What are the Components of a Car Insurance Policy?

Car insurance policies are like the cars they insure: they’re made up of many components that work together symbiotically. For you, your car, and your car insurance policy to work optimally, those parts need to be in functioning order. A car can’t run without all its parts, and your auto insurance policy can’t work without all the proper coverage.

People understandably have lots of questions for their insurance broker when searching for a car insurance policy, like: “What’s the best car insurance?” and, “What’s the cost of car insurance?” Uninsured customers want to be able to compare car insurance quotes and policies. Some customers need special types of car insurance, like classic car insurance, or even sound system insurance. Everyone wants the cheapest car insurance with the best coverage, but for your insurance policy’s engine to rev, you have to start with the basics.

Liability Insurance

Fact: liability car insurance is mandatory in almost every states and drivers are required to get the minimum amount of coverage set by state law. Fact: today, 1 in 8 drivers, around 16%, are completely uninsured. In five states, Mississippi, New Mexico, Michigan, Tennessee, and Florida, more than 20% of drivers are uninsured (with California at #12). Unfortunately, you can’t tell who’s insured on the road. Avoid financial loss in the event of an accident or theft by getting liability insurance. Considering that liability insurance is the cheapest car insurance, with an average car insurance premium of between $80 and $150 per month, you have no reason not to.

There are two components to liability insurance: bodily injury and property damage coverage. Bodily injury liability coverage helps pay for costs associated with injuries or deaths caused during an accident. Property damage liability coverage reimburses other drivers for any damage you or anyone driving your car might have caused. Californians spend over $520 each year on liability insurance. The minimum liability coverage in California is $15,000 for injury to one person, $30,000 for total bodily injuries in one accident, and $5,000 for property damage liability. When your little brother borrows your car and hits the neighbor’s mailbox, you’ll be glad that you have all the liability coverage you need.

Comprehensive Coverage

You’re the world’s most cautious driver. You’ve never been in an accident of any kind. Unfortunately, that won’t stop that dangling tree branch from totaling your parked car. For everything outside of your control, there’s comprehensive coverage, or “full coverage car insurance,” an optional form of coverage that helps pay for damages from things like fires, vandalism, or animals. Over 77% of insured drivers get comprehensive coverage in addition to liability insurance. According to the National Association of Insurance Commissioners Auto Insurance Database Report, Californians spend an average of $100 each year on comprehensive coverage. Comprehensive coverage is there to protect you from all of life’s surprises, whether it’s the little league home run that broke your windshield or the raccoon that just climbed through.

Collision Coverage

One night, you’re driving down the road. Suddenly, a deer leaps in front of your car. You swerve out of the way but instead of hitting the deer, you hit a tree. After a trip to the mechanic, you are informed that your car has been declared a total loss. Collision insurance helps pay for costs to repair or replace your vehicle if you get in an accident involving an object or another vehicle.

When leasing or financing a car, lenders will typically require customers to purchase collision insurance. Over 73% of insured drivers in the United States buy collision coverage and Californians spend an average of $396 on collision coverage each year. An average collision claim in California costs over $3,000. California premiums increase more than any state in the country for drivers after a single car insurance claim worth $2,000 or more is filed. That adds up quickly.

Medical Payments Coverage

There’s a three-car accident on the highway. You’re right in the middle. A car hits your fender. You hit a car in front of you. Medical payments coverage, an optional coverage typically referred to as “Med Pay,” can help pay for medical costs if you or your passengers are injured in an accident regardless of who’s “at fault.” If you get injured, medical payments coverage can help pay expenses related to health insurance deductibles and co-pays, doctor and hospital visits, surgeries, medical technician fees, and professional nursing services. If you don’t have medical payments coverage, you have to pay out of pocket for these costs.

Personal Injury Protection

Personal Injury Protection coverage, otherwise known as “PIP” or “no-fault insurance,” is an extension of your car insurance that helps pay for you or your passengers’ medical expenses after an accident. In California, more than one driver can be deemed “at fault” in an accident. But, just like medical payments coverage, personal injury protection coverage can help pay for medical expenses regardless of who’s at fault. Personal injury protection can even help cover lost wages or child care expenses. California is described as a “fault” state, meaning it does not require drivers to carry PIP insurance. In California, drivers must carry proof of financial responsibility and cover the costs of any damage caused in accidents.

Uninsured/Under-Insured Motorist

You’re sitting at a café when you see someone crash into your parked car. You hope their liability insurance will cover the damage, but it turns out they don’t even have liability insurance. What do you do? Luckily, you’re covered. You have uninsured motorist coverage, which protects you from costs in an accident where the at-fault driver doesn’t carry liability insurance. Under-insured motorist coverage similarly protects you from at-fault drivers whose liability insurance can’t cover the damages or medical expenses incurred in an accident.

Other Optional Types of Insurance

So now we’ve assembled the basics of your auto insurance policy. What’s next? When shopping for the best policy, ask your auto insurance agency to provide a quote on optional insurance coverages. Rental reimbursement coverage, which helps you pay for transportation expenses while your car is being repaired after an accident, has become a popular form of insurance in certain metropolitan cities. For new and used vehicle owners, GAP insurance covers the difference between the cash value of a vehicle and the balance still owed on its financing. New car replacement coverage helps new car owners recoup the total value of their car if it’s totaled in under one year or has been driven less than 15,000 miles. Comparable to AAA roadside assistance, towing and labor coverage pays for your vehicle to be towed after an accident and helps cover labor expenses for repairs.

People who drive for ridesharing apps like Uber and Lyft should ask their insurance brokers for a free quote on ridesharing coverage, which helps cover damages if you use your vehicle to transport paying passengers. Most insurance companies exclude coverage on accidents if the personal vehicle is used for work. For the audiophiles and people who sing in their cars, sound system coverage helps protect your sound system so you can keep the beat steady. When you’ve finally got your little red convertible, you’ll need classic car insurance, which covers the appreciated value of your collector cars. Like you, it just gets better with age.

Just like you review your car with a mechanic, you should review your car insurance policy with your policy broker. Call Frontlight Insurance today and ask your insurance broker for a free quote on specialty types of coverage. You may not know you need it. Always discuss the coverage you need with your broker and have him compare your car insurance quote across multiple auto insurance companies. Remember: the best car insurance policy is car insurance that’s best for you!