Vehicle insurance (also known as car insurance or auto insurance) in the United States is designed to cover the risk of a financial penalty or the loss of a motor vehicle that the owner may have to encounter if their vehicle is involved in a wreck that results in property, financial or physical damage. Most states require a motor vehicle owner to carry some minimum level of liability insurance.
states that do not require the Vehicle owner to carry car insurance
States that do not require the vehicle owner to carry car insurance include;
- Virginia, where an uninsured motor vehicle cost may be paid to the state,
- New Hampshire, and Mississippi, offer vehicle owners the option to post cash bonds (see below). The privileges and immunities clause of Article IV of the U.S. Constitution protects the rights of citizens in each respective state when traveling to another.
The procedure of any Vehicle Insurence in the USA
A motor vehicle owner typically pays insurers a monthly or yearly fee, often called an insurance premium. In the insurance premium what a motor vehicle owner pays is usually determined by a variety of factors including the type of covered vehicle, marital status, credit score, whether the driver rents or owns a home, the age and gender of any covered drivers, their driving history, and the location where the vehicle is primarily driven and stored/parked. Most insurance companies will increase insurance premium rates based on these factors, and less frequently, offer discounts.
Insurance companies provide a motor vehicle owner with an insurance card for the particular coverage term, which is to be kept in the vehicle in the event of a traffic wreck as proof of insurance. Recently, states have started passing laws that allow electronic/online versions of proof of insurance to be accepted by the authorities.
Insurance Providers in the USA
In the United States, the largest private passenger vehicle insurance providers in terms of market share were:
- State Farm (18.1%),
- GEICO (12.8%),
- Progressive Corporation (9.8%),
- Allstate (9.3%),
- USAA (5.7%).
Insurance is secured either by operating with a separate insurance agent or with an insurance agent who is licensed to sell insurance policies. Some can fetch several agencies or a growing number of online brokers who provide policy purchases through online sites.
Liability coverage
Liability coverage, sometimes known as Casualty insurance, is offered for bodily injury (BI) or property damage (PD) for which the insured driver is deemed responsible. The amount of coverage provided (a fixed dollar amount) will differ from jurisdiction to jurisdiction. Whatever the minimum, the insured can usually increase the coverage (before a loss) for an additional charge.
An example of property damage is when an insured driver (or 1st party) drives into a telephone pole and damages the pole; liability coverage pays for the damage to the pole. In this example, the motorist insured may also become liable for other expenses related to damaging the telephone pole, such as loss of service claims (by the telephone company), depending on the jurisdiction. An example of bodily injury is where an insured driver causes bodily harm to a third party and the insured driver is deemed responsible for the injuries. However, in some jurisdictions, the third party would first exhaust coverage for accident benefits through their insurer (assuming they have one) and/or would have to meet a legal definition of severe impairment to have the right to claim (or sue) under the insured driver’s (or first party’s) policy. If the third party sues the insured driver, liability coverage also covers court costs and damages that the insured driver may be deemed responsible for.
- Medical payment coverage (MedPay)
Like personal injury protection, medical payments (MedPay) coverage pays the medical bills for you and your passengers for injuries sustained in a car accident, regardless of who is at fault. However, unlike PIP coverage, MedPay does not cover any additional or related expenses, like lost wages.
MedPay is required in some states and optional in others. It is not available in all states.
- Collision coverage
Collision coverage pays for repairs if your car is damaged during a car accident or if it collides with another object like a building or tree, even if you’re at fault. It may also cover damage from potholes.
- Comprehensive coverage
Comprehensive coverage, other than collision coverage, pays for damage to your car that occurs during an event that’s not a car accident or collision with another object. Examples of covered losses include fire damage, hail damage, damage from falling objects, a cracked or shattered windshield, vandalism, or damage from an animal. It also reimburses you if your car is stolen.
Split limits
A split limit liability coverage policy splits the coverages into property damage coverage and bodily injury coverage. In the example given above, payments for the other driver’s vehicle would be paid out under property damage coverage, and payments for the injuries would be paid out under bodily injury coverage.
Bodily injury liability coverage is also usually split into a maximum payment per person and a maximum payment per accident.
The limits are often expressed separated by slashes in the following form: “bodily injury per person”/”bodily injury per accident”/”property damage”. For example, California requires this minimum coverage:
- $15,000 for injury/death to one person
- $30,000 for injury/death to more than one person
- $5,000 for damage to property
This would be expressed as “$15,000/$30,000/$5,000”.
Another example, in the state of Oklahoma, drivers must carry at least state minimum liability limits of $25,000/$50,000/$25,000. If an insured driver hits a car full of people and is found by the insurance company to be liable, the insurance company will pay $25,000 of one person’s medical bills but will not exceed $50,000 for other people injured in the accident. The insurance company will not pay more than $25,000 for property damage in repairs to the vehicle that the insured one hit.
In the state of Indiana, the minimum liability limits are $25,000/$50,000/$10,000, so there is a greater property damage exposure for only carrying the minimum limits.
Personal injury protection (PIP)
This no-fault insurance coverage pays the medical expenses for you or your passengers if you are injured in an accident, regardless of who is at fault. Personal injury protection (PIP) may also apply if you’re riding a bike or walking and are hit by a vehicle.
In some cases, PIP coverage may reimburse you for lost wages and expenses for tasks you can’t perform while recovering, such as house cleaning. PIP is required in some states and is optional in others. As always, check with your state’s DMV to determine if PIP is available in your state and if you are required to carry it.
What Car insurance Includes/Provide
To ensure you have the coverage you need, many auto insurance companies offer optional insurance add-ons for purchase, including:
- Roadside assistance: If you have a flat tire, need a tow, or are locked out of your car, this coverage reimburses you for services to get you moving again.
- New car replacement: This type of coverage will pay to replace a totaled vehicle with a new one of the same make and model. Coverage is typically limited to relatively new vehicles – two years old, for example – but the cutoff varies by insurer.
- Mechanical breakdown insurance: If your car breaks down and your manufacturer’s warranty doesn’t cover the repairs, this coverage will.
- Rental reimbursement: This add-on will cover the cost of a rental vehicle while your car is undergoing repairs during a covered claim. It does not apply when your car is in the shop for routine maintenance.
- Rideshare insurance: If you drive for a ridesharing company, this insurance provides coverage if you’re in an accident while working. Personal auto insurance policies typically exclude coverage for any business exposures.
- Gap insurance: If your car is deemed “totaled” following an accident and you owe more on your car loan or lease than the insurance company will pay, gap insurance will pay the difference.
What Car Insurance Doesn’t Cover
There are some things car insurance won’t cover – even if you have a comprehensive policy.
- Personal property inside the car. If you leave cash, jewelry, electronics or other valuables in your car and they’re stolen, don’t expect your car insurance provider to cover it (although your homeowners or renters insurance might).
- Injury to a pet inside the car. Unfortunately, if you’re driving with Fido and they’re hurt or injured in an accident, your car insurance won’t be paying the vet bills.
- Normal wear and tear. Car insurance doesn’t typically cover maintenance and replacement costs, such as oil changes or new spark plugs.
- Modifications, accessories, and aftermarket add-ons. If you’ve added a spoiler, or rims, or made other modifications, your insurance won’t pay to replace them (unless you’ve added a special rider to your policy).
- Intentional damage. Don’t damage your car on purpose, hoping for an insurance payout – it won’t be covered, and you could even lose your policy.
- Criminal use. Car insurance won’t cover an accident or other damage that occurs while using the car for criminal activity.
- Racing use. You also shouldn’t expect your policy to cover damage incurred while drag racing. If you want to participate on the racetrack, look into motorsports policies.
- Ridesharing. Drivers who use their car for Uber, Lyft, or food delivery may find their insurance won’t cover accidents that occur when they’re “on the clock.” However, some insurers offer this type of coverage as an add-on.
- Unlicensed or excluded drivers. If a child, an unlicensed driver, or someone who’s been specifically excluded from your policy (like a disgruntled roommate) uses your car and crashes it, don’t expect your insurance company to pay for repairs.
How Much Does Car Insurance Cost?
The national average cost of a car insurance policy is $1,547 per year, according to our analysis of insurers. Your rate may be higher or lower. To determine your rate, car insurers factor in things like your age, location, driving record, vehicle type, and insurance score.
The cost of car insurance also depends on how much coverage you purchase and the deductible and limits you choose. The key to finding the most affordable car insurance with the best coverage for your needs is to shop around and compare quotes from at least three different insurers.
How Is Car Insurance Priced?
Several factors affect the price of your car insurance premiums. Car insurers use detailed calculations to determine their risk in insuring you; the higher the risk, the more expensive the insurance. They also base costs on your policy type, the coverage you request, and other factors, including:
- Demographics. Younger drivers tend to pay more than older drivers, and, where gender is a factor, men tend to pay more than women.
- Driving history. Drivers with one or more car accidents, previous claims, or moving violations are likely to have higher premiums.
- Credit score. Drivers with low credit scores tend to have higher premiums than those with good or excellent scores.
- Location. Where you live and work will affect your car insurance costs. Rates vary by state, city, and even neighborhood, with drivers in high-traffic, accident-prone areas often paying more.
- Vehicle type. New cars are typically more expensive to insure than old cars. Given their advanced technological features and higher value, they can be more costly to repair. In addition, the car’s safety record, safety features, and size can also influence pricing.
- Vehicle use. Drivers who don’t log many miles tend to pay less than drivers who spend a lot of their time on the road.
The Best Car Insurance Companies in the USA
Average Annual Rates:
- USAA: $1,022
- Geico: $1,250
- State Farm: $1,279
- Travelers: $1,355
- American Family: $1,383
- Nationwide: $1,473
- Progressive: $1,540
- AAA: $1,958
- Farmers: $2,078
- Allstate: $2,135
How to File a Car Insurance Claim?
Filing a car insurance claim can be overwhelming, and each insurance company has its process and tools in place. However, there are some things you can do to make the process easier.
- Immediately call your car insurance agent. Explain what happened, and find out what your policy covers as well as any deadlines for filing a claim.
- Gather the required information. Depending on the nature of your claim, you may need to include a police report, photos of the damage, the names and information of anyone involved in the accident, and a repair estimate. Your insurer should be able to provide you with a list of information or documents you need to include.
- File a claim. You can usually submit an official claim over the phone or via your insurance company’s website or mobile app.
- Ask about a rental car. If your policy covers a rental car, find out the process for getting the car or reimbursement.
Why Are Car Insurance Claims Denied?
Here are three reasons that insurance companies may deny claims:
- The driver is someone who lives with you or has access to your car and is of driving age but not on your policy.
- You were using your car for business purposes at the time of the accident.
- The car isn’t “garaged” at your house. This isn’t about the car being in your garage literally. It means that a car is insured on your policy, but it’s owned and kept at someone else’s address.
Insurers will also deny claims for what could be called self-inflicted damage. That includes damage done while off-roading or at the track. And almost no auto insurance policy (or warranty, for that matter) covers wear and tear.
Furthermore, filing a fraudulent claim is illegal in all 50 states and Washington, D.C., so don’t change the date or details of an accident or occurrence hoping you’ll receive coverage for damages. You could face severe fines, criminal charges, and even imprisonment.
