Skip to main content

Understanding Car Insurance Coverage

Most of us have to drive around to do things like go to work and visit friends. And driving around means we need car insurance coverage, and understanding it is vital to get the right policy. This guide covers everything you need to know about auto insurance coverage.

What Does Car Insurance Actually Cover?

The first time you hear about car insurance, you probably have a simple question: what does that insurance cover? But answering this question is a bit complicated.

That’s because your car insurance may cover several different things or only one thing. And that’s the difference between getting full coverage auto insurance and getting only liability insurance.

We think everyone needs more than just the minimum level of coverage. But not everyone necessarily needs full coverage. This guide will help you figure out how much protection you and your car actually need.

Different Types of Car Insurance

There are several different kinds of car insurance. Before you can decide what type of coverage you need, it’s important to understand all the available coverage.

Liability Insurance

The most basic kind of car insurance is liability coverage. Bodily injury liability helps pay for injuries or even death that occurs because of an accident you caused. And property damage liability pays for property damage that occurs because of an accident you caused.

How much liability protection you have depends on the level of coverage you pay for. For example, your state will have a legally required minimum level of coverage for each type of liability insurance (such as $10,000 for bodily injury and $10,000 for property damage in Florida). If the damage exceeds that amount, you will need to pay for the rest out of pocket.

Collision Coverage

The primary quality of liability insurance is that it pays out when you are at fault. If the other person is at fault, you will get paid out from their own liability insurance.

However, many drivers want some guaranteed protection for their vehicles, which is exactly what collision insurance offers.

Whether you cause an accident or are the victim of an accident, collision coverage will pay for damage to your vehicle up to the covered amount.

Comprehensive Coverage

While collision insurance protects your vehicle from accidents, there are other ways your automobile might get damaged. And one of the best ways to protect against these additional threats is comprehensive coverage.

Comprehensive coverage is one of the most misunderstood terms in the world of car insurance. So let’s review some answers to your question: What does comprehensive coverage car insurance cover?

Typically, your comprehensive insurance will cover your car in the event of vandalism, theft, flood, or fire. Other covered losses may be specified by your insurance carrier.

As with other types of insurance, though, comprehensive coverage will only cover the losses specified in your policy. Despite the name, this type of insurance is not completely comprehensive. And you’ll need both collision and comprehensive insurance if you are leasing or financing a car.

Extra Medical Coverage

When paying for your own bodily damage, the other person’s liability insurance is often not enough. If you require medical care (especially prolonged medical care), the costs may soon exceed their level of liability coverage. And if you were at fault, then liability insurance will not take care of any medical costs.

This is why some drivers get the protection of extra medical coverage. There are two types of medical coverage you may be interested in.

The first is medical payments coverage. As the name implies, this coverage helps pay for medical expenses related to a car accident you were in (regardless of who was at fault). This coverage will pay for medical bills, assorted doctor’s visits, and even funeral expenses, and you are protected as a pedestrian or as a passenger in someone else’s vehicle.

The other type of medical coverage is Personal Injury Protection. This is like an enhanced form of Medical Payments Coverage because it pays for more than your medical bills and funeral services. It also pays for lost wages, nursing care, medical prescriptions, and more.

Protecting Against Other Motorists

States require a minimum level of liability coverage so that you can drive with reasonable peace of mind. If someone else causes an accident while driving, you can reasonably expect to be compensated by their liability coverage.

However, other drivers sometimes don’t have enough coverage to cover the damage, and they may not have enough money to pay for the rest out of pocket. And despite the law, some drivers still drive without any insurance at all. That’s why you may want to take out underinsured motorist coverage as well as uninsured motorist coverage.

In this case, the names are self-explanatory. Uninsured motorist coverage pays compensation when the other driver has no insurance. Underinsured motorist coverage pays compensation when the other driver does not have enough coverage to pay for the damages.

What Is Full Coverage Car Insurance?

two happy women in convertible car

Another term you sometimes hear is “full coverage auto insurance coverage.” But what does this term actually mean?

Technically, there is no type of insurance called “full coverage.” Instead, this is a kind of nickname for a combination of insurance coverages.

What Does Full Coverage Car Insurance Cover?

Different carriers may recommend different combinations of coverage for you. But at the minimum, full coverage is usually a combination of liability, collision, and comprehensive coverage.

Like the term “comprehensive coverage,” full coverage auto insurance is often misunderstood. While this combination of coverages offers very solid protection for you and your vehicle, anything not outlined in your “full coverage” policy will not be covered.

Speaking the Language of Car Insurance

It doesn’t take long to learn some of the most important car insurance terms. And once you have the lingo down, you’ll be better able to understand your own policy.

One term we use a lot is “coverage.” This directly spells out the exact limits of protection for your policy. Anytime you are wondering whether your insurance protects against something, you can review the coverage section of your policy, which is the contract you have with your insurance carrier. Keep in mind that it’s legally binding, so make sure to study it closely before you sign anything.

Your deductible is the amount you have to pay out of pocket before your insurance policy will cover anything. If the total damage in an accident is not higher than your deductible, then your insurance may not pay any compensation.

Meanwhile, the limits in your insurance policy define the maximum amount the insurance company will pay out for different kinds of coverage. If someone has the minimum property damage liability coverage of $10,000 in Florida, for example, their carrier will not pay a penny past $10,000 after an accident.

Finally, your insurance premium is just another term for your insurance bill. Most drivers pay this bill from month to month. However, you may be able to get a lower premium if you are willing to pay for your insurance in 6- or 12-month increments.

Do You Have the Right Level of Insurance?

Now you know more about the different types of car insurance coverage. And you probably have another question: How do I know if I have the right level of coverage?

Unfortunately, this is not a question that is easy to answer. Or another way of looking at it is that the right answer changes from person to person.

Generally speaking, we recommend that everyone gets more than the minimum level of insurance coverage. This is because the cost of a car accident you are at fault for may very quickly exceed those minimum levels of coverage, and then you’re in some serious debt.

However, not everyone necessarily needs full coverage insurance. For example, the extra protection that comes from adding comprehensive coverage is great if you are worried about things like floods, theft, and vandalism. But if you live in a low-risk area for these things, this coverage may be unnecessary.

Ultimately, it is most important to find the “sweet spot” between your coverages, your deductible, and your limit. Higher limits usually raise your premium, and higher deductibles lower it. But only you can decide which balance of limit vs. deductible is right for your lifestyle.

Find the Best Auto Insurance Coverage for You

Discover the difference that Freeway Insurance can make for your premium and peace of mind. You can get started with a quote online or visit us at an office near you. And you can always call us at (800) 777-5620 for a quick and easy quote!

Ready to Get a Quick Quote?