Automobile Coverage

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What is auto insurance?

Auto insurance protects you against financial loss if you have an accident. It is a contract between you and the insurance company. You agree to pay the premium and the insurance company agrees to pay your losses as defined in your policy.

Auto insurance provides property, liability & medical coverage:

Property coverage pays for damage to or theft of your car.
Liability coverage pays for your legal responsibility to others for bodily injury or property damage.
Medical coverage pays for the cost of treating injuries, rehabilitation and sometimes lost wages and funeral expenses.

Six different kinds of coverage

An auto insurance policy is comprised of six different kinds of coverage. Most states require you to buy some, but not all, of these coverages. If you're financing a car, your lender may also have requirements.

Most auto policies are for six months or a year. Your insurance company should notify you by mail when it's time to renew the policy and to pay your premium.

Why do you need auto insurance?

It's really all about protecting yourself financially.

If you're in an accident or your car is stolen, it costs money (often a lot of money,) to fix or replace it.

If you or any passengers are injured in an accident, medical costs can be extremely expensive.

If you or your car are responsible for damage or injury to others, you may be sued for much more than you're worth.

Not only is having insurance a prudent financial decision, many states require you to have at least some coverage.

Frequently Asked Questions

Common questions regarding your personal needs for automobile insurance.

What is property damage liability?

This coverage pays for damage you (or someone driving the car with your permission) may cause to someone else's property. Usually, this means damage to someone else's car, but it also includes damage to lamp posts, telephone poles, fences, buildings, or other structures your car hit.

Collision
This coverage pays for damage to your car resulting from a collision with another car, object, or as a result of flipping over. It also covers damage caused by potholes. Collision coverage is generally sold with a deductible of $250 to $1,000 — the higher your deductible, the lower your premium. Even if you are at fault for the accident, your collision coverage will reimburse you for the costs of repairing your car, minus the deductible. If you're not at fault, your insurance company may try to recover the amount they paid you from the other driver's insurance company. If they are successful, you'll also be reimbursed for the deductible.

Comprehensive
This coverage reimburses you for loss due to theft or damage caused by something other than a collision with another car or object, such as fire, falling objects, missiles, explosion, earthquake, windstorm, hail, flood, vandalism, riot, or contact with animals such as birds or deer.

Comprehensive insurance is usually sold with a $100 to $300 deductible, though you may want to opt for a higher deductible as a way of lowering your premium. Comprehensive insurance will also reimburse you if your windshield is cracked or shattered. Some companies offer glass coverage with or without a deductible.

States do not require that you purchase collision or comprehensive coverage, but if you have a car loan, your lender may insist you carry it until your loan is paid off.

Do I need insurance to rent a car?

When renting a car, you need insurance. If you have adequate insurance on your own car, including collision and comprehensive, this may be enough.

Before you rent a car check these tips

Call your credit card company

Find out what insurance your card provides. Levels of coverage vary.

Contact your insurance company

Find out how much coverage you have on your own car. In most cases, the coverage and deductibles you have on your personal auto policy would apply to a rental car, providing it's used for pleasure and not business. If you don't have comprehensive and collision coverage on your own car, you will not be covered if your rental car is stolen or if it is damaged in an accident.

If you don't have auto insurance, you have two choices: you can buy coverage at the car rental counter, or you can purchase a non-owner auto liability insurance policy.

Rental car counter insurance

Some rental car companies combine personal accident and personal effects coverage together as one type of insurance, while others sell it individually.
The cost of insurance at the rental car counter will vary depending on the rental car company, state, and location of the dealer and the type of car you rent.
Some rental car companies may check your credit and driving history and may deny coverage. Check with the rental car company to find out its policy.

Rental car counter insurance can provide the following coverage:

Collision damage waiver (CDW)

Sometimes called a loss damage waiver (LDW), this coverage relieves you of financial responsibility if your rental car is damaged or stolen. The CDW may be void, however, if you cause an accident by speeding, driving on unpaved roads, or driving while intoxicated. This coverage generally costs between $9 and $19 a day. If you have comprehensive and collision on your own car, you may not need to purchase this coverage.

Personal effects coverage

This provides coverage for the theft of personal items in your car. However, if you have homeowners or renters' insurance, you may be covered for items stolen from the car, minus your deductible. You need to have receipts or other proof of ownership. This type of insurance usually costs about $1 to $4 per day.

Liability insurance

This provides excess liability coverage of up to $1 million for the time you rent a car. Rental companies are required by law to provide the minimum level of liability insurance required by your state. Generally, this does not offer enough protection in a serious accident. If you have adequate liability coverage on your car or an umbrella policy on your home/automobile, you may consider forgoing this additional insurance. It generally costs about $9 to $14 a day. If you don't own a car, and rent cars often, consider purchasing a non-owner liability policy. Frequent car renters sometimes find this more cost-effective than constantly paying for the extra liability coverage.

Personal accident insurance

This provides coverage to you and your passengers for medical/ambulance bills. This type of insurance usually costs about $1 to $5 per day, but may be unnecessary if you are covered by health insurance or have adequate medical coverage under your auto policy.

Non-owned auto liability insurance

Instead of buying liability coverage from the car rental company each time you rent a car, you can purchase a non-owner auto liability insurance policy from an insurance company for about $300 a year which might be cheaper if you rent frequently.

In addition, if you're thinking of buying an umbrella liability policy, a non-owner auto policy may meet the underlying auto insurance policy requirements. Umbrella liability insurance provides high limits of liability coverage above basic policies. Most insurers will not issue an umbrella liability policy unless the basic policies meet certain dollar limits of coverage.

A non-owned auto insurance policy covers you for damage you may cause to someone else's car and liability for injuries to its occupants, or to pedestrian, in the event of an accident. The policy will also provide medical payments coverage for you and your passengers, and underinsured and uninsured coverage. This pays for the cost of an accident involving a hit-and-run driver or a driver who has little or no insurance.

However, non-owned auto insurance does not provide collision coverage. Collision coverage pays for damage to the car you're driving if you crash into another car or object or the car rolls over. You have to buy this from the car rental company. However, some credit cards provide collision coverage if the rental car is paid for with the card or check with your credit card company first.

Note: If you're renting a car abroad, you may need an international driver’s license.

What is uninsured & underinsured motorist coverage?

This coverage will reimburse you, a member of your family, or a designated driver if one of you is hit by an uninsured or hit-and-run driver.

Underinsured motorist coverage comes into play when an at-fault driver has insufficient insurance to pay for your total loss. This coverage will also protect you if you are hit as a pedestrian.

What coverage is provided if I pull a trailer with my vehicle?

In most cases, if the vehicle pulling the trailer is covered under the policy, the liability coverage will be extended to the trailer if you own the trailer. However, physical damage (comprehensive or collision) must be purchased separately. You will need to review your policy for exceptions.

What is bodily injury liability?

This coverage applies to injuries that you, the designated driver or policyholder, cause to someone else. Both you and any family members listed on the policy are also covered when driving someone else's car with their permission.

It's very important to have enough liability insurance, because if you are involved in a serious accident, you may be sued for a large sum of money. Definitely consider buying more than the state-required minimum to protect assets such as your home and savings.

What is PIP (Medical payments)?

This coverage pays for the treatment of injuries to the driver and passengers of the policyholder's car. At its broadest, personal injury protection, or PIP, can cover medical payments, lost wages, and the cost of replacing services normally performed by someone injured in an auto accident. It may also cover funeral costs.

What if I lease a car?

If you lease a car, you still need to buy your own auto insurance policy. The auto dealer or bank that is financing the car will require you to buy collision and comprehensive coverage. You'll need to buy these coverages in addition to the others that may be mandatory in your state, such as auto liability insurance.

Collision covers the damage to the car from an accident with another automobile or object.
Comprehensive covers a loss that is caused by something other than a collision with another car or object, such as a fire or theft or collision with a large animal.

The leasing company may also require “gap” insurance. This refers to the fact that if you have an accident, and your leased car is damaged beyond repair or “totaled,” there's likely to be a difference between the amount that you still owe the auto dealer and the check you'll get from your insurance company. That's because the insurance company's check is based on the car's actual cash value which takes into account depreciation. The difference between the two amounts is known as the “gap.”

On a leased car, the cost of gap insurance is generally rolled into the lease payments. You don't actually buy a gap policy. Generally, the auto dealer buys a master policy from an insurance company to cover all the cars it leases and charges you for a “gap waiver.” This means that if your leased car is totaled, you won't have to pay the dealer the gap amount. Check with the auto dealer when leasing your car.

If you have an auto loan rather than a lease, you may want to buy gap insurance to protect yourself from having to come up with the gap amount if your car is totaled before you've finished paying for it. Ask your insurance agent about gap insurance or search the Internet. Gap insurance may not be available in some states.

Can I drive in another country?

Most personal auto policies provide coverage for driving in Canada. However, we recommend that you check with us before taking your car across the border.

Mexican law requires that you purchase separate liability coverage from a Mexican insurance company prior to operating your vehicle in Mexico. Your personal auto policy may provide some limited coverage but this coverage must meet the insurance requirements of the Republic of Mexico. Failure to purchase the proper Mexican liability insurance could result in a substantial fine if you are involved in an accident while driving in Mexico. Again, we suggest that you check with our office prior to taking your vehicle across the border.

What coverage do I need for carpooling?

Environmental concerns, traffic congestion, convenience, desire to relieve driver stress, poor public transportation, lack or expense of parking are all factors that contribute to commuters forming driver groups or carpools. Parents use such arrangements to transport children to school, sports events, and extracurricular activities. It is also common for a student owning a car to carry classmates back and forth between home and school.

Regardless of the name, driver groups, share-the-ride arrangements, or carpools are a permanent part of the American scene. Typically, several drivers take turns assuming the responsibility for driving their companions. It's common for the turns to last a week and may be switched on a rotating basis. These people frequently live in the same area and work in the same office or plant. They may take turns driving or may regularly ride in one car and pay the owner a reasonable fee for gasoline, maintenance, and wear and tear.

The practice of a parent taking a group of children on an outing, to a “Little League” baseball game and the like, is commonplace. Other examples of group driving exposures are plentiful:

Church group activities
Book club members driving to their regular meeting or outing
Coaches taking players to practices or games
Employees traveling together to league games or practices, etc.

01 Liability Insurance Exclusion

Drivers involved in car pools and other group arrangements may wonder if the situation is covered under their auto policy. This concern is valid as many auto policies have restrictions. Typically, liability coverage under personal automobile policies does not apply to “liability arising out of the ownership or operation of a vehicle while it is being used as a public or livery conveyance.” (A public conveyance is a vehicle used indiscriminately in transporting the public without being limited to certain persons or occasions. A livery vehicle is one that is offered for rental.) There is slight variation in language among policies issued by various insurers, but the intent is the same: to exclude the use of a personal automobile for transporting people or property for income. However, this exclusion does not affect coverage for car pool, driver group, or share-the-ride arrangements.

You have already learned that many drivers use different ride-sharing arrangements. The typical automobile insurance policy covers these arrangements because the driving exposure is essentially the same. The common policy exclusion that refers to “public or livery conveyances” is to prevent coverage for business situations. Using a car or SUV that is insured by a personal auto policy to transport people or goods for hire is unfair to insurers. The premium a company charges for personal use is inadequate to cover “public or livery conveyances” that are typically:

Driven more miles
Exposed to worse (i.e., high density) traffic situations
Driven under more pressure to meet delivery schedules
Exposed to poorer driving conditions

In other words, such use calls for more careful underwriting, different or special coverages, and a higher premium. However, group-driving arrangements are another form of personal use such as using a car for commuting, vacations, personal errands, etc. The result is that a “personal” premium compensates an insurer for most pool arrangements.

02 Are there other coverage considerations?

Yes. Car owners may worry if their insurance is affected if another member of a pool is driving their car. The answer is that any person using the vehicle with the car owner's permission is covered along with the car owner.

Persons who drive in carpools may want to discuss the details with their insurance agent. An insurance agent may recommend that you carry higher bodily injury liability insurance limits. Higher medical payments limits may also be in order. Providing full details can help an agent make sure that any fees involved in the arrangement represent coverage for the driver's operating expenses and not additional income.

03 Conclusion

In most instances, using a car in a typical share-the-ride arrangement or carpool will not affect the protection under the personal auto policy. The fact that passengers pay a small amount of money to help cover the expense of automobile operation is unlikely to eliminate their driver's insurance coverage since the car is not being used as a “public or livery conveyance.” However, any fees received by a driver from car pool passengers should only reflect a reasonable share of the gas and oil expense and depreciation on the car.