What you need to know about your car insurance

Understanding your car insurance policy can be tricky. What does it cover? What doesn't it cover? Do I need liability only or Full-Coverage? Which add-on coverages will you need? Finding the right answers can be hard or difficult to understand. This article is going to break down just a few of the basics about your car insurance that you should know.

Most states have a minimum amount of insurance coverage you must maintain. Usually, this will include Bodily Injury Liability and Property Damage Liability. Bodily injury covers costs of injury or death to yourself and others while property damage covers the cost of damage caused to property, such as other vehicles, mailboxes, or fences. Liability coverage only covers incidents in which the insured individual is liable for the damage (this is the at-fault individual). These coverages only cover the other individual in an incident where you are at-fault. They won't have deductibles but they will have limits to how much they will pay per incident. Any expenses that go beyond those limits are the personal responsibility of the insured individual.

Some states may also require drivers to maintain Personal Injury Protection or Uninsured Motorist Coverage. Personal Injury Protection will help to cover the costs of injury, lost wages, and other related expenses for yourself and your passengers. Uninsured Motorist Coverage provides much the same coverage as liability except that it is coverage that the insured provides for themselves if they are the victim of an incident with an individual who does not have the minimum required insurance coverage. It often comes paired with Under-Insured Motorist Coverage, which covers any expenses you may incur at the fault of another individual that exceed the limits of their coverage. This coverage is useful because if you are in an accident that is the fault of another individual, they are responsible for the costs but getting payment may be difficult and take a long time.

When someone says 'full-coverage' they are usually referring to Comprehensive and Collision. Comprehensive covers your vehicle in incidents like vandalism, theft, and other non-collision damage incidents. Collision covers your vehicle in collision accidents when you are the at-fault party. Both liability and full-coverage cover events in which the insured individual/car is at fault; the primary difference is that liability covers the other party while collision coverage applies to your property.

While some insurance policies include coverage for glass, such as broken or cracked windshields, many often do not. However, this coverage may be available as an add-on to the policy. Typical chip repair in a windshield could run between $60 and $100, cracks $125 and up, based on size, and windshield replacement costs could run over $300. With glass coverage, many of these repairs include a zero deductible, which means no money out of pocket for you.

Gap Coverage is an insurance add-on, often included in vehicle lease payments, that covers the 'gap' between the vehicle value and how much you still owe on the purchase of a vehicle. New vehicle costs will typically include various fees, such as interest, as well as the sales price. However, insurance policies only pay based on the book value. As your vehicle depreciates, you could owe more than the car's book value. If a leased vehicle is totaled, Gap Coverage will pay the remaining balance after the insurance pays.

Many people mistakenly believe that full-coverage includes Roadside Assistance. However, if your policy does not specify that it is included, you will need to purchase an add-on to get this coverage. Roadside assistance coverage varies by carrier but may offer coverages such as towing, jump start, door unlocking, gas delivery, flat tire change, and more. Also, these policies may have mileage or dollar limits for each coverage. For instance, if tow coverage has a $100 limit and the cost of your covered tow is $125, the policy will only pay to the limit leaving the additional cost being an out-of-pocket expense.

Most states require drivers to keep a copy of their insurance cards in the vehicle for proof of coverage in the event of an accident or traffic violation. However, it's usually a good idea to keep your coverage information on you as well. Some policies cover the driver, not the vehicle, so your coverage would include you driving or being a passenger in someone else's car. Also, if you lock the keys in your vehicle, you will not have access to your policy information in the glove box when calling for roadside assistance. While you can usually find your policy information by searching for other criteria, you can get help faster by having this information available when you call. If you are unable to locate your insurance coverage information, you could end up having an out-of-pocket expense that may or may not be reimbursable.

It is important to keep your car insurance information up-to-date. Most policies renew every six months so it will be necessary to change out the cards when the new ones come in. Do not rely solely on digital cards because you may not have access to them if your device loses power or you are in an area with little to no data. Some policies automatically cover a new vehicle when purchased by an insured individual (sign and drive), however, this coverage has a time limit before the vehicle must be added to the policy, and policies that don't allow sign and drive coverage will need to be notified before the new vehicle will be covered. Always advise your insurance agent when you change your name, address, phone number, marital status, and household members as well.

Understanding what you need your insurance to do is the first step to getting the right coverage for you. Always do your research when it comes to insurance policies to ensure you are getting all the benefits you need and don't pay for ones you don't.

E. M. Prince, Nov. 9, 2020

AAA Automotive. (2020). Windshield repair and replacement. https://www.aaa.com/autorepair/articles/windshield-repair-and-replacement

Insurance Information Institute. (2020). Auto insurance basics – understanding your coverage. https://www.iii.org/article/auto-insurance-basics-understanding-your-coverage

NerdWallet. (2019, May 20). Key terms for understanding car insurance quotes. https://www.nerdwallet.com/blog/insurance/key-terms-understanding-auto-insurance-quotes/

Rawpixel.com, (n.d.). People with a car insurance policy [Digital image]. Retrieved November 09, 2020, from https://stock.adobe.com/search/free?filters%5Bcontent_type%3Aphoto%5D=1&filters%5Bfree_collection%5D=1&filters%5Bcontent_type%3Aimage%5D=1&order=relevance&safe_search=1&k=car+insurance&search_page=1&search_type=usertyped&acp=&aco=car+insurance&get_facets=1&asset_id=227224135