire, is minted by lightning washes away in a flood or winds up buried beneath a thick trunk of a tree you’re still have to fix/replace your wheels, though it wasn’t “technically” an accident (with one more car, that is! ). This is where comprehensive insurance coverage is necessary.
Comprehensive car insurance, liability insurance and collision insurance are the 3 components of an automobile insurance plan. State law needs drivers to carry liability coverage, but comprehensive and collision insurance are optional if you own the car outright. If you have financed the car, your auto loan firm might need you to carry comprehensive insurance. If you have paid for the car in full and you cannot afford comprehensive car insurance, you own an older automobile that does not have much worth, you think you are at low-danger of non-collision destroy, or you favor to self-insure, you can select not to buy comprehensive insurance. On the other hand, even if your own your automobile clear and free, if you live in rural place where collisions with animals are general, in a stormy place that often obtains hails, or in a top crime area of town where snatching and theft happen daily, you might want to buy comprehensive car insurance.
Comprehensive and collision insurance each have their own deductibles, so you can select different deductibles based on how much danger you think you are susceptible in each of these places.
Collision Car Insurance
In a nutshell, collision insurance covers the cost of fixing or replacing your car in case an accident happens. Collision insurance is commonly added as an extension of a basic car insurance policy. The kinds of covered accidents include the following:
- Hitting another car
- Colliding with a stationary object (i.e. tree, bridge, lamp post)
It does not cover damages due to theft, vandalism, acts of nature and damage paid for by another driver’s policy.
What is a collision deductible?
Most collision insurance policies offer what is called a collision deductible. It is basically the amount of money that a person is willing to shell out if a collision caused damage to the person’s car. In essence, the collision deductible makes the premium cost a little bit lower, while still ensuring that there will be an insurance policy that covers the rest of the collision cost.
How does collision insurance help you?
The popular belief is that collision insurance is only helpful when an accident was the insurance owner’s fault. However, the truth is that collision insurance actually serves the following purposes:
- Pays for damage to your vehicle in an accident that you cause
- Pays for the vehicular damage in an accident caused by another driver
- Pays for the vehicle damage not covered by other sections of your basic policy such as:
- The insurance company pays for the cost of repair or replacement of the vehicle based on its current market value
- Insurance will pay damages, then get reimbursement from the other driver’s insurance ,- Useful when the other driver’s insurance takes too long
- Hit and run accidents , - Instances where the other driver does not have an insurance , - When you do not have comprehensive insurance for damage caused by vandalism or theft
What is the difference between collision insurance and comprehensive insurance?
The most vital difference between collision and comprehensive insurance is the control of the car driver. As explained the previous items, comprehensive insurance takes into account events that are within the control of motorists whereas comprehensive insurance has additional clauses for “acts of God or nature,” which are really out of people’s hands.
By and large, a safe track record is by far the biggest factor that contributes to your online car coverage reductions. If you have not been involved in accidents or moving violations during the past 3 years you may be able to lessen your car insurance premiums by up to 40%.
SR-22 insurance refers to any insurance coverage that a driver must purchase in order to file an SR-22 form through his or her insurance company. A driver may have to purchase SR-22 insurance if he or she has been convicted of:
- Driving without mandatory liability insurance
- Driving under the influence of alcohol or drugs
- Committing multiple traffic violations within a short period
- Committing other criminal offenses or infractions
What Type Car Insurance Do You Need?
Everyone needs car insurance, but the question is: how much do you really need? Unfortunately there’s no way of knowing what accidents and situations you’ll be thrown into, so it’s best to cover all your bases. Since insurance can be overwhelming, you’ll want to keep these four things in mind when you look for car insurance:
- Your state’s minimum insurance requirements
- Types of coverage that you would be willing to add in addition to the minimum requirements
- A good insurance deductible
- A good list that compares car insurance quotes
Every state requires some liability insurance, but the minimum requirement may not cover all the repairs and medical expenses you need. Most agencies say you need to carry policies that cover at least $300,000 in bodily protection and $100,000 in property damage.
What if you don’t have the minimum coverage?
In many states, the police will actually confiscate your car! You’ll have to pay a ticket for not having insurance and show proof of insurance to get your car back! If you are worried about other people not having insurance (trust me, there’s a lot out there), you may want to get insurance that protects you from uninsured motorists.
Full coverage car insurance is a combination of this kind of car insurance. It may cover several or all.