Jessica Sautter is a Content Writer for CarInsuranceCompanies.com with a Bachelor’s Degree from Eastern Michigan University in Elementary Education with a Major in Reading and a Minor in Mathematics.

Full Bio →

Written by

Chris Harrigan has an economic degree from Limestone College and an MBA from Clemson University. He previously managed auto insurance claims for Enterprise Rent-A-Car. Currently, he is using his business and insurance expertise to provide insurance data analysis and visualizations to enhance the user experience.

Full Bio →

Reviewed by Chris Harrigan
Former Auto Insurance Claims Manager

UPDATED: Oct 8, 2020

Advertiser Disclosure

It’s all about you. We want to help you make the right car insurance coverage choices.

Advertiser Disclosure: We strive to help you make confident insurance decisions. Car insurance comparison shopping should be easy. We partner with top car insurance companies. This doesn’t influence our content. Our opinions are our own.

Editorial Guidelines: We are a free online resource for anyone interested in learning more about auto insurance. Our goal is to be an objective, third-party resource for everything auto insurance related. We update our site regularly, and all content is reviewed by auto insurance experts.

Key takeaways...

  • Before taking to the road, it’s essential to have the proper car insurance
  • All states require some form of liability insurance
  • Make sure you shop around to find the best rate for the coverage you need

Owning a vehicle and driving are huge responsibilities. Before taking to the road, it’s essential to have the proper car insurance. There are thousands of companies out there, each selling different policies at various prices.

Before tackling the monumental task of deciding on a policy, it’s wise to have a basic understanding the types of auto insurance coverage available.

Enter your ZIP code and get multiple car insurance quotes online for FREE.

Table of Contents

Liability

AdobeStock_86689418-1600x1600 (1)

All states require some form of liability insurance.

While it varies state-to-state the amount of coverage and how extensive it needs to be, liability is a necessity because it pays for damages incurred to the party who is not at fault in an accident.

– Types of Liability Insurance

Most states require Property Damage Liability (PDL) and Bodily Injury Liability (BIL) coverage.

Both guarantee their policyholders will have the means to compensate other parties outside of their own vehicle involved in an accident in which the policyholder was at fault.

As their names suggest, PDL insurance covers the costs to repair or replace property such as, vehicles or stationary objects; while BIL covers fees associated with injuries sustained in an accident.

 What Liability Insurance Pays For

When property damages are sustained, PDL will cover costs to repair or replace a vehicle and damage sustained to other property, whether it be a building or a guardrail.

BIL insurance helps pay for medical bills, physical therapy, rehabilitation, funeral costs, compensation of lost wages due to missing work from sustained injuries, legal fees for the other party, and possibly pain and suffering damages awarded by a judge.

 Why Liability Insurance is Necessary

Besides being a legal requirement, liability insurance keeps at-fault drivers from having to pay solely out of pocket to the victim(s) of the accident.

Both the costs of property and bodily damage can become quite high rather quickly, and without the proper coverage, one accident can leave an individual in financial ruin.

Compare quotes from the top car insurance companies and save

 Secured with SHA-256 Encryption

Coverage that Helps When Guilty Parties Can’t Pay

AdobeStock_55935447-1600x1600

When a driver is an accident with someone who is either underinsured or completely without insurance, they may need to rely upon their own policy to provide the coverage needed.

These types of policies are often called Uninsured Motorist (UIM) coverage and can pay for the necessary repairs, medical costs, as well as additional fees for car rental and even lost work wages. This type of coverage is also a requirement in some states.

Compare Car Insurance Companies

Compare quotes from the top car insurance companies and save

 Secured with SHA-256 Encryption

Coverage for Lease and Lien Holders

When leasing or taking a loan out on a car, many lenders will require specific guidelines as to what insurance must be carried. State laws may also dictate the type of coverage they require.

Since value depreciates rapidly in cars and the value of a car at present day is usually the value payment is based upon and not the purchase price, it’s important to make sure a damaged or totaled vehicle is covered extensively.

Guaranteed Auto Protection (GAP coverage) coverage is often encouraged so the value between what is owed on a car and what the car is worth can be compensated for in case an accident should occur within the first year of ownership.

Additional Types of Coverage

Dollarphotoclub_103413467 (1)-1600x1600 (6)

Numerous types of coverage besides liability exist. Some states require these additions for all drivers. For instance, 16 states require Medical/Personal Injury Protection (PIP insurance) which can cover the costs of medical bills that incur, regardless of who is at fault.

Collision coverage, as the title states, offers reparations after a collision, again without concern for who was at fault.

Comprehensive plans pay out for damages which occur due to natural disasters and some companies offer additional fire and theft plans to cover just those types of incidents.

Compare quotes from the top car insurance companies and save

 Secured with SHA-256 Encryption

Combining and Customizing Plans

As its title states, Physical Damage coverage will compensate for the wide variety of physical damage that may occur to a vehicle or property.

This type of coverage is often best for expensive vehicles and those with money still owing on them.

Additional umbrella plans may be suggested by an insurer dependent upon each policy holder’s needs, making a more complete and logical plan that’s easy to understand and maintain.

Relevant Cost Factors

It’s true that the various ways a company decides on what to charge policyholders are quite vast. The following can all influence what each person pays to be insured:

  • Age
  • Gender
  • Marital Status
  • Type of Car Being Insured
  • Amount of Driving Time
  • Location
  • Driving Record

Just How Much Insurance Will Cost

After reviewing all the various types of coverage and factors involved in establishing insurance rates, it becomes clear prices will vary drastically for each individual.

One crucial fact people tend to ignore is that costs are set by each individual insurance company.

By accepting the first quote they’re given, a driver may be making a crucial and costly mistake.

Compare quotes from the top car insurance companies and save

 Secured with SHA-256 Encryption

Comparison Shopping to Save Thousands

The easiest answer to reducing insurance costs is to look around. Some companies offer discounts for responsible drivers, loyal customers, good students, or numerous other characteristics they’ve earmarked for discounts.

Only by shopping around can customers discover these opportunities and the ease and effortlessness of getting quotes online today can save thousands of dollars in the long run.

Enter your ZIP code to receive multiple auto insurance quotes for FREE now!

References:

  1. http://www.investopedia.com/terms/l/liability.asp
  2. https://wallethub.com/edu/collision-insurance/7292/
  3. https://wallethub.com/edu/comprehensive-vs-collision/10023/
  4. http://www.huffingtonpost.com/laura-adams/how-age-gender-and-marital-status-affect-your-car-insurance_b_6973360.html
  5. https://www.consumerreports.org/cro/car-insurance/credit-scores-affect-auto-insurance-rates/index.htm