Car Insurance Provides Loss Protection for Drivers

Car insurance protects you from the financial responsibility of damages resulting from a car accident. Rates for full coverage are $79.58/mo on average.

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Zaneta Wood, Ed.S. has over 15 years of experience in research and technical writing bringing a keen understanding of data analysis and information synthesis to reach a wide variety of audiences. She studied adult education and instructional technology at Appalachian State University as well as technical and professional communication at East Carolina University. Zaneta has prepared technical p...

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Joel Ohman is the CEO of a private equity backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Jo...

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Reviewed by Joel Ohman
Founder & CFP®

UPDATED: May 12, 2020

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Here's what you need to know...

  • A standard car insurance policy can protect the driver from claims made by the occupants of another vehicle, as well as for physical damages caused
  • Coverage can also be put in place to provide you with an extra level of protection if the at-fault driver in an accident doesn’t have enough insurance coverage to compensate you for your injuries

By law, drivers must have car insurance. Loss claims can be made against the policy in some circumstances.

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Loss Due to Injuries

Car insurance coverage is something that you buy to demonstrate financial responsibility. Your policy is a contract with the insurance company stating that, in return for the premiums you pay, the insurer will pay for claims for personal injuries.

Some types of policies pay for the injuries suffered by the occupants of the other vehicle, while others pay out for medical bills, rehabilitation expenses, and lost wages for yourself and the occupants of your vehicle.

The bodily injury liability portion of your policy pays for the injuries sustained by the occupants of the other vehicle.

In most parts of the United States, this type of coverage is mandatory for drivers, and a minimum level of protection must be put in place to drive legally.

A car insurance buyer who is looking for bodily injury liability insurance coverage can always choose to buy a higher level of protection than the level mandated by law.

In some states, the minimum level of coverage is set at a relatively low level, and this may not be enough protection to fully compensate accident victims if their injuries are severe.

In no-fault states, drivers may be required to have Personal Injury Protection (PIP) in place. This insurance policy pays for the injuries sustained by the occupants of their own vehicle when an accident occurs. It covers medical bills and lost wages up to the policy limit chosen.

No-fault states that require drivers to have PIP in place will set a minimum level of coverage for this protection. Consumers can still choose to buy a policy with a higher limit if they wish.

A person who already has a good level of protection through his or her health insurance coverage may want to go with the minimum level of PIP required by law.

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Loss from Physical Damage

Property damage liability insurance pays for the cost of repairing the other driver’s vehicle when an accident occurs. It also pays for the cost of repairing public property damaged in the accident, including light stands, fences, guard rails, and mailboxes.

Car insurance customers can insure their own vehicle against loss caused by physical damage. Collision coverage pays for the cost of repairing the car if it is damaged due to striking another vehicle or an object.

Comprehensive insurance coverage pays out when the loss is something other than a collision. This part of the policy pays for a loss due to fire, theft, wind, hail and vandalism.

Loss When the At-fault Driver Doesn’t Have Coverage

There are essential coverage types to have when another driver is not well insured:

  • Uninsured motorist coverage – Compensates you for your injuries and car repairs when the at-fault driver in an accident does not have insurance coverage at all. Your insurance company would pay out to you and then attempt to sue the uninsured to recover the benefits.
  • Underinsured motorist coverage – Makes up the difference between the coverage available to the at-fault driver and the true cost of the damages he or she caused. In this situation, the at-fault driver’s coverage would pay out first up to the policy limit.

Unless you want to pay for damages you cause or damages to your own vehicle personally, you need car insurance. Loss can be due to several causes, and you need to take steps to adequately protect yourself.

Consider the level of protection you need carefully and buy enough insurance coverage to adequately meet those needs. Shopping around can help you find the best rates on coverage for your personal insurance situation.

Enter your ZIP code to find affordable car insurance rates and quotes now!

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Average Monthly Car Insurance Rates by State