Auto Insurance Coverage

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Auto Insurance Coverage

Do I really need car insurance?

auto insurance coverage

Of course you need auto insurance coverage, without it you’ll get hosed. Without car insurance, each time you take that giant, fancy, dangerous machine out for a spin, you may as well take along the contents of your bank account and buckle them in for the ride. Could get bumpy!

Just in case you’re still not convinced, here are three other totally reasonable arguments for the intrinsic worth of car insurance:

  • The dumbest kid you graduated high school with? He has a driver’s license. Ditto the meanest bully and the principal, who was something like 70 years old back when you graduated. They all drive—and we share the same roads.
  • The law. No matter where you live, chances are the powers that be in your state (because insurance is regulated state-by-state) expect you to carry some kind of policy. And seriously: If you’re going to break a law, why not break a more exciting one?
  • After that inevitable accident we’ve already warned you that you’ll have someday, you really want take a stab at dealing with it alone? Making sure the other driver is insured, working with the other driver’s insurance, getting through claims and repairs All By Yourself, Celine-Dion style? Nah, not you, you smart, insured person.

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What Exactly is Auto Insurance?

Here’s the Insurance Information Institute’s definition:

Auto insurance is a contract between you and the insurance company that protects you against financial loss in the event of an accident or theft. In exchange for your paying a premium, the insurance company agrees to pay your losses as outlined in your policy.

But we think we can do better:

Insurance* (noun) (*This Definition Written In Plain English): A deal between you and a company: You pay them a premium and they pay for your losses (if you have them).

The fact remains, it’s never as plain as it should be, it’s complicated. Your auto insurance is a contract that outlines when coverage applies and the responsiblities of the parties. If you don’t pay attention, you could miss something.

Insurance folks talk a lot about risk. The fact is, walking out your front door is a bold move. And for drivers, dangers lurk at every (literal) turn. Car insurance industry experts estimate that you’ll file one claim every 17.9 years or so—that adds up to an average of three or four accidents over a lifetime. Think about that. Not one, not even two. If you know you’ll almost certainly have a wreck, doesn’t it make sense to protect yourself?

That’s exactly what auto insurance does. Instead of you having to pay for the damages from a wreck or act of nature (hello, hail!) out of your stylish-but-not-super-deep pockets, your insurance company does. How can they manage this? They ‘assume’, or take on, your risk, along with a bunch of other folks, too. Your monthly payment (or premium) goes into a pool with a lot of other premiums, and when a wreck happens and the money shark comes calling, the company can then pull out however many premium-fish are necessary to keep him satisfied—and keep him from tearing your arm off.

The Four (4) Basic
of Car Insurance

  • If you screw up on the road, this is what you need. (And what most states require legally). Liability covers the injury or property damage that you may cause someone else.

    In other words: covers the OTHER person in an accident.

  • Medical can cover the cost of treating your injuries or injuries of your passengers—sometimes extending even to include lost wages or rehab.

    In other words: covers you & yours when you get hurt in an accident

  • Unfortunately, not everyone is smart enough to pay for car insurance. If you get in a wreck and an uninsured jerk driver is at fault, this helps protect you anyway, covering medical bills for you (and in some states, damage to your car).

    In other words: You’re still protected even if the other driver is uninsured.

  • If somebody steals your car and they get pulled over immediately for your broken taillight or your car gets damaged, physical damage coverage is your new best friend. You’ll often hear this referred to as “Full Coverage” but this only describes what covers damage to your car.

    In other words: protects your car against risks like theft, fire, weather, and accidents.

The Six (6) Primary Auto
Coverage Options

  • Bodily Injury Coverage

    Bodily Injury coverage provides protection to you when you cause an accident, and the other party suffers injuries. It is typically mandatory and is offered in a split-limit of liability, where there is a limit for a singler person injured, and another limits for each occurence.

  • Property Damage Coverage

    Property damage coverage is the protection offered by your auto insurance policy for damage you cause to other personal or business property. Property damage coverage is offered to the other party, and not a direct benefit to the policyholder.

  • Medical Payments Coverage

    If you, your passengers or family members who are driving the insured vehicle are injured in an accident, medical payments coverage may help pay for costs associated with the injuries. Covered costs may include hospital visits, surgery, X-rays and more.

    Medical payments coverage is required in some states and optional in others.

  • Uninsured Motorist Coverage

    If you’re hit by a driver who doesn’t have insurance, uninsured motorist coverage may help pay for your medical bills or, in some states, repairs to your vehicle. If you’re hit by an underinsured driver, that means they have car insurance but their liability limits aren’t enough to cover your resulting medical bills. That’s where underinsured motorist coverage may help.

  • Comprehensive Coverage

    Comprehensive may help cover damage to your car from things like theft, fire, hail or vandalism. If your car is damaged by a covered peril, comprehensive coverage may help pay to repair or replace your vehicle (up to the vehicle’s actual cash value). This coverage has a deductible, which is the amount you’ll pay out of pocket before your insurer reimburses you for a covered claim.

    Comprehensive is typically an optional coverage — but your lender may require it if you’re leasing or paying off your vehicle.

  • Collision Coverage

    If you’re involved in an accident with another vehicle, or if you hit an object such as a fence, collision coverage may help pay to repair or replace your car (up to its actual cash value and minus your deductible).

    Collision coverage is typically optional. It may be required, however, by your vehicle’s leaseholder or lender.

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