Auto Insurance Coverage Levels

There are different types of auto insurance coverage and different coverage amount. Auto insurance can more or less be broken down into three different coverage levels: basic coverage, standard coverage, and superior/custom coverage. Read below to learn more about these coverage types so that you can determine which one fits you your family the best.

Coverage Level – Basic Coverage

basic coverageThe goal of basic auto insurance coverage is to protect you in case of an accident or other damages to your car, other drivers, or your passengers. In most states, the minimum insurance requirements probably do not provide enough protection to cover your costs and liability in a severe accident.

A winning strategy for getting the basic protection that you need is to first find out your state’s minimum requirements and then consider your assets and what you risk to lose in an accident. Upon determining your risk tolerance, you may then be able to purchase additional insurance coverage to fill the gaps.

The type of basic coverage you need depends on your lifestyle

Some factors to consider may include the cost of your car; how often you drive with passengers; and the costs or liability you could incur if you have an accident with another vehicle. If you have an old or damaged car, then you may feel it doesn’t make much sense to purchase collision or comprehensive insurance. However, if you happen to have a new and expensive car, then comprehensive or collision insurance could be very valuable in protecting your assets.

Consider also the other drivers you may interact with on the road. If an uninsured driver hits you, then you may have to pay the damages on your own – unless you have uninsured motorist insurance. On the other hand, if you are found at fault in an accident where the other driver has a luxury vehicle, then the costs could be very high – even if your car sustains minor damage.

Also, you may wish to consider the protections you already have so that you do not double up on coverage. For example, if you already have medical or full health insurance, you may not find it worthwhile to purchase vehicle coverage for medical payments. Keep in mind, however, that your medical plan won’t cover injuries to other drivers, so you would still need liability insurance that is consistent with your state’s laws, as well as your own financial situation.

Basic coverage if you don’t own a car

Even if you don’t own a car, you may want to purchase a basic level of coverage if you do drive others’ vehicles on a somewhat regular basis. Basic auto insurance can protect you in case you damage someone else’s car, or if you get in an injury accident. You probably won’t need a full coverage auto insurance policy, but some coverage may help protect you and your assets.

Coverage Level – Standard Auto Insurance

standard coverageA standard auto insurance policy encompasses a package of several different types of insurance coverage, each with its own premium costs, deductible amounts and maximum coverage.

A standard level of coverage is often more than the state minimum requirements and provides more protection than basic coverage. Standard insurance is appropriate for drivers who have a reasonably new car, with few violations and positive driving records. Their premiums will be at a preferred rate because they have a safe driving record and a car at an average value.

Some drivers may be excluded from standard coverage because of a poor driving history, or because they own a luxury or sports car that has a higher-than-average valuation. Such “high-risk” drivers may need to purchase superior coverage, which means their premiums will be higher than they would be for standard drivers.

It’s important to note that the definition of “standard coverage” will vary from insurer to insurer. Some insurers will provide standard coverage to drivers with a few marks on their driving record; while other auto insurance providers consider luxury car drivers less of a risk than drivers who are younger or who have been ticketed for speeding.

The standard categories for auto insurance coverage

There are six standard categories for car insurance:

  • Bodily Injury Liability Coverage – Covers medical and legal costs incurred if you are found at fault in an accident where other drivers or passengers are injured or killed.
  • Property Damage Liability Coverage – Covers the costs of damages if your car damages someone else’s vehicle or property.
  • Collision Coverage – Covers damage to your vehicle if you are found at fault in an accident.
  • Comprehensive Coverage – Covers damage to your vehicle caused by natural disasters, theft or vandalism, falling objects, hitting an animal, or civil unrest.
  • Medical payments – Covers medical costs for injuries to the driver and passengers in your own car.
  • Uninsured or Under-insured Motorists Coverage – Pays for your injuries or damage to your car in case of an accident caused by a driver who lacks sufficient insurance, or in some cases, from a hit-and-run driver.

Important: There are no standard auto insurance costs

The costs for car insurance can vary greatly depending on your region, the vehicle you drive, how many miles you drive each year, and other factors. Age and driving record also play a role in determining your premiums.

The costs can also vary widely by the insurance company. It is a good idea to query several companies and compare their quotes, and then choose the plan that fits your needs at the lowest cost available. Keep in mind when you compare these costs that some insurers will quote you a price based on six months of coverage, while others will quote for a year at a time.

Coverage Level – Superior & Custom Auto Insurance

superior coverageNon–standard car insurance can cover many different types of situations. Many drivers may need to protect a highly valued sports car, a luxury vehicle, or a custom-built car and they will need higher maximum coverage. Other drivers may be considered high-risk due to their driving history or age, and they will pay higher premiums.

The average car insurance buyer may find that the standard buffet of insurance categories does not cover all of their needs, so they may pay for additional insurance coverage to augment their standard plan. In fact, a study by the National Association of Insurance Commissioners found that 77% of drivers choose to purchase comprehensive coverage, even though it may not be required; that’s because comprehensive coverage provides valuable protection and is an excellent value, dollar for dollar.

Looking at the luxury auto insurance buyer

A superior plan may help to cover your assets if you have a superior car – such as a sports car, a luxury vehicle, or a custom built vehicle. Even if you don’t have a luxury car, you may want to consider purchasing a superior level of coverage if you otherwise have high earnings and a large wealth of assets to protect.

Auto insurance for high-risk drivers

Another reason you may need to pay more for auto insurance is if you have a high-risk driver on your policy. This might simply be because you have a new driver in your household or someone under 25 years old. Age and experience play a role in determining your premiums, even if the drivers have shown good driving skills.

Other drivers who have a serious violation, a DUI, or other accident on their record may also have to buy superior coverage or pay higher premiums for average coverage. Such drivers may have a difficult time obtaining coverage from some standard insurance carriers but may be acceptable risks to other companies, so long as they pay a higher premium. In fact, in Ohio alone, more than 1 in every 10 drivers has their license suspended, according to the Ohio Morning Journal. Drivers with suspended licenses generally have to obtain high-risk coverage, and then file an SR-22 form with their state’s DMV.

Additional types of auto insurance coverage

There are also certain types of non-standard coverage that you may want to consider to augment your standard plan. For example:

  • Rental Car ReimbursementCovers the cost to pay for a rental vehicle up to a certain amount (usually between $15-25 per day) if your vehicle is out of commission from a loss that is covered under your comprehensive or collision policy
  • Emergency Road Service (also known as Towing and Labor) – If you lock your keys in the car, or your car breaks down, then this type of coverage will send a tow truck or other professional out to tow or repair your vehicle for you
  • Reparation Benefits – Covers medical costs up to a selected amount and usually works as primary over any health insurance. Holding such a policy also excludes you from carrying a Medical Payments policy
  • Work Loss – Covers any wages that you or any drivers or passengers lose if you are unable to work due to injury caused by a car accident
  • Mechanical Breakdown Insurance – Most auto policies do not cover accidents or damage caused by mechanical problems. Mechanical breakdown insurance covers repairs to cover mechanical parts of the car. Usually, such a policy will exclude the costs for regular maintenance or average wear-and-tear on the vehicle.

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