Car Insurance FAQ: What does Car Insurance Cover
Auto insurance doesn’t have to be confusing. The experts at AutoInsuranceMatchup.com have taken the time to collect and answer some of the questions we hear most frequently.
What is an Auto Insurance Deductible?
Your auto insurance deductible is what you pay out of pocket before the insurance company pays the rest of the claim, up to your policy’s pre-set coverage limit. As an example, if your deductible is $500 and you have a claim of $3,000 for a fender bender, you would file a claim with your insurance company and if approved, they would cover the full amount minus your deductible. You would pay $500 and the insurance company would pay the remaining $2,500.
You are typically able to choose your deductible amount, with the lower deductible resulting in an increased monthly premium. The lower the deductible, the higher your monthly cost. It’s important to consider your financial situation before choosing a deductible as higher monthly premiums may be more financially viable than paying a large sum of money in the case of an accident.
What does Auto Insurance Cover?
Auto insurance typically provides coverage for property damage, liability, and medical costs. Property damage covers damage or theft, liability covers your legal responsibility to others in the case of bodily injury or property damage, and medical covers the cost of treating injuries, rehabilitation of injuries, and extenuating circumstances such as lost wages, funeral expenses, rental cars, etc.
What does Collision Insurance Cover?
Collision insurance covers damage to your car that occurs as a result of a collision with another automobile or object when you are at fault. If you lose control of your vehicle and hit a guardrail, your collision insurance will cover the cost to get your car repaired from the resulting damage, as long as your insurance company approves the claim.
What does Comprehensive Car Insurance Cover?
Comprehensive car insurance covers theft or damage caused by an incident other than a collision. This includes acts of god such as flooding, hail, and falling trees. Comprehensive coverage also covers your car in case of a fire, vandalism, or other incidents typically out of your control.
What Does Liability Car Insurance Cover?
Liability car insurance covers the cost of the other driver’s property and bodily injuries if you are found at fault in an accident. Liability insurance breaks down into two types:
What does Bodily Injury Liability cover?
- This applies to the medical expenses of the other party if you are at fault. If you run a red light and hit another automobile, your bodily liability coverage will cover the medical expenses of the person you hit, and may even cover legal costs and lost wages in the case of a lawsuit.
What does Property Damage Liability cover?
- Property damage liability: In the same scenario, the property damage liability would cover the damages to the automobile you hit. This may include repair or replacement costs of the automobile you hit as well as other property damage that may have occurred during the accident such as light poles, structures, and other property damage.
Liability insurance does not cover the damage that you or your vehicle incur during an accident, that would be covered by your comprehensive or collision coverage.
What does car insurance NOT cover?
This is difficult to answer as each insurance company and various policy type has different coverages. Some frequently uncovered options, depending on the policy, are damage caused by acts of God, your belongings in the vehicle in the case of theft, wear and tear, and damage from excluded drivers.
- Acts of God: Some companies have exclusions for natural disasters, while some policies will cover damage in the event of an earthquake, hurricane, flood, or tornado, many do not. It is important to consider the Acts of God clause and consider this coverage in your policy purchasing decision.
- Your belongings within the vehicle: Depending on your coverage level, if your car is broken into and items like laptops, phones, golf clubs, or other valuables are taken, your auto insurance may not cover this loss.
- Wear and tear: Auto insurance does not cover standard wear and tear to your car. In the case of auto failure, you would want to consider an extended auto warranty as your insurance would not cover a breakdown of parts.
- Damage from excluded drivers: If your policy excludes a family member due to accident history, DUI, or other exclusions, they will not be covered in the event of an incident.
What deductible should I choose for car insurance?
There’s no proper answer to what you should choose. There are a variety of factors to consider when selecting your car insurance deductible.
Do you have emergency savings? If you have money set aside for emergencies then you may consider a higher deductible. For many, paying $1,000 out of pocket in the case of an accident could be extremely difficult, and the high out of pocket costs may be less preferable than a higher monthly premium cost.
It’s best to consider your own financial situation and work with your insurance agent to find the best deductible and monthly premium for you.