There are several coverages included in auto insurance, each of which covers a different aspect of your risk as a driver. Here is a brief overview of the most common coverages:
- Liability: Liability coverage will pay for repairs, property damage, and medical costs for injuries suffered by others in the vehicle, plus other expenses related to an at-fault accident such as legal fees.
- Collision: If you hit another vehicle or an object, your collision coverage will pay for to repair the damage to your vehicle after you pay a deductible.
- Comprehensive: Also known as "other than collision," this pays for losses to your vehicle if it suffers damage from something other than an accident, such as a tree falling on your vehicle.
- Uninsured/underinsured motorist: Pays for injuries and property damage you suffer in an accident when the driver at fault either is uninsured or does not have enough insurance to cover your injuries and damage.
Additional coverages can be purchased to cover things like medical expenses, rental vehicles, and roadside assistance.
How Does Auto Insurance Work?
Auto insurance helps you to recover from damage, injuries, and expenses related to a collision or other incident. When you purchase a policy, you'll have a deductible that must be paid before benefits kick in.
In the event of an accident, you would pay your deductible and then receive financial coverage or reimbursement up to your policy limits. Each type of coverage you purchase will have its own limits, and every state has minimum limits that they require of drivers.
Why Is Auto Insurance Important?
Whether you're on the road or your vehicle is parked outside your home, there's a risk of an accident that can result in damage for you and your vehicle. Auto insurance provides a safety net when drivers make mistakes or unexpected things happen.
As a driver you're responsible for any injuries or damage you cause to others when driving your vehicle. If you're in an accident with an uninsured driver you'll be responsible for your own injury and damages as well. These costs can add up, and the lower the amount of auto insurance coverage you have, the more you have to pay out of pocket.
Is Auto Insurance Required?
Forty-seven states require vehicles to have some level of insurance coverage before they can be on the road. Failure to have insurance can mean a fine and/or jail time in these states, not to mention suspension or revocation of your driver’s license.
In most of these states, the minimum required coverage is liability insurance to cover damage and injuries you may cause, though a handful of states require additional coverage, such as collision and comprehensive.
How Expensive Is Auto Insurance?
The national average cost for auto insurance is $1,311. While rates vary from state to state and take into account a variety of factors, car insurance is usually fairly affordable.
The factors that affect your costs include whether your vehicle is new or used, the overall safety rating of the car, your driving record, your age and gender, and even your ZIP code, as certain areas tend to have a higher occurrence of accidents and claims than others.
The discounts you may qualify for include:
- Good student discount: This may apply if a young driver in your family has good grades.
- Good driver discount: This may apply if you’ve been accident-free for a certain amount of time.
- Multi-car discount: This may apply if you insure more than one of your vehicles with the same company.
- Multi-policy discount: This may apply when you insure both your home and vehicle with the same company.
Your local agent can also talk with you about these discounts and determine the ones that would benefit you and save you the most money on your policy.
Is Auto Insurance Tax Deductible?
If you are self-employed and use your personal vehicle for business, you can take a tax deduction for your car insurance on the actual mileage used for business travel.
If you drive a vehicle 15,000 miles for business and 15,000 for personal use, your deduction will cover half of your overall use.
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