Personal Insurance Coverage
Best Guide To The Right Auto Insurance in 2023
TLTR: This blog explores auto insurance and how you can get one according to your needs.
Imagine, it’s the weekend and you are out on a family drive. Winding roads, clear sky, and upbeat music – could this day get any better? Coupled with a warm weather and you swaying with the music as you drive along, BAM! You’ve just rear-ended the van in front of you. Crumpled hood, smashed in bumper and the other driver is complaining of neck pain.
At this point, you’ll see hefty bills alert! But thanks to your auto insurance, you know you’re covered and won’t have to dig deep in your pockets to cover the costs.
Road accidents happen more frequently than you realize. The Association for Safe International Road Travel reports that road accidents cost US $380 million annually in direct medical costs. Compared to other high-income countries like Canada, Australia, Western Europe, and Japan, the US has a 50% higher number of deaths from road crashes. Clearly, accidents in the US are unfortunately a common occurrence, and it’s vital that you have auto insurance.
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Auto Insurance and Personal Automobile Policy
Auto insurance, is a legally binding contractual agreement between you (the insured) and the insurance company (the insurer). It protects you against gratuitous financial losses due to vehicular theft or vandalism, as well as vehicular damage, property damage, and medical expenses arising from an accident in return for a monthly premium.
Broadly categorizing, there are two types of auto insurance–commercial auto insurance and personal auto insurance, also known as personal automobile policy (PAP). Commercial auto insurance is for vehicles used primarily for commercial purposes, while PAP or auto insurance is for privately owned cars.
What Does PAP Cover?
By and large, the available PAP coverages depend on the laws of your state and the type of policy that you purchase. However, the general coverages of a PAP are as below:
Auto Liability Coverage
At this point, in most states, auto liability coverage is mandatory. The auto liability coverage can be for:
- Bodily Injury Liability – Costs associated with a third party’s injuries caused by an accident.
- Property Damage Liability – Costs related to replacing or repairing another person’s property.
Basically, auto liability coverage covers all the costs that you are liable for.
Medical Payments or Personal Injury Protection (PIP) Covered Under Auto Insurance
Medical payments following car accidents can be quite high. For any death or bodily injury sustained in an auto accident, your PAP also pays for reasonable medical and funeral expenses. PIP, on the other hand, covers you and your passengers’ health costs as well as results in lost wages after an accident.
For instance, according to the Florida Department of Financial Services in Florida, PIP covers 80% of all reasonable and necessary medical expenses like x-rays, ambulance, hospital, dental, rehabilitative, and nursing services. It also pays 60% of lost wages and has a $5,000 death benefit.
Uninsured and Underinsured Motorist Protection (UI/UIM) Liability Coverage
A PAP is not mandatory in all states and many drivers go without one. Additionally, even in states where having a PAP is compulsory, some drivers may be underinsured. There is a possibility that you may get in an accident with an uninsured or underinsured motorist. In such cases, UI and UIM coverages cover your costs for bodily injury and property damages.
Physical Damage Coverage
Your PAP covers damages to or a complete loss of your insured auto (owned or non–owned like a borrowed car). Due to this, you can decide how much property damage cost you want your PAP to cover you against different risk exposures.
Collision Coverage
Under collision coverage, your PAP will cover the costs to repair your vehicle after a collision with another vehicle or any object like a fence. Your insurer pays for the repair or replacement of your vehicle. The replacement coverage is provided by deducting your deductibles from the actual cash value of your auto. Usually, your lender and auto leaseholder ask for collision coverage.
Comprehensive coverage
Comprehensive coverage covers physical damage to your insured auto from theft, vandalism, fire, hail, or falling objects. Your insurer pays for the repair or replacement costs of your damaged auto when the costs are caused by covered perils. However, this coverage excludes any damages caused due to collision or overturn. Though comprehensive coverage is optional, your lender may ask you to include it in your PAP.
Other coverages
There are other types of PAP coverages that you can include per your needs. Your local auto insurance agent will advise you during the insurance purchase process. The different coverages that you may want to ask about are:
- Rental reimbursement coverage
- Sound system coverage
- New auto replacement coverage
- Gap coverage
- Towing and labor cost coverage
Sometimes accidents can result in substantial expenses on your behalf. However, an appropriate PAP with an adequate insured amount helps you cushion that blow.
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Exclusions For Car Insurance
It’s important to know that your PAP does not cover all kinds of damages nor all kinds of risks. There are some exclusions, which you might need to consider:
- Payments for intentional bodily injury or deliberate property damage are not entertained.
- Compensation won’t be provided if someone uses your insured auto without your permission.
- No coverage for vehicles that are designed for off-road rides.
- Coverage for vehicles with less than four wheels is not given.
- No coverage for vehicles used for flight or in water.
For this reason, it will be important for you to wisely pick a reliable auto insurance company.
Common Endorsements
Endorsements help you personalize your insurance policy by adding, modifying, or removing coverages as per your need. The most common endorsements for your PAP are as follows:
Lessor
If you hit someone with your leased car, the injured party can sue you and your lessor. Given that be, a PAP is viable to cover defense costs for your lessor too.
Trust Endorsement
If you hit someone while driving a car whose title is held solely in the name of your family trust, then the injured party can sue both you and the trust. With trust endorsement, you add the trust as an additional insured.
Additional Resident of your household
This endorsement is for additional residents of your household like roommates, domestic partners, housekeepers, etc. who may use your vehicle but do not own it. With this endorsement, your PAP extends coverage to the named person.
Miscellaneous Type Vehicles
It’s important to realize that recreational vehicles like dune buggies, motorcycles, motor homes, motorized gulf carts, etc., are usually excluded from a standard PAP. You can either apply for individual coverages such as golf cart insurance or drone insurance.
You can also protect your recreational vehicles through a Miscellaneous Type Vehicles endorsement on your PAP.
Limited Transportation Network aka No Passenger Public or Livery Endorsement
If you use your vehicle for ridesharing, this endorsement is for you. Typically, your PAP contract is void if you use your auto for commercial purposes. This endorsement limits or excludes coverage from the time you log into Uber or Lyft or any transportation network platform, regardless of passenger occupancy in your auto.
Once you add endorsements to your policy, they become a part of the legal contract. Reach out to your local auto insurance agent to get expert advice on the type of PAP you need.
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Frequently Asked Questions
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Do I need auto insurance?
Almost all states require you to have auto insurance except Virginia, New Hampshire, and Mississippi. If you are a Virginia resident and do not have auto insurance, you are subject to an uninsured motor vehicle fee by the state. Likewise, in the other two states, you have the option to post cash bonds.
Additionally, many other states also give the option to self-insure by posting a bond or depositing funds at the DMV. However, this usually costs tens of thousands of dollars, so may not be a realistic option for the average driver.
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How can I keep my auto insurance costs low?
There are many ways to keep your premiums low:
- Maintain a good driving record.
- Make timely payments to your insurer.
- Determine the cost of auto insurance before purchasing a vehicle. For instance, high premiums are charged for high-performance vehicles.
- Keep your annual mileage low.
- Ask about available discounts. Here are a few of the more common ones:
- Specific occupational discounts.
- Students with good grades can lower their premiums.
- Have multiple policies with the same insurer.
- Have multiple cars on the same policy.
- Take a defensive driving course.
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Do my personal auto insurance cover losses if I use it for ridesharing?
No, as soon as you use your car for commercial purposes like ridesharing, your insurance contract will be void. A commercialized vehicle has higher liability risks than a personal vehicle. Higher risks mean higher costs of car insurance. If you want to use your vehicle for ridesharing, you can either opt for an endorsement or purchase rideshare insurance.
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Highlights
- Auto Insurance and Personal Automobile Policy
- What Does PAP Cover?
- Exclusions For Car Insurance
- Common Endorsements
- Frequently Asked Questions
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Thanks for elaborating on how a car insurance policy covers your vehicle from damage caused by fire and other natural disasters. I’ve been thinking about getting a car for a while now, and I want to make sure that it’ll last for me for a couple of years. I’ll be sure to keep this in mind before driving away from an auto dealer.
Always glad to help, Zachary! When you get your new car, don’t forget to go to our agent directory to find yourself a local, reliable insurance agent.
Your statement that your PAP will pay for the costs of repairing your car following an accident with another car or any other object, such as a fence, caught my attention. My relative just purchased a new vehicle and is seeking for insurance. I appreciate the article, and I’ll let him know about your website so he can pick the best vehicle insurance provider.
I like how you mentioned the physical damage comprehensive coverage an insured car covers from vandalism, theft, or falling objects. My sister just recently got her first car and she was advised to get car insurance for it to protect her from unexpected accidents or acts of nature that can cause her or her car harm. This article is so informational it taught me so much about different insurance coverage.
It really helped when you said that collision coverage under auto insurance will cover the repairs your vehicle will need after a collision with another object or vehicle. My dad’s urging me to get auto insurance for my recently bought SUV and he might be right. An insurance will put me at ease knowing I’ll be covered if an unforeseen incident happens to my car.
It’s good to know that auto liability coverage is mandatory. I just got off of my parents’ car insurance, so I would like to find my own policy. I will definitely be reviewing this article to help me find the right policy for my needs.
I’m glad that you informed us how most states require auto liability coverage as mandatory since they cover costs associated with bodily injuries and property damage. I recently got my driver’s license and I plan to buy a secondhand car soon, so I’m looking at my options for insurance next. I’ll be sure to choose a well-reputed automobile insurance company for my insurance plans.
Ooh, nice! You certainly grabbed my attention when you suggested that we could actually save lots of money by acquiring multiple coverage from the same insurance provider. I’m so happy for my workmate because she’s finally have enough money to purchase a car next month. Nevertheless, I must tell her about this so she’ll opt for a suitable policy in the end.
Thank you for explaining about comprehensive coverage. I’ve been wondering what this all covers since talking to an agent yesterday. I think knowing this will help me to understand what kind of coverage we would like for our car.
I appreciate that you explained that in exchange for a monthly premium, it offers protection against unnecessary financial losses brought on by vehicle theft or vandalism, as well as against vehicle damage, property damage, and accident-related medical costs. Over the weekend, one of my close friends bought a new automobile and is eager to have it insured. She can choose the ideal vehicle insurance provider for her needs by asking our buddy group for recommendations on reputable car insurance companies. Thanks for your article!
I appreciate that you made clear that your (the insured’s) purchase of motor insurance is a legally enforceable contract between you and the insurance provider (the insurer). Now that I’ve heard of it, I can finally research auto insurance and decide which kind to obtain because I recently purchased a new vehicle. I’ll be looking into it because I heard a reputable auto insurance company gives vehicle insurance rates.