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What Does an Auto Insurance Cover? A Comprehensive Guide!

What Does an Auto Insurance Cover? A Comprehensive Guide!

There are so many ways your car can get damaged but only two ways of protecting it. You either drive your car safely or park it somewhere secure. Yet these two ways are not enough to get your car away from the threat of a collision, dents, scratches, or just downright getting stolen. This is why people get auto insurance coverage. But the vast world of car insurance is anything but simple.

As a driver, it is important that you know the ins and outs of car insurance policies, what they cover, and what can get you in trouble. In this article, we’ll look at what auto insurance covers, the different policies you can buy, and some important things to keep in mind when buying car insurance coverage. Let’s get started.

What Does Auto Insurance Cover? 

Any damage to your car or injuries to you is covered under auto insurance. But sadly, there’s no “one policy does it all” in car insurance coverage. The types of damages covered under car insurance are divided and distributed under different policies. Some of the policies are mandatory, while some are optional. 

The average cost of a car accident in the US will shock you, and the average cost of medical treatments needed after a car accident will shock you even more. But that’s not all, there are other costs involved as well. The damage in a car accident is almost always collateral. So what about the other driver involved in the accident? 

Types of Auto Insurance Coverage

Liability Coverage: A car accident that’s caused by your negligence is your liability. This means that if you get in a collision accident with the other driver, the damages the other car sustains, and the injuries the other driver gets, you are liable to pay for it. This includes the cost of medical treatments and car/property repairs.

But what if you do not have the money to pay for it? This is why it is mandatory to have liability coverage (it pays the other driver, and it cannot be claimed by the policyholder). Except in the state of New Hampshire, you’ll need a liability policy to legally drive a vehicle. 

Collision Damage Waiver: Collision damage waiver is the policy that can be claimed by the policyholder, and it pays for the repairs needed for your car after a collision accident. It does not matter what your car collides with, if there was a collision while you were driving the car, you can claim your collision policy. Collision damage waiver is optional, i.e., you can choose to have it or not, but it is recommended that you get it. 

Comprehensive Coverage: Like a collision damage waiver covers collision accidents while you drive, a comprehensive policy covers all the accidents that might happen when you are not driving. This includes natural accidents such as projectile damage, trees falling on your car, etc. It also includes damages due to floods, earthquakes, fires, hurricanes, theft, riots, vandalism, etc. 

If you live in an area where car theft is very high, or you’re afraid your car might get damaged due to some other reason, then getting comprehensive coverage is a must. This is the only policy that will reimburse you if your car gets stolen. 

Personal Injury Protection: Collision damage waiver pays for the repairs of your car, but which policy will pay for your medical treatments? Personal injury protection covers the cost of medical treatments needed after a car accident. This policy is mandatory in 12 states, called “no-fault” states. 

Personal injury protection is very similar to Med Pay, but PIP has a slight advantage over Med Pay as it also covers lost wages. So the money that you lose by missing your work will be reimbursed by the personal injury protection policy. 

Uninsured/Underinsured Motorist Coverage: When the car accident is not your fault, you can claim liability coverage of the driver at-fault to pay for your medical and repair expenses. But what if the other driver does not have a policy? Or what if the other driver does not wait around and drives away? 

This is where uninsured/underinsured motorist coverage comes in. This policy will pay for the accident costs if the driver at-fault does not have liability coverage or has one but the coverage limit is not enough to pay for the total costs. 

Take the example of Indiana where over 15% of the drivers are uninsured. You need to get UM/UIM policy in states like these. Look for the cheapest car insurance in Indiana to get the best policy at the best price.

Important Things to Keep in Mind 

Before you hop on the bandwagon and get the policies everyone else is buying, just stop for a second and think. There are so many things you need to consider before buying a car insurance policy. Let’s get started with the basics.

Coverage limits are perhaps the most important thing you need to consider when buying a policy. It is not enough to have the state-mandated minimum coverage limit as it is almost always never enough to pay for the entire cost of the accident. 

You should always have a coverage limit that’s more than what the state requires you to have. This ensures that you do not end up paying the extra amount from your pockets. Increasing or decreasing your deductible will lower or increase your insurance premium rates respectively. 

Also consider adding your family members to your policy if they will be driving your car regularly if they get in a car accident and they are not registered in the policy, your claim can be rejected. 

Coming to the price, the cost of the auto insurance policy depends on several factors such as your driving record, past insurance claims, type of the car, age, gender, location, credit score, etc. The best way to save money on policies would be by comparing different auto insurance companies, maintaining a clean driving record, and getting all the discounts available.

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