The 30-Second Rundown
Most people are familiar with auto insurance since it’s one of the more common types of coverage. Insurance firms often highlight their auto coverage plans in commercials and other media. Auto Insurance is quickly becoming a basic necessity and is already a legal requirement for drivers, so researching plans and companies is vital.
Why is Auto Insurance So Important?
Automobile insurance protects you in the event that you are in a collision, regardless of fault, and it protects your vehicle from damage while it is not being driven. The costs associated with accidents or sudden repairs could be crippling without insurance. Auto coverage ensures policyholders will be able to cover those costs and get back on the road.
It’s also very important to have coverage because it is required in some instances. Every state now has laws regarding insurance coverage and failing to get auto insurance or maintain the minimum coverage level results in fines and/or revoking of your license.
Another instance where auto insurance is required is with ridesharing services. More people are relying on ridesharing services like Lyft and Uber as a flexible means of income. These services won’t hire drivers without auto coverage for their cars.
Auto insurance also includes many types of vehicles, such as boats, motorcycles, or even snowmobiles. This coverage has more moving parts than most types of coverage, but it is crucial.
What Types of Auto Insurance are There?
There are two types of auto insurance policies: personal and commercial. Personal auto insurance policies cover drivers using their own vehicles, or personal vehicles that they have consent to drive. Commercial auto insurance policies offer coverage that is not part of personal policies and for insuring vehicles that are used to run or operate a business. Auto insurance companies usually offer both types.
Customers have a lot of coverage options when purchasing insurance policies. Companies offer basic coverage packages with optional add-ons to extend coverage. The type and amount of coverage changes with add-ons and the type of policy (commercial or personal).
Personal Auto Insurance
There are varying levels of protection under a personal auto insurance policy. There are “basic coverages” that are part of most basic auto insurance plans, which are often required by state law. Currently, there are only two states that don’t require drivers to have auto insurance: New Hampshire and Virginia. In Mississippi, you may self-pay using bonds or cash. All other states require coverage for bodily injury, property damage, and underinsured/uninsured motorists at the bare minimum.
The following are the types of basic coverage offered by auto insurance plans:
- Bodily Injury Liability: This ensures that any injuries caused to another person by the policyholder or designated driver are covered. Bodily injury liability insurance also covers the insured while operating someone else’s vehicle with their consent.
- Personal Injury Protection: PIP insurance covers the treatment of injuries to all occupants of the automobile at the time of the accident.
- Property Damage Liability: This covers any consented driver of your vehicle against damages caused to someone else’s property, most commonly their vehicle. However, in addition to vehicles, the term “property” can refer to telephone poles, gates, and many other structures.
- Collision Insurance: This covers damage done to your automobile from colliding with another vehicle or object, or if your vehicle is flipped. It can also pay for damages that occur as a result of potholes in the road.
- Comprehensive: Comprehensive insurance reimburses you for losses resulting from theft or non-collision damage, such as door dings or curb rash. Depending on the policy, it may cover against fire damage or even animal contact, such as a collision with a deer.
- Underinsured and Uninsured Motorist: This covers against any designated driver on your policy being struck in a hit-and-run or by an underinsured driver.
The following are some examples of additional coverage offered by auto insurance plans. This is not an exhaustive list, and providers may offer other coverage not listed:
- Fire and Theft: This type of coverage applies when your automobile is damaged or totaled as a result of fire, or if your automobile is stolen.
- Gap Insurance: A brand new automobile loses as much as 30% of its value within the first three months after purchase. If your new vehicle is involved in an accident and it is totaled or stolen, your regular auto insurance would not reimburse you for the entire amount you just paid or financed to purchase the vehicle—leaving you with a “gap.” Gap insurance covers this financial difference.
- Emergency Road Assistance: In the event of a sudden breakdown, this coverage helps drivers with the costs, excluding mechanical repairs and accidents. This service may deliver gas if the car won’t start due to an empty gas tank, help with towing, or fix a flat tire.
- Rental Car Reimbursement: If a driver needs to use a rental car while their car is being repaired, this coverage secures the rental cost. There is typically a rate the insurance provider will cover per day for a certain number of days based on your coverage.
- Breakdown Insurance: This add-on provides coverage to help with the repair costs of a vehicle. Usually, this is only for cars a few months old and covers the vehicle for a set time period.
Commercial Auto Insurance
Commercial auto insurance often has similar coverage to personal auto insurance. However, they are treated as two completely different types of insurance. Businesses face more risks because of the presence of employees as drivers, thus possibly involving Workers’ Compensation if the employee is injured in an accident. With a business vehicle, there may be products on board or the commercial vehicle may be more expensive to repair as compared with a passenger car.
It’s important for business owners with vehicles to have commercial auto insurance. Even if the driver or business has personal insurance, insurers won’t pay for a work-related incident unless there is specific commercial insurance coverage for the vehicle. Commercial auto insurance is required for vehicles used for delivery, taxis and limousines, rental services, and food trucks. Vehicles that are registered to a business and/or used for that purpose need to be covered by commercial auto insurance.
Typically, commercial auto insurance plans cover the following:
- Bodily Injury Liability: Covers the cost of injuries to others you are responsible for. It also helps in the event of a lawsuit for court costs.
- Property Damage Liability: Pays to repair property damage of others if you are responsible for the incident. It also helps with court costs.
- Personal Injury/Medical Payments: Helps cover the medical expenses of the covered driver or employee.
- Collision Coverage: Covers costs of damage to the vehicle involved in the incident.
- Comprehensive Coverage: Pays for damage due to weather, theft or other outside occurrences.
- Uninsured/Underinsured: Helps to cover costs in the event the at-fault driver doesn’t have insurance.
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Where Do I Start Comparing Auto Insurance Providers?
Before you can compare auto insurance quotes, you must determine what sort of coverage you need. A personal auto policy will have different rates and coverage levels than a commercial auto policy. Furthermore, your state may have minimum coverage level requirements, so whatever policy you get has to meet those requirements.
Below are lists of frequently asked questions about personal auto insurance and commercial auto insurance policies. These questions will help you determine the type of coverage you need so you can get the best quote.
FAQs About Personal Auto Insurance
What type of coverage do I need to register my car? Lenders vary on the amounts, but generally require you to have comprehensive and collision coverage at minimum.
What about young drivers? All drivers in the household—regardless of age—must be listed. Generally, drivers under 25 are charged higher premiums because they tend to cause more accidents.
Am I covered if I drive someone else’s car? Are they covered if they drive mine? Generally, you are covered if you drive someone else’s car. However, the answer may be quite different if the driver is a young person. The same applies if you let a young person not on your policy drive your car. Always ask for a copy of your policy to determine coverage.
Do I need to buy additional coverage if I rent a car? Generally, the answer is no—if the car is driven for personal use and the following is in place:
- More than minimum bodily injury, property damage and collision coverage
- Your policy extends coverage to rental vehicles
- You use a credit card that specifically provides rental coverage
However, there is one exception. If you are renting a car for the purpose of ridesharing, you do need to buy additional coverage. Some providers offer insurance specifically for ridesharing services.
What do rental car companies offer?
- Collision Damage Waiver: Covers responsibility for damages from an accident, or if the vehicle is stolen, as well as miscellaneous expenses. Cost: Approximately $10-$20 per day.
- Liability: Covers you if you injure someone with your rental car. Cost: About $5-$15 per day.
- Personal Coverage: Covers medical costs due to an accident. Cost: About $5 per day.
- Personal Contents: Covers personal contents within the car if they are stolen or damaged. Cost: About $3-$5 per day.
When might it be a good idea to get insurance with a rental car?
- You only have state mandated minimum coverage
- You don’t want to risk paying a high deductible
- You’re driving outside the United States (generally, your policy will not cover you)
What is excess coverage? ‘Excess Coverage’ is optional coverage in excess of the state-required minimums. Amounts offered are generally between one to five million dollars.
Is it better to buy direct or from an agent? Generally an agent can find the best rate and policy coverage package. Given the complexities of this type of coverage, it makes sense to work with an agent who can craft a policy that takes into consideration the entirety of your family and financial picture. Here are some examples:
- Many consumers do not understand that the bodily injury provision covers only those you cause injury to. If someone injures you, you have to hope they have sufficient coverage. “Sufficient” is of course, in the eye of the beholder. The at-fault-driver may have only state mandated coverage, which usually pays between $25,000 and $50,000.
- Substantial discounts may be available if you know how to bundle different types of coverage.
- Family liability is another concern, since states may hold the family of an under-aged driver responsible, if there is insufficient coverage.
- Rental car insurance is another good example. Rather than take the chance, it’s well worth the time to get the opinion of an expert as to whether you are covered.
- There is also the question of deductibles on your coverage. You may be tempted to purchase a low deductible for your automobile, however, an agent may suggest that you take the money you’ll save each month purchasing a higher deductible and apply it to other forms of coverage. In other words cheapest in the short-term is rarely cheapest in the long-term.
- Are you moving from one state to another?
In most cases, consumers do not find gaps in their coverage until there is a claim and it’s too late. Be sure to work with an agent that is looking out for your best interests.
FAQs About Commercial Auto Insurance
Do I need commercial auto insurance? You need commercial auto insurance for any vehicle used for business purposes or registered to your company. If your business provides one of the following services, you should have commercial auto insurance:
- Delivery (food, goods, appliances, equipment, etc.)
- Limousine, taxi, or ridesharing*
*Some insurance companies have policies specifically for ridesharing.
Why can’t I use my existing auto insurance plan for my business? Your personal auto insurance covers damages to your vehicles and other people or vehicles you may hit. Commercial insurance covers damages to the vehicles in addition to any goods you may have. Delivery businesses will also travel longer distances and put more miles on their vehicles. So, you need more liability coverage than what typically is covered by personal auto insurance.
I’m a lyft driver. Do I need commercial auto insurance? Yes, you do. Lyft is considered a ridesharing service.
I’m a pizza deliverer. Do I need commercial auto insurance? You have a few insurance options as a pizza delivery driver.
- Buy a commercial auto insurance policy. This will cover you, your vehicle, other people and their vehicles, and any company damages. It’s the safest option.
- You could get non-owner coverage from your employer. Non-owner refers to the vehicle, since the company doesn’t own your car. The plan will give coverage for injuries and damages to other property, however doesn’t cover your vehicle. Furthermore, your personal auto insurance policy may not cover the damages to your car if you get into an accident while on the job. This is probably the worst option.
- Or, find an insurance company that offers insurance for personal vehicles used for delivery. You can get a plan tailored to your situation.
How much is commercial auto insurance? Like any other policy, cost is specific to your needs. Factors that determine cost include the size and number of vehicles, company size, and amount of coverage you need. Usually, it costs more to insure heavy duty vehicles and young employees.
Can my commercial auto insurance cover personal use? Yes, the car will still be insured.
Can I get tax deductions for commercial auto insurance? Yes, you can. When filing taxes you can deduct the cost of your insurance policy as a business expense. Talk more with a tax advisor about your tax filing situation.
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Other Considerations When Comparing Auto Insurance Providers
Now that you know what type of policy and the amount of coverage you need, it’s time to get quotes. These days, you can get quotes online after submitting your information and then talk to an agent about the quote. You always have the option to call an agent directly, as well.
Factors to consider:
- Claims Processing: You research information about how the company processes claims. Do you want a provider with online claims submission? What’s the average time it takes to get a claim processed? Once approved, are the claim payouts fair?
- Customer Support: You want a firm that provides great products as well as customer service. Is your agent knowledgeable about all the products they offer? Does your agent try their best to save you money or offer discounts? Can you get assistance quickly with full support?
- Coverage Options: It’s important to know your options. A bundle may be appealing, but you should base your plan on what you actually need. Look for potential areas to save if a coverage option isn’t necessary for your situation.
- Discounts: What sort of discounts does your insurance company offer? Are there any discounts that apply to you? Share your driver history and information with an agent to see what discounts you may be eligible for.
- Price: This should be the last factor when determining what auto insurance provider to use. Policies are tailored to your specific car, driving record, even credit history. You can’t get a price without going through the application process. After you receive quotes from each provider, compare the amount of coverage you get for the price you’ll pay. However, don’t sacrifice your assets for a lower cost. Make sure you are fully protected no matter the price.
Where Can I Get Auto Insurance?
You may recognize Allstate from the mayhem commercials, with drivers facing disastrous situations since they weren’t protected from “mayhem.” For more than 85 years, Allstate has provided customers with protection from unexpected events. Their rating from A.M. Best is A+.
All State’s basic auto insurance policy includes everything you need to hit the road worry-free. The policy options include: collision, comprehensive, liability, medical payments, personal injury protection, uninsured/underinsured motorist. Additional features you can add to the policy are: rental reimbursement, sound system, and towing and labor. The also have policies to protect the vehicles used by small businesses and motorcycles.
Nationwide has been protecting assets for over 85 years, starting as a small mutual auto insurance firm. They have an A+ rating from A.M. Best.
Nationwide’s personal auto policy includes: Liability coverage, collision coverage, comprehensive car insurance, uninsured/underinsured motorists, medical payments coverage, personal injury protection, rental reimbursement, and towing and labor insurance. They also have commercial car insurance with auto liability, medical payments, and comprehensive coverage.
Additional optional features are roadside assistance and vanishing deductible (removes $100 from deductible for every safe year of driving). Another special perk Nationwide offers is accident forgiveness for your first at-fault accident.
Progressive has been in business for 80 years and are considered pioneers in the insurance industry. They were the first insurance company to have a website and to offer quotes online; Progressive was the first to have a mobile app as well.
Progressive’s personal policy protects drivers with bodily injury and property damage liability, medical payments, and uninsured/underinsured bodily injury. Coverage options for vehicles include: collision, comprehensive, uninsured motorist property damage, roadside assistance, custom parts and equipment value, rental reimbursement and pet injury. They also offer commercial auto coverage for vehicles and trailers.
Farmers Group opened business in 1928, right before the Great Depression and has survived the test of time. In 2007, they won the J.D. Power award for Call Center Customer Service Excellence for the third year in a row. Despite this, Farmers had some of the highest complaint rates, especially in Washington and Oregon. The have an A rating with A.M. Best.
American Family Insurance
American Family Insurance opened for business in 1927, starting out as auto insurance firm for farmers and other businesses in the agriculture industry. Today they have expanded to offer different types of insurance to anyone. In 2010 they won the Teen Driving Safety Leadership award for their teen driver program. It allowed parents to see video feedback of teen’s driving and reduced risky behavior. They have an A.M. Best rating of A.
American Family Insurance has a basic personal auto plan to protect your “wallet, wheels, and wellbeing.” This plan includes: property/bodily liability coverage, collision coverage, comprehensive coverage, medical expense coverage and personal injury protection. Possible upgrades include: lease/loan coverage, emergency road assistance, accidental death and dismemberment, uninsured/underinsured motorist coverage, and rental reimbursement. They also offer a business auto policy and rideshare insurance.
J.D. Power ranked State Farm as #1 in life insurance Customer Satisfaction in 2016. Founded in 1922 by GJ Mecherle, they have been in business for over 90 years. The company has an A++ rating with A.M. Best, which is the highest rating an insurer can have.
Their auto insurance products include personal policies, antique and classic cars, and small business auto insurance. Coverage options for auto policies include: collision, comprehensive, liability, uninsured/underinsured motorists, medical payments, emergency roadside assistance, and car rental and travel expenses. They also offer protection for other vehicles like motorcycles, boats and snowmobiles.
GEICO is well known for it’s British gecko mascot, promising to save you money on your car insurance. Found in 1936, GEICO has been in business over 80 years. Now, GEICO is the second largest auto insurer after State Farm. They also have an A++ rating from A.M. Best.
The basic coverage of GEICO’s auto insurance plan includes: property and bodily harm liabilities, medical payments, uninsured motorist, collision and comprehensive. Additional coverage options you can purchase are: emergency road service, rental reimbursement, and mechanical breakdown insurance. They also offer commercial auto and ridesharing policies.
Liberty Mutual was founded in 1912, one of the oldest insurance companies on this list. They have since expanded the range of coverage offered and have become a global company. In 2010, Liberty Mutual was given an Energy Star by the EPA for their energy preservation measures. Their A.M. Best rating is A and they have a low complaint median for their size.
The standard coverage personal auto plan with Liberty Mutual is probably the most lacking on this list. Their basic plan covers bodily injury, property damage, and medical payments. Everything else is additional coverage: accident forgiveness, better car replacement, collision coverage, comprehensive coverage, deductible fund, lifetime repair guarantee, new car replacement, and rental car reimbursement. They do offer a commercial auto policy, and coverage options include legal liability, coverage for drivers, and lease gap coverage.
Travelers was founded in 1864, making it the oldest insurance company on this list. They started providing travel insurance to train passengers and have since expanded to offer a range of insurance products. A.M. Best gave Travelers an A+ rating.
The basic Travelers personal auto plan includes: bodily injury/property damage liability,
Injuries from uninsured/underinsured motorists, medical payments, comprehensive damages, and collisions. Optional coverage you can add to your policy include: Loan/lease gap, reimbursement, roadside assistance, and new car replacement. They also offer commercial auto plans that cover liability, underinsured/uninsured motorists and physical damage.
Be sure to research any state or regional insurance companies. They may have offers that are a good fit, in addition to the companies listed above.
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