If you own and operate a car, truck, or other vehicle, then you need auto insurance.
There are more basic versions but if you own and operate vehicles as part of your business (or your employees do) then you may require a different type of coverage, even if these vehicles are your personal ones.
In addition, you will need to include each member of your family who drives your vehicle(s) on your auto insurance policy or policies (if you have multiple vehicles to cover).
Determining the type of auto insurance that you need depends on the cars, trucks, or other vehicles that you own, who will be driving them, your location, where they will be normally parked, and more.
What is Auto Insurance?
Auto insurance exists to provide financial protection for cars, trucks, motorcycles, and other road vehicles; it is also referred to as vehicle insurance, car insurance, or motor insurance.
It provides financial protection for your vehicle against physical damage and for you from bodily injury in the event of a collision or accident.
It typically covers liability from accidents that occur while you or another party are operating your vehicle.
What’s more, auto insurance can cover your assets in the case of theft or damage to your vehicle from events other than collisions, like vandalism or weather damage (think hail storms or similar natural disasters).
Of course, all of this coverage varies depending on your individual policy and coverage.
You will also need to consider the deductible that you will need to pay before any repairs or work is done on your car, truck, or other vehicle in the event of damage.
Why Do You Need Auto Insurance?
If you own and drive a car, you need insurance to cover any potential damage to your vehicle and any other vehicles in the event of an accident or collision.
Auto insurance also provides financial protection to you for bodily injury in the event of a collision or accident, This policy should also include other drivers in the event that you allow a friend or family member to drive your car. Your needs may also necessitate getting uninsured motorist insurance (which is required in some locations).
This type of insurance covers damages and bodily injury in the event that you are in a collision or an accident with an uninsured driver.
Each state in the U.S. has their own mandatory minimums and related rules, so you should always consult with an insurance agent to make sure your policy is appropriate for your state.
What Type(s) of Auto Insurance Do You Need?
Besides the basic coverage that is likely required, you may want to include comprehensive coverage in case of theft or other damage as well as collision insurance.
You may also need coverage for uninsured motorist.
Uninsured driver insurance is important because in the event that you are in a collision or accident that involves an uninsured driver you’ll want to make sure that you are covered.
If you’ve recently purchased a new car or truck, you may also want gap insurance.
This type of coverage is optional, but useful for newer cars that you may be adding to existing auto insurance policy because it is meant to cover the difference between the balance of your lease or loan and what your insurance claim pays out if your vehicle is totaled.
How Do You Choose the Right Type of Auto Insurance?
The type and amount of auto insurance that you need depends on the value of your vehicle, your age, location, and several other factors.
Each state in the U.S. has their own mandatory minimums and related rules, so you should always consult with an insurance agent with experience and a solid understanding of your state’s distinct laws and regulations surrounding auto insurance.
Furthermore, every U.S. state does require drivers to carry insurance for both bodily injury and property damage, but the minimum can range from $30,000 to $100,000 depending on the state.
Auto insurance can cover some or all of the following issues:
- Medical bills for the insured party (e.g. if you or your passengers suffer bodily injury during an accident or collision)
- Property damage caused by the insured party (if you cause damage to another vehicle or other property during a collision or accident)
- Physical damage to the insured vehicle
- Damage to third parties (this covers both the vehicle and the people in it, property damage and bodily injury)
- Damage such as fire and theft
- Rental vehicle costs if your car is damaged or totaled
- Costs for towing the vehicle to a mechanic for repairs
- Accidents or collisions involving uninsured motorists
Do You Need Uninsured Motorist Insurance?
Chances are that you do, because this protects you from damages caused by another driver who doesn’t carry insurance (you may have to pay a premium for this coverage).
Your jurisdiction may not require these types of coverage, but it can be a wise decision to carry these policies if you can.
Standard requirements for auto insurance include bodily injury liability, property damage, and medical payment coverage; better car replacement, towing coverage, and rental car coverage may be additional benefits you may want to consider.
How Much Does Auto Insurance Cost?
Car insurance costs vary depending on your location, age, and a range of other factors as determined by your insurance company.
Areas with high crime rates tend to result in higher insurance premiums, since your car or truck may be more likely to be damaged, broken into, or stolen.
The specific amount of reported thefts, year, and model of your vehicle will also contribute to the insurance company’s assessment of your risk and therefore the cost of your premium.
The type of vehicle also matters.
The two factors that matter most are performance capability and cost at retail.
Luxury cars or trucks may result in a higher premium since they cost more to repair and replace, and high performance vehicles may as well (high performance vehicles can be defined as those that are created to be capable of higher speeds and performance levels) because they are deemed to be capable of promoting riskier driving behaviors despite the personal driving record of the owner.
Your driving record also has an impact on your insurance cost.
For instance, individuals with a clean driving record are more likely to get lower premiums, while those with accidents, collisions, and traffic or moving violations will see their rates go up, especially if they are at fault.
Insurers often allow for one moving violation every three to five years before your premiums increase, but that depends on the company and its policies – so check yours or ask your insurance agent if you have questions.
How Do Car Insurance Deductibles Work?
Note that in addition to your monthly premium, you will likely have a deductible or excess payment.
This is a fixed amount that must be paid each time your car is repaired and you are making a claim on your auto insurance policy.
Typically, this payment is made to the mechanic or garage directly, and your auto insurance claim makes up the difference.
That said, if your car is totaled and considered a write-off for insurance purposes, your insurance will deduct the excess amount – the deductible – from your settlement payment.
However, if the accident or collision was determined to be the other driver’s fault, then you may be able to reclaim the deductible or excess payment from their insurance company.
What Other Types of Insurance Are Related to Auto Insurance?
An umbrella liability policy can help to cover any damages or losses that fall outside the limits of your auto insurance policy.
Auto umbrellas are typically lumped in with other umbrella liability insurance policies.
If you have a motorcycle, a boat, ATVs, or similar items, you will need specialty insurance for those vehicles.
Have questions or concerns about the type of policy you need?
Contact an ASCO insurance agent who understands the requirements for your state and make sure your assets are covered.