Auto insurance is an important — and generally required — part of owning a vehicle. It provides financial protection in case of accidents or damages and ensures peace of mind on the road. However, navigating the various car insurance coverage types can be overwhelming. In this blog, we'll help you understand the options available so you can make informed decisions when protecting your vehicle and yourself.
Types of Car Insurance Coverage
Here are seven types of car insurance coverage to consider when building a policy.
Liability coverage insurance is split into two categories: bodily injury and property damage liability.
- Bodily injury liability: Helps financially protect you if you’re found legally responsible for causing bodily injury to another person.
- Property damage liability: Helps cover the damages to another person’s property — e.g., vehicles, buildings, fences, etc.
Most states require liability coverage, and you must purchase at least the minimum liability coverage set by your state. Generally, the liability coverage limits will include three amounts for bodily injury per person, bodily injury per accident, and property damage per accident. Here’s a typical example:
- Bodily injury per person ($25,000): The maximum amount an insurer will cover for a single injury
- Bodily injury per accident ($50,000): The maximum amount an insurer will cover per accident for all injuries
- Property damage per accident ($25,000): The maximum amount an insurer will cover per accident in property damage
Collision protection helps cover your vehicle’s repair costs following an accident with another driver (regardless of fault) or an encounter with a fixed object — e.g., a light post, guardrail, pothole, etc.
Your insurer will assess the damages and pay for the repairs, usually up to your vehicle’s actual cash value minus your deductible.
- Actual cash value (ACV): The amount your car is worth today, accounting for depreciation.
- Deductible: The amount you pay out of pocket on an auto claim before your insurer pays for the rest. You can choose your deductible, which typically ranges from $100 to 2,000. Generally, the higher the deductible, the lower the premium — or your monthly payment for auto insurance.
Comprehensive auto coverage helps pay to repair or replace your vehicle following a non-collision incident, such as:
- Falling objects — e.g., tree branches
- Windshield damage
After you pay your deductible, your insurer can help cover the rest. This coverage is usually optional, but your lender may require it if you're leasing a vehicle.
Uninsured/Underinsured Motorist Coverage
Uninsured/underinsured motorist coverage is a common policy required in some states but optional in others. Depending on your state, this coverage might be separate, combined, or split into four categories:
- Uninsured motorist bodily injury: Helps pay medical expenses for you and your passenger if an uninsured driver hits your vehicle.
- Uninsured motorist property damage: Helps cover damage to your vehicle if you’re involved in an accident with an uninsured driver.
- Underinsured motorist bodily injury: Helps cover medical bills to you and your passengers if you’re hit by a driver with insurance but not enough coverage to pay for the injuries they caused.
- Underinsured motorist property damage: Helps cover your vehicle’s repair costs if you're hit by a driver who has insurance but not enough coverage to pay for the damages they caused.
What if you’re in a hit-and-run? Uninsured motorist coverage may cover injuries or damages if a driver hits your vehicle and flees the scene. However, in some states, uninsured motorist property damage may not cover hit-and-runs, so you would likely need collision coverage to help pay for those damages.
Personal Injury Protection (PIP) Coverage
Personal injury protection insurance helps pay for your medical expenses following an accident, regardless of who’s at fault. It can also cover other costs incurred due to your injuries — e.g., lost income, childcare costs, senior care expenses, etc. Some states require PIP, while others have it as optional coverage or don’t offer it at all.
Medical Payments Coverage
If you, your passengers, or your family members sustain injuries in a car accident, medical payments insurance may help pay for costs associated with the injuries — e.g., hospital visits, X-rays, surgeries, etc.
While there are similarities between medical payments coverage and PIP, the key difference between the two coverages is that PIP covers additional costs — such as lost income or child care expenses — while medical payments coverage doesn’t.
Rental Car Coverage
Rental car coverage covers you when you rent a vehicle from a rental car company. During the rental process, an associate will decide whether you want to add insurance to the rental or waive it. Your auto insurance’s liability, collision, and comprehensive coverage typically extend to rental cars. The credit card you use to reserve and pay for the rental may also offer rental car coverage benefits. However, purchasing this coverage through the rental company can be a good idea, especially if:
- You don’t want to file a rental car claim through your insurance, which would affect your premium.
- Your credit card doesn’t offer rental car coverage benefits.
Tips for Choosing the Right Coverage
When it comes to choosing the right coverage, there’s no one-size-fits-all approach. Picking an auto insurance policy that suits your lifestyle and budget depends largely on your location, your vehicle, and how you drive your car. The best way to determine how much car insurance you need is to talk to an agent.
At Mercury Insurance, we sell insurance through independent agents who provide excellent advice and can tailor an auto insurance policy to meet your needs.